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Posted on Jun 19, 2024

Ratio Analysis 1. The current ratio for a company with current assets of $70,000, quick assets of $30,000, total assets of $150,000 current liabilities of

Ratio Analysis 1. The current ratio for a company with current assets of $70,000, quick assets of $30,000, total assets of $150,000 current liabilities of $50,000 and net sales of $80,000 would be: A. 0.20. B. 1.40. C. 3.00. D. 1.00. 2. Rick's has a cash balance of $80,000; short-term investments of $20,000; net receivables of $60,000; and inventory of $450,000. Current liabilities total $200,000. Ricks' acid test (quick ratio) is within: A. 3.05 to 1. B. 2.25 to 1. C. 0.80 to 1. D. 0.54 to 1. 3. Isaiah Company has net income of $720,000, beginning total assets of $2,100,000, and ending total assets of $2,300,000. Isaiah's return on total assets is: A. 32.7%. B. 11.2%. C. 3.1%. D 31.3%. 4.Tammy Company has a beginning accounts receivable balance of $65,000 and an ending accounts receivable balance of $60,000. Net credit sales are $250,000. Tammy's accounts receivable turnover rate is: A. 3.846. B. 4.167. C. 4.000. D. 2.000. 5. With a beginning accounts receivable balance of $80,000; an ending accounts receivable balance of $120,000; and net credit sales of $900,000, the accounts receivable turnover is: A. 9.00. B. 4.50. C. 7.50. D. 11.25. 6. Topiary's Unlimited has a cost of goods sold of $1,600,000. The beginning merchandise inventory was $195,000 and the ending merchandise inventory is $205,000. Topiary's merchandise inventory turnover ratio is: A. 8.21 times. B. 7.80 times. C. 8.00 times. D. 9.00 times. 7. Amanda's has a cost of goods sold of $1,900,000. The beginning and ending merchandise inventories are $133,000 and $125,000, respectively. Amanda's merchandise inventory turnover ratio is: A. 65.5 times. B. 33.8 times. C. 14.7 times. D. 29.4 times. 8. Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year. Net credit sales during the year amounted to $2,000,000. The average collection period of the receivables in terms of days was a. 30 days. b. 365 days. c. 146 days. d. 73 days 9.Parr Hardware Store had net credit sales of $6,500,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The receivables turnover was a. 7.7 times. b. 10.8 times. c. 9.3 times. d. 10 times. 10.Waters Department Store had net credit sales of $16,000,000 and cost of goods sold of $12,000,000 for the year. The average inventory for the year amounted to $2,000,000. Inventory turnover for the year is a. 8 times. b. 14 times. c. 6 times. d. 4 times. 11.Waters Department Store had net credit sales of $16,000,000 and cost of goods sold of $12,000,000 for the year. The average inventory for the year amounted to $2,000,000. The average number of days in inventory during the year was a. 91 days. b. 61 days. c. 46 days. d. 26 days. 12.The current assets of Kile Company are $150,000. The current liabilities are $100,000. The current ratio expressed as a proportion is a. b. c. d. 150%. 1.5 : 1 .67 : 1 $150,000 $100,000 13. A company has a receivables turnover of 10 times. The average net receivables during the period are $400,000. What is the amount of net credit sales for the period? a. $40,000 b. $4,000,000 c. $480,000 d. Cannot be determined from the information given 14.Gold Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year. Net credit sales during the year amounted to $7,650,000. The receivables turnover ratio was a. 9.0 times. b. 4.5 times. c. 8.7 times. d. 9.3 times. 15. Gold Clothing Store had a balance in the Accounts Receivable account of $810,000 at the beginning of the year and a balance of $850,000 at the end of the year. Net credit sales during the year amounted to $6,640,000. The average collection period of the receivables in terms of days was a. 91.3 days. b. 45.6 days. c. 30 days. d. 46.7 days. 16. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments Accounts receivable (net) Inventory Property, plant and equipment Total Assets $ 45,000 25,000 20,000 210,000 $300,000 Liabilities and Stockholders' Equity Current liabilities Long-term liabilities Stockholders' equitycommon Total Liabilities and Stockholders' Equity $ 50,000 90,000 160,000 $300,000 Income Statement Sales Cost of goods sold Gross margin Operating expenses Net income $ 120,000 66,000 54,000 30,000 $ 24,000 Number of shares of common stock Market price of common stock Dividends per share 6,000 $20 .50 What is the current ratio for Soho? a. 1.80 b. 1.30 c. 1.40 d. .64 17.The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments Accounts