Prepare a flexible budget performance report title (in proper form) for Spalding Company for the calendar year 2015. Why is a proper title important for this or any report?
> If Quail Company invests $50,000 today, it can expect to receive $10,000 at the end of each year for the next seven years, plus an extra $6,000 at the end of the seventh year. What is the net present value of this investment assuming a required 10% retur
> Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Assume Peng requires a 15% return on its investments. Comp
> Howard Co. is considering two alternative investments. The payback period is 3.5 years for Investment A and 4 years for Investment B. (1) If management relies on the payback period, which investment is preferred? (2) Why might Howard’s analysis of these
> Park Co. is considering an investment that requires immediate payment of $27,000 and provides expected cash inflows of $9,000 annually for four years. Assume Park Co. requires a 10% return on its investments. Based on its internal rate of return, should
> Heels, a shoe manufacturer, is evaluating the costs and benefits of new equipment that would custom fit each pair of athletic shoes. The customer would have his or her foot scanned by digital computer equipment; this information would be used to cut the
> Google applies overhead to product costs. What account(s) is (are) used to eliminate over-applied or under-applied overhead from the Factory Overhead account, assuming the amount is not material?
> Rory Company has a machine with a book value of $75,000 and a remaining five-year useful life. A new machine is available at a cost of $112,500, and Rory can also receive $60,000 for trading in its old machine. The new machine will reduce variable manufa
> A division of a large company reports the information shown below for a recent year. Variable costs and direct fixed costs are avoidable, and 40% of the indirect fixed costs are avoidable. Based on this information, should the division be eliminated?
> A guitar manufacturer is considering eliminating its electric guitar division because its $76,000 expenses are higher than its $72,000 sales. The company reports the following expenses for this division. Should the division be eliminated? Avoidable
> Excel Memory Company can sell all units of computer memory X and Y that it can produce, but it has limited production capacity. It can produce two units of X per hour or three units of Y per hour, and it has 4,000 production hours available. Contribution
> A company has already incurred $5,000 of costs in producing 6,000 units of Product XY. Product XY can be sold as is for $15 per unit. Instead, the company could incur further processing costs of $8 per unit and sell the resulting product for $21 per unit
> Holmes Company produces a product that can either be sold as is or processed further. Holmes has already spent $50,000 to produce 1,250 units that can be sold now for $67,500 to another manufacturer. Alternatively, Holmes can process the units further at
> Kando Company incurs a $9 per unit cost for Product A, which it currently manufactures and sells for $13.50 per unit. Instead of manufacturing and selling this product, the company can purchase Product B for $5 per unit and sell it for $12 per unit. If i
> Radar Company sells bikes for $300 each. The company currently sells 3,750 bikes per year and could make as many as 5,000 bikes per year. The bikes cost $225 each to make; $150 in variable costs per bike and $75 of fixed costs per bike. Radar received an
> A company is considering investing in a new machine that requires a cash payment of $47,947 today. The machine will generate annual cash flows of $21,000 for the next three years. Assume the company uses an 8% discount rate. Compute the net present value
> Refer to the information in QS 25-11 and instead assume the investment has a salvage value of $20,000. Compute the investment’s net present value. Information from QS 25-11: Following is information on an investment considered by Hudso
> Assume that we tour Samsung’s factory where it makes its products. List three direct costs and three indirect costs that we are likely to see.
> Following is information on an investment considered by Hudson Co. The investment has zero salvage value. The company requires a 12% return from its investments. Compute this investment’s net present value. Investment Al Initial in
> Compute return on investment for each of the divisions below (each is an investment center). Comment on the relative performance of each investment center. Investment Center Net Income Average Assets Return on Investment Cameras and camcorders $4,50
> Use the information in the following table to compute each department’s contribution to overhead (both in dollars and as a percent). Which department contributes the largest dollar amount to total overhead? Which contributes the highest
> Car Mart pays $130,000 rent each year for its two-story building. The space in this building is occupied by five departments as specified here. The company allocates 65% of total rent expense to the first floor and 35% to the second floor, and then all
> For each of the following types of indirect expenses and service department expenses, identify one allocation basis that could be used to distribute it to the departments indicated. ______ 1. Computer service expenses of production scheduling for operati
> A company purchases a 10,020 square-foot commercial building for $325,000 and spends an additional $50,000 to divide the space into two separate rental units and prepare it for rent. Unit A, which has the desirable location on the corner and contains 3,3
> The windshield division of Fast Car Co. makes windshields for use in Fast Car’s assembly division. The windshield division incurs variable costs of $200 per windshield and has capacity to make 500,000 windshields per year. The market price is $450 per wi
> The windshield division of Fast Car Co. makes windshields for use in Fast Car’s assembly division. The windshield division incurs variable costs of $200 per windshield and has capacity to make 500,000 windshields per year. The market price is $450 per wi
> Fill in the blanks in the schedule below for two separate investment centers A and B. Round answers to the nearest whole percent. Investment Center A B Sales ... $10,400,000 Net income ... $ 352,000 Average invested assets. $1,400,000 Profit margin.
