Details of this Paper

PART I (20 Points, 1 Points each) Multiple Choi...




PART I (20 Points, 1 Points each) Multiple Choice: Indicate the answer that best completes the opening statement. 1. A variable cost is a cost that a. varies per unit at every level of activity. b. occurs at various times during the year. c. varies in total in proportion to changes in the level of activity. d. may or may not be incurred, depending on management's discretion. 2. A cost which remains constant in total at various levels of activity is a a. variable cost. b. fixed cost. c. mixed cost. d. manufacturing cost. 3. Which of the following costs are variable? Cost 10,000 Units 30,000 Units 1. $100,000 $300,000 2. 40,000 240,000 3. 90,000 90,000 4. 50,000 150,000 a. 1 and 2. b. 1 and 4. c. only 1. d. only 2. 4. The high-low method is often employed in analyzing a. fixed costs. b. mixed costs. c. variable costs. d. conversion costs. 5. Contribution margin a. is always the same as gross profit margin. b. excludes variable selling costs from its calculation. c. is calculated by subtracting total manufacturing costs per unit from sales revenue per unit. d. equals sales revenue minus variable costs. 6. If a company had a contribution margin of $150,000 and a contribution margin ratio of 40%, total variable costs must have been a. $225,000. b. $90,000. c. $375,000. d. $60,000. 7. A company has contribution margin per unit of $12 and a contribution margin ratio of 40%. What is the unit selling price? a. $20.00. b. $30.00. c. $4.80. d. Cannot be determined. 8. Sales are $250,000 and variable costs are $175,000. What is the contribution margin ratio? a. 43% b. 30% c. 70% d. cannot be determined because amounts are not expressed per unit. 9. A company has total fixed costs of $150,000 and a contribution margin ratio of 20%. The total sales necessary to break even are a. $600,000. b. $750,000. c. $187,500. d. $180,000. 10. A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $80,000. The number of units the company must sell to break even is a. 40,000 units. b. 16,000 units. c. 160,000 units. d. 26,667 units. 11. Fixed costs are $600,000 and the contribution margin per unit is $150. What is the break-even point? a. $1,500,000. b. $4,000,000. c. 1,500 units. d. 4,000 units. 12. A company is considering the following alternatives: Alternative 1 Alternative 2 Revenues $120,000 $120,000 Variable costs 60,000 70,000 Fixed costs 35,000 35,000 Which of the following are relevant in choosing between the alternatives? a. Variable costs b. Revenues c. Fixed costs d. Variable costs and fixed costs 13. A company has a process that results in 6,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $40,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action? a. Sell now, the company will be better off by $4,000. b. Process further, the company will be better off by $4,000. c. Process further, the company will be better off by $36,000. d. Sell now, the company will be better off by $40,000. 14. A company can produce and sell only one of the following two products: Machine Contribution Hours Required Margin Per Unit Product 1 3 $30 Product 2 2 $25 If the company has machine capacity of 2,000 hours, what is the total contribution margin of the product it should produce to maximize net income? a. $20,000. b. $24,000. c. $25,000. d. $16,000. 15. Which one of the following is NOT a benefit of budgeting? a. It facilitates the coordination of activities. b. It provides assurance that the company will achieve its objectives. c. It provides definite objectives for evaluating performance. d. It requires all levels of management to plan ahead on a recurring basis. 16. A master budget consists of a. an interrelated long-term plan and operating budgets. b. financial budgets and a long-term plan. c. interrelated financial budgets and operating budgets. d. all the accounting journals and ledgers used by a company. 17. The starting point in preparing a master budget is the preparation of the a. production budget. b. sales budget. c. purchasing budget. d. personnel budget. 18. An overly optimistic sales budget may result in a. increases in selling prices late in the year. b. insufficient inventories. c. increased sales during the year. d. excessive inventories. 19. The cash budget reflects a. all revenues and all expenses for a period. b. all the items that appear on a budgeted income statement. c. expected cash receipts and cash disbursements from all sources. d. all the items that appear on a budgeted balance sheet. 