receivable (net) Inventory Property, plant and equipment Total Assets $ 45,000 25,000 20,000 210,000 $300,000 Liabilities and Stockholders' Equity Current liabilities Long-term liabilities Stockholders' equitycommon Total Liabilities and Stockholders' Equity $ 50,000 90,000 160,000 $300,000 Income Statement Sales Cost of goods sold Gross margin Operating expenses Net income Number of shares of common stock Market price of common stock Dividends per share What is the receivables turnover for Soho? $ 120,000 66,000 54,000 30,000 $ 24,000 6,000 $20 .50 a. b. c. d. 2.1 times 2 times 4.8 times 9.6 times 18.The following financial statement information is available for Houser Corporation: 2011 Inventory Current assets Total assets Current liabilities Total liabilities 2010 $ 44,000 81,000 432,000 30,000 102,000 $ 43,000 106,000 358,000 36,000 88,000 The current ratio for 2011 is a. .37:1. b. 2.7:1. c. .79:1. d. 4.24:1. Relevant Cost 1.Alvarez Company is considering the following alternatives: Revenues Variable costs Fixed costs Alternative A $50,000 30,000 10,000 Alternative B $60,000 30,000 16,000 What is the incremental profit? a. $10,000 b. $0 c. $6,000 d. $4,000 2. Seville Company manufactures a product with a unit variable cost of $42 and a unit sales price of $75. Fixed manufacturing costs were $80,000 when 10,000 units were produced and sold, equating to $8 per unit. The company has a one-time opportunity to sell an additional 2,000 units at $55 each in an international market which would not affect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? a. $84,000 b. $10,000 c. $40,000 d. $26,000 3. It costs Lannon Fields $14 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30. A buyer in Mexico offers to purchase 3,000 units at $18 each. Lannon Fields has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income? a. Decrease $6,000 b. Increase $6,000 c. Increase $54,000 d. Increase $12,000 4. It costs Fortune Company $10 of variable and $4 of fixed costs to produce one bathroom scale, which normally sells for $28. A foreign wholesaler offers to purchase 1,000 scales at $12 each. Fortune would incur special shipping costs of $1 per scale if the order were accepted. Fortune has sufficient unused capacity to produce the 1,000 scales. If the special order is accepted, what will be the effect on net income? a. $1,000 increase b. $1,000 decrease c. $2,000 decrease d. $12,000 increase 5. A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units: Direct materials Direct labor Variable overhead Fixed overhead $4 10 8 6 A foreign company wants to purchase 1,000 units at a special unit price of $25. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $2,000 in order to stamp the foreign company's name on the product. The incremental income (loss) from accepting the order is a. $3,000. b. $1,000. c. $(3,000). d. $(1,000). 6. Chapman Company manufactures widgets. Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $80,000 for 100,000 units. Chapman is currently making these components in its own factory. The following costs are associated with this part of the process when 100,000 units are produced: Direct materials Direct labor Manufacturing overhead Total $ 31,000 29,000 40,000 $100,000 The manufacturing overhead consists of $16,000 of costs that will be eliminated if the components are no longer produced by Chapman. From Chapman's point of view, how much is the incremental cost or savings if the widgets are bought instead of made? a. b. c. d. $20,000 incremental savings $4,000 incremental cost $4,000 incremental savings $20,000 incremental cost 7. Saran Company has contacted Truckel with an offer to sell it 5,000 of the wickets for $36 each. If Truckel makes the wickets, variable costs are $22 per unit. Fixed costs are $16 per unit; however, $10 per unit is unavoidable. Should Truckel make or buy the wickets? a. Buy; savings = $50,000 b. Buy; savings = $20,000 c. Make; savings = $40,000 d. Make; savings = $20,000 Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Sales $500,000 Variable expenses Contribution margin Fixed expenses Net income (loss) Wood $200,000 325,000 175,000 75,000 $100,000 Aluminum $ 65,000 140,000 60,000 35,000 $ 25,000 Hard Rubber $765,000 58,000 7,000 22,000 $(15,000) Total 523,000 242,000 132,000 $110,000 8. Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped? a. $125,000 b. $103,000 c. $105,000 d. $140,000 9. Assume all of the fixed expenses for the hard rubber line are avoidable. What will be total net income if that line is dropped? a. $125,000 b. $103,000 c. $105,000 d. $140,000 10. If the total net income after dropping the hard rubber line is $105,000, hard rubber's avoidable fixed expenses were a. $20,000. b. $2,000. c. $7,000. d. $5,000. Ratio Analysis 1. The current ratio for a company with current assets of $70,000, quick assets of $30,000, total assets of $150,000 current liabilities of $50,000 and net sales of $80,000 would be: A. 0.20. B. 1.40. C. 3.00. D. 1.00. 2. Rick's has a cash balance of $80,000; short-term investments of $20,000; net receivables of $60,000; and inventory of $450,000. Current liabilities total $200,000. Ricks' acid test (quick ratio) is within: A. 3.05 to 1. B. 2.25 to 1. C. 0.80 to 1. D. 0.54 to 1. 3. Isaiah Company has net income of $720,000, beginning total assets of $2,100,000, and ending total assets of $2,300,000. Isaiah's return on total assets is: A. 32.7%. B. 11.2%. C. 3.1%. D 31.3%. 4.Tammy Company has a beginning accounts receivable balance of $65,000 and an ending accounts receivable balance of $60,000. Net credit sales are $250,000. Tammy's accounts receivable turnover rate is: A. 3.846. B. 4.167. C. 4.000. D. 2.000. 5. With a beginning accounts receivable balance of $80,000; an ending accounts receivable balance of $120,000; and net credit sales of $900,000, the accounts receivable turnover is: A. 9.00. B. 4.50. C. 7.50. D. 11.25. 6. Topiary's Unlimited has a cost of goods sold of $1,600,000. The beginning merchandise inventory was $195,000 and the ending merchandise inventory is $205,000. Topiary's merchandise inventory turnover ratio is: A. 8.21 times. B. 7.80 times. C. 8.00 times. D. 9.00 times. 7. Amanda's has a cost of goods sold of $1,900,000. The beginning and ending merchandise inventories are $133,000 and $125,000, respectively. Amanda's merchandise inventory turnover ratio is: A. 65.5 times. B. 33.8 times. C. 14.7 times. D. 29.4 times. 8. Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year. Net credit sales during the year amounted to $2,000,000. The average collection period of the receivables in terms of days was a. 30 days. b. 365 days. c. 146 days. d. 73 days 9.Parr Hardware Store had net credit sales of $6,500,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The receivables turnover was a. 7.7 times. b. 10.8 times. c. 9.3 times. d. 10 times. 10.Waters Department Store had net credit sales of $16,000,000 and cost of goods sold of $12,000,000 for the year. The average inventory for the year amounted to $2,000,000. Inventory turnover for the year is a. 8 times. b. 14 times. c. 6 times. d. 4 times. 11.Waters Department Store had net credit sales of $16,000,000 and cost of goods sold of $12,000,000 for the year. The average inventory for the year amounted to $2,000,000. The average number of days in inventory during the year was a. 91 days. b. 61 days. c. 46 days. d. 26 days. 12.The current assets of Kile Company are $150,000. The current liabilities are $100,000. The current ratio expressed as a proportion is a. b. c. d. 150%. 1.5 : 1 .67 : 1 $150,000 $100,000 13. A company has a receivables turnover of 10 times. The average net receivables during the period are $400,000. What is the amount of net credit sales for the period? a. $40,000 b. $4,000,000 c. $480,000 d. Cannot be determined from the information given 14.Gold Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year. Net credit sales during the year amounted to $7,650,000. The receivables turnover ratio was a. 9.0 times. b. 4.5 times. c. 8.7 times. d. 9.3 times. 15. Gold Clothing Store had a balance in the Accounts Receivable account of $810,000 at the beginning of the year and a balance of $850,000 at the end of the year. Net credit sales during the year amounted to $6,640,000. The average collection period of the receivables in terms of days was a. 91.3 days. b. 45.6 days. c. 30 days. d. 46.7 days. 16. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments Accounts receivable (net) Inventory Property, plant and equipment Total Assets $ 45,000 25,000 20,000 210,000 $300,000 Liabilities and Stockholders' Equity Current liabilities Long-term liabilities Stockholders' equitycommon Total Liabilities and Stockholders' Equity $ 50,000 90,000 160,000 $300,000 Income Statement Sales Cost of goods sold Gross margin Operating expenses Net income $ 120,000 66,000 54,000 30,000 $ 24,000 Number of shares of common stock Market price of common stock Dividends per share 6,000 $20 .50 What is the current ratio for Soho? a. 1.80 b. 1.30 c. 1.40 d. .64 17.The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments Accounts receivable (net) Inventory Property, plant and equipment Total Assets $ 45,000 