> Refer to information in QS 24-9. Assume a target income of 12% of average invested assets. Compute residual income for each division. Information from QS 24-9: Investment Center Net Income Average Assets Return on Investment Cameras and camcorders
> If the present value of the expected net cash flows from a machine, discounted at 10%, exceeds the amount to be invested, what can you say about the investment’s expected rate of return? What can you say about the expected rate of return if the present v
> For the current period, Kayenta Company’s manufacturing operations yield a $4,000 unfavorable price variance on its direct materials usage. The actual price per pound of material is $78; the standard price is $77.50 per pound. How many pounds of material
> Tercer reports the following on one of its products. Compute the direct materials price and quantity variances. Direct materials standard (4 lbs. @ $2/lb.) Actual direct materials used . Actual finished units produced . | cost $8 per finished unit 3
> BatCo makes metal baseball bats. Each bat requires 1 kg of aluminum at $18 per kg and 0.25 direct labor hours at $20 per hour. Overhead is assigned at the rate of $40 per direct labor hour. What amounts would appear on a standard cost card for BatCo?
> Refer to information in QS 23-3. Assume that actual sales for the year are $480,000, actual variable costs for the year are $112,000, and actual fixed costs for the year are $145,000. Prepare a flexible budget performance report for the year. Informatio
> Brodrick Company expects to produce 20,000 units for the year ending December 31. A flexible budget for 20,000 units of production reflects sales of $400,000; variable costs of $80,000; and fixed costs of $150,000. If the company instead expects to produ
> In a recent year, BMW sold 216,944 of its 1 Series cars. Assume the company expected to sell 225,944 of these cars during the year. Also assume the budgeted sales price for each car was $30,000, and the actual sales price for each car was $30,200. Comput
> Farad, Inc., specializes in selling used SUVs. During the month, the dealership sold 50 trucks at an average price of $9,000 each. The budget for the month was to sell 45 trucks at an average price of $9,500 each. Compute the dealership’s sales price var
> Refer to the information from QS 23-18. Compute the variable overhead spending variance and the variable overhead efficiency variance. Information from QS 23-18: Mosaic Company applies overhead using machine hours and reports the following information.
> Fogel Co. expects to produce 116,000 units for the year. The company’s flexible budget for 116,000 units of production shows variable overhead costs of $162,400 and fixed overhead costs of $124,000. For the year, the company incurred actual overhead cost
> The following information describes a company’s usage of direct labor in a recent period. Compute the direct labor rate and efficiency variances for the period. Actual direct labor hours used. 65,000 Actual direct labor rate per ho
> Explain in simple terms the notion of equivalent units of production (EUP). Why is it necessary to use EUP in process costing?
> Beech Company produced and sold 105,000 units of its product in May. For the level of production achieved in May, the budgeted amounts were: sales, $1,300,000; variable costs, $750,000; and fixed costs, $300,000. The following actual financial results ar
> Scora, Inc., is preparing its master budget for the quarter ending March 31. It sells a single product for $50 per unit. Budgeted sales for the next four months follow. Prepare a sales budget for the months of January, February, and March. January F
> Tora Co. plans to produce 1,020 units in July. Each unit requires two hours of direct labor. The direct labor rate is $20 per hour. Prepare a direct labor budget for July.
> Zortek Corp. budgets production of 400 units in January and 200 units in February. Each finished unit requires five pounds of raw material Z, which costs $2 per pound. Each month’s ending inventory of raw materials should be 40% of the following month’s
> Liza’s predicts sales of $40,000 for May and $52,000 for June. Assume 60% of Liza’s sales are for cash. The remaining 40% are credit sales; these customers pay in the month following the sale. Compute the budgeted cash receipts for June.