20. Which one of the following items would never appear on a cash budget? a. Office salaries expense b. Interest expense c. Depreciation expense d. Travel expense PART II (20 Points) Jim Wayman is considering opening a Kwik Oil Change Center. He estimates that the following costs will be incurred during his first year of operations: Rent $6,000, Depreciation on equipment $7,000, Wages $13,700, Motor oil $1.25 per quart. He estimates that each oil change will require 5 quarts of oil. Oil filters will cost $3.00 each. He must also pay The Kwik Corporation a franchise fee of $.95 per oil change since he will operate the business as a franchise. In addition, utility costs are expected to behave in relation to the number of oil changes as follows: Number of Oil Changes Utility Costs 4,000 $6,000 6,000 $7,300 9,000 $9,600 12,000 $12,600 19,000 $15,000 Mr. Wayman anticipates that he can provide the oil change service with a filter at $18.00 each. Instructions: (a) Using the high-low method for utility costs, determine the variable and fixed costs for utilities. (b) Compute the total variable costs per oil change and total fixed costs (don't forget to include the variable and fixed utility costs determine in "a"). (c) Determine the break-even point in number of oil changes and sales dollars. (d) Without regard to your answers in parts (a), (b) and (c), determine the oil changes required to earn net income of $20,000, assuming fixed costs are $28,000 and the contribution margin per unit is $8. PART III (20 Points) The Unruh Company reports the following results for the month of November: Sales (10,000 units) $600,000 Variable costs 420,000 Contribution margin 180,000 Fixed costs 110,000 Net income $ 70,000 Management is considering the following independent courses of action to increase net income. 1. Increase selling price by 10% with no change in total variable costs. 2. Reduce variable costs to 60% of sales. 3. Reduce fixed costs by $30,000. Instructions: If maximizing net income is the objective, which is the best course of action? Show all of your computations. PART IV (10 points) Carter Company manufactures cappuccino makers. For the first eight months of the year the company reported the following operating results while operating at 80% of plant capacity: Sales (500,000 units) $75,000,000 Cost of goods sold 45,000,000 Gross profit 30,000,000 Operating expenses 24,000,000 Net income $ 6,000,000 An analysis of costs and expenses reveals that variable cost of goods sold is $80 per unit and variable operating expenses are $30 per unit. In September, Carter Company receives a special order for 40,000 machines at $120 each from a major coffee shop franchise. Acceptance of the order would result in $10,000 of shipping costs but no increase in fixed expenses. Instructions (a) Prepare an incremental analysis for the special order. (b) Should Carter Company accept the special order? Justify your answer. PART V (10 points) Barnes Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs: Direct materials $35,000 Direct labor 15,000 Variable manufacturing overhead 10,000 Fixed manufacturing overhead 20,000 $80,000 Another company has offered to sell the same component part to the company for $12.00 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Barnes Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $16,000. Instructions Prepare an incremental analysis report for Barnes Company which can serve as informational input into this make or buy decision. PART VI (20 Points) The Gannon Company has budgeted sales revenues as follows: June July August Credit sales $27,000 $29,000 $18,000 Cash sales 18,000 51,000 39,000 Total sales $45,000 $80,000 $57,000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are: June $60,000 July 50,000 August 21,000 Other cash disbursements budgeted: (a) selling and administrative expenses of $9,500 each month, (b) dividends of $22,700 will be paid in July, and (c) purchase of a computer in August for $5,000 cash. The company MUST maintain a minimum cash balance of $10,000 at the end of each month. The company borrows money from the bank at 9% per year interest if necessary to maintain the minimum cash balance of $10,000. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $10,000 of which none is borrowed. Instructions: Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.,I cannot open the first document you sent can you save it in a different version of word? Also i cannot have my answers on an excel spreadsheet please save that to a word document as well. Thank you


Paper#2291 | Written in 18-Jul-2015

Price : $25