25,000 20,000 210,000 $300,000 Liabilities and Stockholders' Equity Current liabilities Long-term liabilities Stockholders' equitycommon Total Liabilities and Stockholders' Equity $ 50,000 90,000 160,000 $300,000 Income Statement Sales Cost of goods sold Gross margin Operating expenses Net income Number of shares of common stock Market price of common stock Dividends per share What is the receivables turnover for Soho? $ 120,000 66,000 54,000 30,000 $ 24,000 6,000 $20 .50 a. b. c. d. 2.1 times 2 times 4.8 times 9.6 times 18.The following financial statement information is available for Houser Corporation: 2011 Inventory Current assets Total assets Current liabilities Total liabilities 2010 $ 44,000 81,000 432,000 30,000 102,000 $ 43,000 106,000 358,000 36,000 88,000 The current ratio for 2011 is a. .37:1. b. 2.7:1. c. .79:1. d. 4.24:1. Relevant Cost 1.Alvarez Company is considering the following alternatives: Revenues Variable costs Fixed costs Alternative A $50,000 30,000 10,000 Alternative B $60,000 30,000 16,000 What is the incremental profit? a. $10,000 b. $0 c. $6,000 d. $4,000 2. Seville Company manufactures a product with a unit variable cost of $42 and a unit sales price of $75. Fixed manufacturing costs were $80,000 when 10,000 units were produced and sold, equating to $8 per unit. The company has a one-time opportunity to sell an additional 2,000 units at $55 each in an international market which would not affect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? a. $84,000 b. $10,000 c. $40,000 d. $26,000 3. It costs Lannon Fields $14 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30. A buyer in Mexico offers to purchase 3,000 units at $18 each. Lannon Fields has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income? a. Decrease $6,000 b. Increase $6,000 c. Increase $54,000 d. Increase $12,000 4. It costs Fortune Company $10 of variable and $4 of fixed costs to produce one bathroom scale, which normally sells for $28. A foreign wholesaler offers to purchase 1,000 scales at $12 each. Fortune would incur special shipping costs of $1 per scale if the order were accepted. Fortune has sufficient unused capacity to produce the 1,000 scales. If the special order is accepted, what will be the effect on net income? a. $1,000 increase b. $1,000 decrease c. $2,000 decrease d. $12,000 increase 5. A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units: Direct materials Direct labor Variable overhead Fixed overhead $4 10 8 6 A foreign company wants to purchase 1,000 units at a special unit price of $25. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $2,000 in order to stamp the foreign company's name on the product. The incremental income (loss) from accepting the order is a. $3,000. b. $1,000. c. $(3,000). d. $(1,000). 6. Chapman Company manufactures widgets. Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $80,000 for 100,000 units. Chapman is currently making these components in its own factory. The following costs are associated with this part of the process when 100,000 units are produced: Direct materials Direct labor Manufacturing overhead Total $ 31,000 29,000 40,000 $100,000 The manufacturing overhead consists of $16,000 of costs that will be eliminated if the components are no longer produced by Chapman. From Chapman's point of view, how much is the incremental cost or savings if the widgets are bought instead of made? a. b. c. d. $20,000 incremental savings $4,000 incremental cost $4,000 incremental savings $20,000 incremental cost 7. Saran Company has contacted Truckel with an offer to sell it 5,000 of the wickets for $36 each. If Truckel makes the wickets, variable costs are $22 per unit. Fixed costs are $16 per unit; however, $10 per unit is unavoidable. Should Truckel make or buy the wickets? a. Buy; savings = $50,000 b. Buy; savings = $20,000 c. Make; savings = $40,000 d. Make; savings = $20,000 Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Sales $500,000 Variable expenses Contribution margin Fixed expenses Net income (loss) Wood $200,000 325,000 175,000 75,000 $100,000 Aluminum $ 65,000 140,000 60,000 35,000 $ 25,000 Hard Rubber $765,000 58,000 7,000 22,000 $(15,000) Total 523,000 242,000 132,000 $110,000 8. Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped? a. $125,000 b. $103,000 c. $105,000 d. $140,000 9. Assume all of the fixed expenses for the hard rubber line are avoidable. What will be total net income if that line is dropped? a. $125,000 b. $103,000 c. $105,000 d. $140,000 10. If the total net income after dropping the hard rubber line is $105,000, hard rubber's avoidable fixed expenses were a. $20,000. b. $2,000. c. $7,000. d. $5,000. Ratio Analysis 1. The current ratio for a company with current assets of $70,000, quick assets of $30,000, total assets of $150,000 current liabilities of $50,000 and net sales of $80,000 would be: A. 0.20. B. 1.40. C. 3.00. D. 1.00. 