Question #1:

List the three tests of an ethical business decision posed by the Institute of Business Ethics.

Question #2:

Pangle Health Food Store sells a variety of herbal supplements and natural skin care items. Pangle purchases the items from leading manufacturers. Identify each of the following costs incurred by Pangle in terms of its cost behavior - variable, fixed, mixed, or step.

Select the correct answer for each from the dropdown menu.

Dried fruits for making "All-natural trail mix"
Annual salary for salesclerk
Weight loss supplements packaged in bottles of 100 pills per bottle
Shipping charges for vitamin tablets (billed in 100-pound increments)
Telephone charges (base rate plus usage)
Advertising (annual contract with newspaper for one ad per week)
Salary for Cindi Pangle (president of company)
Sales bonus on body lotions of $1 per 100 sales
Sales bonus on body power of $0.10 per item sold
Straight line depreciation on store fixtures

Question 3

Match the following terms to the appropriate statement by placing the letter to the left of each statement.

Sales revenue is exactly equal to total costs, and there is no profit or loss.

The difference between current sales and breakeven sales.

Analysis that helps managers assess the impact of various business decisions on company profits.

The change in operating income relative to a change in sales.

The sales of each product relative to total sales

Adds an amount to the cost of the product or service to cover the company's operating costs and contribute to its profit.

Computes the desired markup and the maximum cost the company can incur to deliver a product or service at the market price.

Illustrates the relationship between sales and costs, allowing managers to view a range of results in a single glance.

The difference between the selling price and the cost of the product.

A way to compute the expected change in operating income due to a change in sales volume at a given level of sales.

Question 4

Logan's Enterprises reported the following data for May:

Beginning balance, Direct Materials Inventory	$45,000
Beginning balance, Work in Process Inventory	52,000
Beginning balance, Finished Goods Inventory	62,000
Ending balance, Direct Materials Inventory	47,000
Purchase of direct materials	92,000
Direct labor	48,000
Manufacturing overhead	42,000
Cost of Goods Manufactured	200,000
Cost of Goods Sold	220,000

• How much direct materials were used in production?
• What were the total manufacturing costs for the month of May?
• What was the ending balance in the Finished Goods Inventory account?

Question 5

Milligan Manufacturing Company produces and sells garden tools. The company has developed the following production plan for its new electric trimmer.

	January	February	March	April
Budgeted production (in units)	4,000	4,000	5,000	6,000

Each unit requires three feet of metal tubing. The company wishes to have ending inventory equal to 110% of its next month's production needs, plus an additional 100 feet. January's beginning inventory meets this requirement. Milligan's standard cost per foot is $2.80.

• Prepare the 1^st quarter direct materials purchase budget for metal tubing.

Question 6

Cooper Company, a retailer of camping supplies has budgeted activity for January using the following data:

January cash sales	$ 50,000
January credit Sales	380,000
Collections from December credit sales	150,000
Selling and administrative costs (paid in month of purchase)	50,000
Depreciation expense	25,000
Merchandise Inventory, January 1	200,000
Merchandise Inventory, January 31	210,000
Cost of goods sold is 40% of Cooper's selling price
All purchases are paid in cash
Credit sales are collected 60% in the month of sale, 35% in the following month, and 5% is deemed uncollectible

• What is Cooper's budgeted cash receipts for January?

Question 7

R&W Manufacturing Company produces men's hiker shorts. The selling price of the shorts is $35. The following standard cost data per unit includes $7 direct material, $4 direct labor and $12 manufacturing overhead (50% variable, 50% fixed). R&W has received a special order for 200 at a price of $20 each. The only additional cost of accepting the special order is a sales commission of $1 per unit. R&W has ample capacity to produce the special order without interrupting regular production. Ignoring qualitative factors, should R&W accept the special order?

Question 8

Paper Moon, a manufacturer of outdoor lighting fixtures is operating at less than full capacity. The plant manager is considering making the mounting brackets now being purchased from a supplier at $8 each. Paper Moon already has the equipment to produce the brackets. The plant manager has analyzed the cost of producing the brackets and determined that each bracket will require $2 of direct material, $1 of direct labor, and $8 of manufacturing overhead. Seventy-five percent of the manufacturing overhead is a fixed cost that would not be affected by the decision to manufacture the brackets. Should Paper Moon continue to purchase the brackets or produce them internally?

Question 9

Martin Company sells two products, Standard and Deluxe. Data for activity during January are as follows:

	Standard	Deluxe
Sales	$100,000	$120,000
Contribution margin	35%	30%
Traceable fixed costs	$15,000	$25,000

• Prepare a Segment Margin income statement. Common fixed costs of $25,000 are allocated one-half to Standard and one-half to Deluxe.

Question 10

Lakeside Industries' operates as a decentralized organization. Its fishing gear division manufactures fishing lures. The fiberglass division manufactures one component needed by the fishing gear division. The fishing gear division has been purchasing the component from an outside supplier, but top management has suggested that all purchases be made from another Lakeside division if possible. Detailed unit cost for the fiberglass component needed to make lures is given below:

Price charged to regular customers $2.00

Direct material $0.80

Direct labor $0.60

Manufacturing overhead $0.20

Total cost per unit $1.60

The manufacturing overhead is 60% fixed and 40% variable.

• What is the transfer price if Lakeside uses the cost-based price?
• What is the minimum transfer price?