> Grace manufactures and sells miniature digital cameras for $250 each. 1,000 units were sold in May, and management forecasts 4% growth in unit sales each month. Determine (a) the number of units of camera sales and (b) the dollar amount of camera sales
> Royal Philips Electronics of the Netherlands reports sales of €25,400 million for a recent year. Assume that the company expects sales growth of 3 percent for the next year. Also assume that selling expenses are typically 20 percent of sales, while gener
> Activity-based budgeting is a budget system based on expected activities. (1) Describe activity-based budgeting, and explain its preparation of budgets. (2) How does activity-based budgeting differ from traditional budgeting?
> Montel Company’s July sales budget calls for sales of $600,000. The store expects to begin July with $50,000 of inventory and to end the month with $40,000 of inventory. Gross margin is typically 40% of sales. Determine the budgeted cost of merchandise p
> Lexi Company forecasts unit sales of 1,040,000 in April, 1,220,000 in May, 980,000 in June, and 1,020,000 in July. Beginning inventory on April 1 is 280,000 units, and the company wants to have 30% of next month’s sales in inventory at the end of each mo
> Raider-X Company forecasts sales of 18,000 units for April. Beginning inventory is 3,000 units. The desired ending inventory is 30% higher than the beginning inventory. How many units should Raider-X purchase in April?
> Meyer Co. forecasts merchandise purchases of $15,800 in January, $18,600 in February, and $20,200 in March; 40% of purchases are paid in the month of purchase and 60% are paid in the following month. At December 31 of the prior year, the balance of accou
> Use the following information to prepare a cash budget for the month ended on March 31 for Gado Company. The budget should show expected cash receipts and cash disbursements for the month of March and the balance expected on March 31. a. Beginning cash b
> Messers Company is preparing a cash budget for February. The company has $20,000 cash at the beginning of February and anticipates $75,000 in cash receipts and $100,250 in cash disbursements during February. What amount, if any, must the company borrow d
> Lighthouse Company anticipates total sales for June and July of $420,000 and $398,000, respectively. Cash sales are normally 60% of total sales. Of the credit sales, 20% are collected in the same month as the sale, 70% are collected during the first mont
> Wells Company reports the following sales forecast: September, $55,000; October, $66,000; and November, $80,000. All sales are on account. Collections of credit sales are received as follows: 25% in the month of sale, 60% in the first month after sale, a
> Good management includes good budgeting. (1) Explain why the bottom-up approach to budgeting is considered a more successful management technique than a top-down approach.
> Hockey Pro budgets production of 3,900 hockey pucks during May. The company assigns variable overhead at the rate of $1.50 per unit. Fixed overhead equals $46,000 per month. Prepare a factory overhead budget for May.
> In a job order costing system, what records serve as a subsidiary ledger for Work in Process Inventory? For Finished Goods Inventory?
> Miami Solar budgets production of 5,300 solar panels for August. Each unit requires 4 hours of direct labor at a rate of $16 per hour. Variable factory overhead is budgeted to be 70% of direct labor cost, and fixed factory overhead is $180,000 per month.
> Miami Solar budgets production of 5,000 solar panels in July. Each unit requires 4 hours of direct labor at a rate of $16 per hour. Prepare a direct labor budget for July.
> Miami Solar manufactures solar panels for industrial use. The company budgets production of 5,000 units (solar panels) in July and 5,300 units in August. Each unit requires 3 pounds of direct materials, which cost $6 per pound. The company’s policy is to
> Why is the present value of $100 that you expect to receive one year from today worth less than $100 received today? What is the present value of $100 that you expect to receive one year from today, discounted at 12%?
> Why is an investment more attractive to management if it has a shorter payback period?
> Assume that Samsung manufactures and sells 60,000 units of a product at $11,000 per unit in domestic markets. It costs $6,000 per unit to manufacture ($4,000 variable cost per unit, $2,000 fixed cost per unit). Can you describe a situation under which th
> Identify the incremental costs incurred by Apple for shipping one additional iPod from a warehouse to a retail store along with the store’s normal order of 75 iPods.
> Why does the use of the accelerated depreciation method (instead of straight-line) for income tax reporting increase an investment’s value?
> Suggest a reasonable basis for allocating each of the following indirect expenses to departments: (a) salary of a supervisor who manages several departments, (b) rent, (c) heat, (d) electricity for lighting, (e) janitorial services, (f) advertising,
> Each Apple retail store has several departments. Why is it useful for its management to (a) collect accounting information about each department and (b) treat each department as a profit center?
> Identify the usual changes that a company must make when it adopts a customer orientation.
> Google monitors its fixed overhead. In an analysis of fixed overhead cost variances, what is the volume variance?
> Assume that Samsung is budgeted to operate at 80% of capacity but actually operates at 75% of capacity. What effect will the 5% deviation have on its controllable variance? Its volume variance?