2. Rick's has a cash balance of $80,000; short-term investments of $20,000; net receivables of $60,000; and inventory of $450,000. Current liabilities total $200,000. Ricks' acid test (quick ratio) is within: A. 3.05 to 1. B. 2.25 to 1. C. 0.80 to 1. D. 0.54 to 1. 3. Isaiah Company has net income of $720,000, beginning total assets of $2,100,000, and ending total assets of $2,300,000. Isaiah's return on total assets is: A. 32.7%. B. 11.2%. C. 3.1%. D 31.3%. 4.Tammy Company has a beginning accounts receivable balance of $65,000 and an ending accounts receivable balance of $60,000. Net credit sales are $250,000. Tammy's accounts receivable turnover rate is: A. 3.846. B. 4.167. C. 4.000. D. 2.000. 5. With a beginning accounts receivable balance of $80,000; an ending accounts receivable balance of $120,000; and net credit sales of $900,000, the accounts receivable turnover is: A. 9.00. B. 4.50. C. 7.50. D. 11.25. 6. Topiary's Unlimited has a cost of goods sold of $1,600,000. The beginning merchandise inventory was $195,000 and the ending merchandise inventory is $205,000. Topiary's merchandise inventory turnover ratio is: A. 8.21 times. B. 7.80 times. C. 8.00 times. D. 9.00 times. 7. Amanda's has a cost of goods sold of $1,900,000. The beginning and ending merchandise inventories are $133,000 and $125,000, respectively. Amanda's merchandise inventory turnover ratio is: A. 65.5 times. B. 33.8 times. C. 14.7 times. D. 29.4 times. 8. Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year. Net credit sales during the year amounted to $2,000,000. The average collection period of the receivables in terms of days was a. 30 days. b. 365 days. c. 146 days. d. 73 days 9.Parr Hardware Store had net credit sales of $6,500,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The receivables turnover was a. 7.7 times. b. 10.8 times. c. 9.3 times. d. 10 times. 10.Waters Department Store had net credit sales of $16,000,000 and cost of goods sold of $12,000,000 for the year. The average inventory for the year amounted to $2,000,000. Inventory turnover for the year is a. 8 times. b. 14 times. c. 6 times. d. 4 times. 11.Waters Department Store had net credit sales of $16,000,000 and cost of goods sold of $12,000,000 for the year. The average inventory for the year amounted to $2,000,000. The average number of days in inventory during the year was a. 91 days. b. 61 days. c. 46 days. d. 26 days. 12.The current assets of Kile Company are $150,000. The current liabilities are $100,000. The current ratio expressed as a proportion is a. b. c. d. 150%. 1.5 : 1 .67 : 1 $150,000 $100,000 13. A company has a receivables turnover of 10 times. The average net receivables during the period are $400,000. What is the amount of net credit sales for the period? a. $40,000 b. $4,000,000 c. $480,000 d. Cannot be determined from the information given 14.Gold Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year. Net credit sales during the year amounted to $7,650,000. The receivables turnover ratio was a. 9.0 times. b. 4.5 times. c. 8.7 times. d. 9.3 times. 15. Gold Clothing Store had a balance in the Accounts Receivable account of $810,000 at the beginning of the year and a balance of $850,000 at the end of the year. Net credit sales during the year amounted to $6,640,000. The average collection period of the receivables in terms of days was a. 91.3 days. b. 45.6 days. c. 30 days. d. 46.7 days. 16. The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments Accounts receivable (net) Inventory Property, plant and equipment Total Assets $ 45,000 25,000 20,000 210,000 $300,000 Liabilities and Stockholders' Equity Current liabilities Long-term liabilities Stockholders' equitycommon Total Liabilities and Stockholders' Equity $ 50,000 90,000 160,000 $300,000 Income Statement Sales Cost of goods sold Gross margin Operating expenses Net income $ 120,000 66,000 54,000 30,000 $ 24,000 Number of shares of common stock Market price of common stock Dividends per share 6,000 $20 .50 What is the current ratio for Soho? a. 1.80 b. 1.30 c. 1.40 d. .64 17.The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments Accounts receivable (net) Inventory Property, plant and equipment Total Assets $ 45,000 25,000 20,000 210,000 $300,000 Liabilities and Stockholders' Equity