Fill in the blank with the appropriate answer.

1. _____Smith Company will receive a lump sum of $15,000 in 3 years. What is the present value of this cash flow, discounted at 8%?

2. _____Terra Company incurred actual manufacturing overhead of $300,000 this year; the applied overhead was $305,000. Was Terra over or underapplied and by how much?

3. _____Beginning Finished Goods Inventory + Cost of Goods Manufactured Ending Finished Goods Inventory = what?

4. _____The costs of depreciation on the factory and indirect materials would be classified as what type of cost?

5. ____Johnson Company completes and transfers 9,000 units. Additionally, there are 3,000 units that are 30% complete as to conversion. How many equivalent units does this represent?

6. ____Willy has fixed costs of $30,000. The price of their product is $10 and the variable costs = $4 per unit. What is the breakeven point in units?

7. ____Tommie Co. has fixed costs of $250,000 and a CM ratio of .35. How much revenue would Tommie need to generate to make a profit of $60,000?

8. ____When creating a master budget, the first budget to be prepared is which one?

9. ____Bob computed the net present value of a project and found that the NPV was $2,000 when he discounted the future cash flows using a 6% discount rate. Was the IRR 6%, less than 6% or greater than 6%?

10. ___Billie computed the NPV for a project and found that NPV=0. Is the investment acceptable or unacceptable?

11. ___Barney invests $1,000 today. What is the future value of this investment at the end of 5 years if the money is invested at 8%?

12. ___Klingon is considering an investment which costs $13,337. The investment is for 8 years and generates cash flows of $2500 per year. The internal rate of return for this investment would be about?

13. ___Donna sets a price of $10 per unit on her product. The variable cost per unit is $8. What is the contribution margin ratio?

14. ___When goods get finished, the Finished Goods account is debited, but which account gets credited?

15. ___Johnson Company has fixed costs of $1,000,000. The contribution margin per unit is $4.00 and the contribution margin ratio is .40. The breakeven point in units would be?

16. ___William Company used too many direct labor hours in producing its product. Which variance would be unfavorable?

17. ___Name an appropriate cost driver that could be used as the denominator in the POR calculation.

18. ___Johnson Company invests $20,000 in a machine that will save $4,000 per year. The payback period would be?

19. ___Suppose that cash flows for years 1,2, and 3 are: $1,000, $2,000, and $3,000. What is the present value of this series of cash flows discounted at 12%?

20. ___How is the contribution margin ratio calculated?

21. ___Tony Inc. overapplied the MO in the amount of $3,000. When MO is closed, will Cost of Goods Sold be debited or credited?

22. ___When created the COGM statement, how is total manufacturing cost incurred computed?

23. ___The inventory formula used in the production budget goes like this: Sales in units + __________ minus _________= units to produce.

24. ___The present value of a lump sum of $1 to be received in 2 years discounted at 4% is?

25. ___Name two capital budgeting methods that rely on the time value of money (in other words, present value is calculated).

26. ___At Bobs Big Burgers, the cook, Danny, is paid at the rate of $15 per hour. Would this be a variable cost, a fixed cost, or a mixed cost?

27. ___What is the criterion (or the event) for Finished Goods to move on to Cost of Goods Sold?

28. ___John pays $4198.10 to receive one cash flow in 3 years of $5,000. What is Johns internal rate of return?

29. ___If Penny has fixed costs of $30,000 and her CM ratio is .4, what is Pennys breakeven point in revenue?

30. ___Sally pays $14,125.50 to receive a $2500 annuity for 10 years. What is Sallys internal rate of return?

II. Can you fill in the following present value table?

Problem 4: Present Value TablesFill in

PV of $1		PV of Annuity of $1
Periods 9%		Periods 9%
1		1
2		2
3		3

Problem 1: Watson Manufacturing has an opportunity to invest $96,000 in a new machine. The new machine will result in cost savings of $25,000 in year 1, $25,000 in year 2, $25,000 in year 3, $25,000 in year 4, and $25,000 in year 5. The new machine will require a tune-up in year 3 costing $3,000. The salvage value of the machine will be $10,000 at the end of year 5. Watson's cost of capital is 10%. Create a table showing the cash flows in each year of the project and compute the NPV.

0	1	2	3	4	5

The NPV is: $_____________________Is the investment acceptable? ___________

BUDGETS
Johnson Company expects sales of 24,000 units in January, 26,000 units in February, and
28,000 units in March. The sales price per unit is $15. Create a sales budget.
Sales Budget	Jan	Feb	Mar	Total
Unit Sales
Price
Sales Revenue
Johnson wants to finish each month with 20% of the next months sales in
units. Create a production budget, assuming that the January beginning
inventory is 10,000 units, and April sales will amount to 30,000 units.
Production Budget	Jan	Feb	Mar	Total
Sales
Desired Ending Inven.
Total
Beginning Inventory
Units to Produce

Traditional Income Statement			Contribution Income Statement
Sales	840,000		Sales	840,000
Cost of Goods Sold	760,000		Total Variable Costs
Gross Profit	80,000		Contribution Margin
Selling & Admin Expenses	25,000		Total Fixed Costs
Operating Income	55,000		Operating Income

Nevins Cost of Goods Sold was 60% variable and 40% fixed. The Selling and Administrative Costs were 30% variable and 70% fixed. Convert the traditional income statement to a contribution income statement by filling in the statement above, on the right.

Using the contribution income statement, calculate the contribution margin ratio. _______

What is Nevin Companys breakeven point in revenue?______________

How much revenue would be necessary to make an operating income of $100,000? __________