> How can the manager of advertising sales at Google use flexible budgets to enhance performance?
> Samsung monitors its overhead. In an analysis of overhead cost variances, what is the controllable variance and what causes it?
> Assume that Samsung’s consumer electronics division is charged with preparing a master budget. Identify the participants— for example, the sales manager for the sales budget—and describe the information each person provides in preparing the master budget
> Does the manager of a Samsung distribution center participate in long-term budgeting? Explain.
> Samsung is thinking of expanding sales of its most popular smartphone model by 65%. Should we expect its variable and fixed costs for this model to stay within the relevant range? Explain.
> Describe the relations among the income statement, the schedule of cost of goods manufactured, and a detailed listing of factory overhead costs.
> Prepare a proper title for the annual schedule of cost of goods manufactured of Google. Does the date match the balance sheet or income statement? Why?
> The left column lists the titles of documents and accounts used in job order costing. The right column presents short descriptions of the purposes of the documents. Match each document in the left column to its numbered description in the right column. A
> Identify each of the following costs as either a product cost or a period cost. ______ 1. Factory maintenance ______ 2. Sales commissions ______ 3. Depreciation—Factory equipment ______ 4. Depreciation—Office equipment ______ 5. Rent on factory building
> Identify each of the following costs as either direct materials, direct labor, or factory overhead. The company manufactures tennis balls. ______ 1. Rubber used to form the cores ______ 2. Factory maintenance ______ 3. Wages paid to assembly workers ____
> Diez Company produces sporting equipment, including leather footballs. Identify each of the following costs as direct or indirect. The cost object is a football produced by Diez. ______ 1. Electricity used in the production plant. ______ 2. Labor used on
> Refer to the information in QS 17-4. Use that information for Tide Corporation to determine the 2014 and 2015 common-size percents for cost of goods sold using net sales as the base. Data from QS 17-4:
> Use the following information for Tide Corporation to determine the 2014 and 2015 trend percents for net sales using 2014 as the base year. ($ thousands) 2015 2014 Net sales $801,810 $453,000 Cost of goods sold 392,887 134,088
> Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Compute the accounting rate of return for this investment;
> Project A requires a $280,000 initial investment for new machinery with a five-year life and a salvage value of $30,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $20,000 per year for the next five y
> Label each of the following statements as either true (“T”) or false (“F”). ______ 1. Relevant costs are also known as unavoidable costs. ______ 2. Incremental costs are also known as differential costs. ______ 3. An out-of-pocket cost requires a current
> Should Apple use single product or multiproduct break-even analysis? Explain.
> What is the main factor for a company in choosing between the job order costing and process costing systems? Give two likely applications of each system.
> A company is considering investing in a new machine that requires a cash payment of $47,947 today. The machine will generate annual cash flows of $21,000 for the next three years. What is the internal rate of return if the company buys this machine?
> Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. Project 2 requires an initial investment of $4 million and has a present value of cash flows
> Park Co. is considering an investment that requires immediate payment of $27,000 and provides expected cash inflows of $9,000 annually for four years. What is the investment’s payback period?
> In each blank next to the following terms, place the identifying letter of its best description. ______ 1. Indirect expenses ______ 2. Controllable costs ______ 3. Direct expenses ______ 4. Uncontrollable costs A. Costs not within a manager’s control
> In each blank next to the following terms, place the identifying letter of its best description. ______ 1. Cost center ______ 2. Investment center ______ 3. Departmental accounting system ______ 4. Operating department ______ 5. Profit center ______ 6. R
> Classify each of the performance measures below into the most likely balanced scorecard perspective it relates to. Label your answers using C (customer), P (internal process), I (innovation and growth), or F (financial). ______ 1. Customer wait time ____
> Compute the annual dollar changes and percent changes for each of the following accounts.
> Identify which of the following sets of items are necessary components of the master budget. ______ 1. Operating budgets, historical income statement, and budgeted balance sheet. ______ 2. Prior sales reports, capital expenditures budget, and financial b
> The motivation of employees is one goal of budgeting. Identify three guidelines that organizations should follow if budgeting is to serve effectively as a source of motivation for employees.
> SBD Phone Company sells its waterproof phone case for $90 per unit. Fixed costs total $162,000, and variable costs are $36 per unit. Compute the units of product that must be sold to earn pretax income of $200,000. (Round to the nearest whole unit.)
> Google prepares a cash budget. What is a cash budget? Why must operating budgets and the capital expenditures budget be prepared before the cash budget?