Current liabilities Long-term liabilities Stockholders' equitycommon Total Liabilities and Stockholders' Equity $ 50,000 90,000 160,000 $300,000 Income Statement Sales Cost of goods sold Gross margin Operating expenses Net income Number of shares of common stock Market price of common stock Dividends per share What is the receivables turnover for Soho? $ 120,000 66,000 54,000 30,000 $ 24,000 6,000 $20 .50 a. b. c. d. 2.1 times 2 times 4.8 times 9.6 times 18.The following financial statement information is available for Houser Corporation: 2011 Inventory Current assets Total assets Current liabilities Total liabilities 2010 $ 44,000 81,000 432,000 30,000 102,000 $ 43,000 106,000 358,000 36,000 88,000 The current ratio for 2011 is a. .37:1. b. 2.7:1. c. .79:1. d. 4.24:1. Relevant Cost 1.Alvarez Company is considering the following alternatives: Revenues Variable costs Fixed costs Alternative A $50,000 30,000 10,000 Alternative B $60,000 30,000 16,000 What is the incremental profit? a. $10,000 b. $0 c. $6,000 d. $4,000 2. Seville Company manufactures a product with a unit variable cost of $42 and a unit sales price of $75. Fixed manufacturing costs were $80,000 when 10,000 units were produced and sold, equating to $8 per unit. The company has a one-time opportunity to sell an additional 2,000 units at $55 each in an international market which would not affect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? a. $84,000 b. $10,000 c. $40,000 d. $26,000 3. It costs Lannon Fields $14 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30. A buyer in Mexico offers to purchase 3,000 units at $18 each. Lannon Fields has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income? a. Decrease $6,000 b. Increase $6,000 c. Increase $54,000 d. Increase $12,000 4. It costs Fortune Company $10 of variable and $4 of fixed costs to produce one bathroom scale, which normally sells for $28. A foreign wholesaler offers to purchase 1,000 scales at $12 each. Fortune would incur special shipping costs of $1 per scale if the order were accepted. Fortune has sufficient unused capacity to produce the 1,000 scales. If the special order is accepted, what will be the effect on net income? a. $1,000 increase b. $1,000 decrease c. $2,000 decrease d. $12,000 increase 5. A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units: Direct materials Direct labor Variable overhead Fixed overhead $4 10 8 6 A foreign company wants to purchase 1,000 units at a special unit price of $25. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $2,000 in order to stamp the foreign company's name on the product. The incremental income (loss) from accepting the order is a. $3,000. b. $1,000. c. $(3,000). d. $(1,000). 6. Chapman Company manufactures widgets. Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $80,000 for 100,000 units. Chapman is currently making these components in its own factory. The following costs are associated with this part of the process when 100,000 units are produced: Direct materials Direct labor Manufacturing overhead Total $ 31,000 29,000 40,000 $100,000 The manufacturing overhead consists of $16,000 of costs that will be eliminated if the components are no longer produced by Chapman. From Chapman's point of view, how much is the incremental cost or savings if the widgets are bought instead of made? a. b. c. d. $20,000 incremental savings $4,000 incremental cost $4,000 incremental savings $20,000 incremental cost 7. Saran Company has contacted Truckel with an offer to sell it 5,000 of the wickets for $36 each. If Truckel makes the wickets, variable costs are $22 per unit. Fixed costs are $16 per unit; however, $10 per unit is unavoidable. Should Truckel make or buy the wickets? a. Buy; savings = $50,000 b. Buy; savings = $20,000 c. Make; savings = $40,000 d. Make; savings = $20,000 Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Sales $500,000 Variable expenses Contribution margin Fixed expenses Net income (loss) Wood $200,000 325,000 175,000 75,000 $100,000 Aluminum $ 65,000 140,000 60,000 35,000 $ 25,000 Hard Rubber $765,000 58,000 7,000 22,000 $(15,000) Total 523,000 242,000 132,000 $110,000 8. Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped? a. $125,000 b. $103,000 c. $105,000 d. $140,000 9. Assume all of the fixed expenses for the hard rubber line are avoidable. What will be total net income if that line is dropped? a. $125,000 b. $103,000 c. $105,000 d. $140,000 10. If the total net income after dropping the hard rubber line is $105,000, hard rubber's avoidable fixed expenses were a. $20,000. b. $2,000. c. $7,000. d. $5,000