Question: Velma and Keota (V&K) is a

> Selected data from Emporia Company follow. Table Summary: The Balance Sheet as of December 31 shows 3 columns. Column 1 has entries. Column 2 has year 3. Column 3 has year 2. Table Summary: The Income Statements for the years ended December 31 shows 3 co

> The following data come from the financial records of Fargo Corporation for Year 3. Sales $640,000 Interest expense 6,000 Income tax expense 12,000 Net income 42,000 Required How many times was interest earned in Year 3?

> Winthrop Corporation reported the following operating results for two consecutive years. Required 1. Compute the percentage changes in Winthrop Corporation’s income statement components between the two years. Round percentages to one de

> Keystone Manufacturing Company started operations on January 1, Year 1. During Year 1, the company engaged in the following transactions. 1. Issued common stock for $40,000. 2. Paid $10,000 cash to purchase raw materials used to make products. 3. Transfe

> Alaska Airlines and United Airlines are both passenger airline companies. Although they use similar assets to conduct their businesses, the estimated lives they use to depreciate their assets vary, as shown in the following table. Table Summary: A table

> The following information applies to Job 730 completed by Riverton Manufacturing Company during the month of October. The amount of labor cost for the job was $162,000. Applied overhead amounted to $230,000. The project was completed and delivered to Hud

> Stewart Condos Corporation is a small company owned by Dennis Hatch. It leases three condos of differing sizes to customers as vacation facilities. Labor costs for each condo consist of maid service and maintenance cost. Other direct operating costs cons

> Lugar Corporation makes custom-order furniture to meet the needs of persons with disabilities. On January 1, Year 2, the company had the following account balances: $37,800 for both cash and common stock. In Year 2, Lugar worked on three jobs. The releva

> Mapleton Corporation builds sailboats. On January 1, Year 3, the company had the following account balances: $48,000 for both cash and common stock. Boat 25 was started on February 10 and finished on May 31. To build the boat, Mapleton had incurred cash

> John's Car Wash (JCW) offers customers three cleaning options. Under Option 1, only the exterior is cleaned. With Option 2, the exterior and interior are cleaned. Option 3 provides exterior waxing as well as exterior and interior cleaning. JCW completed

> Kirk Gaber, a tailor in his home country, recently immigrated to the United States. He is interested in starting a business making custom suits for men. Mr. Gaber is trying to determine the cost of making a suit so he can set an appropriate selling price

> Woolrich Company makes small aluminum storage bins that it sells through a direct marketing mail-order business. The typical bin measures 6 × 8 feet. The bins are normally used to store garden tools or other small household items. Woolrich customizes bin

> Ashton Ski Company manufactures snow skis. During the most recent accounting period, the company’s finishing department transferred 5,000 sets of skis to finished goods. At the end of the accounting period, 500 sets of skis were estimated to be 40 percen

> Lennox Watches Inc. makes watches. Its assembly department started the accounting period with a beginning inventory balance of $68,000. During the accounting period, the department incurred $96,000 of transferred-in cost, $62,000 of materials cost, $120,

> Kimball Company is a cosmetics manufacturer. Its assembly department receives raw cosmetics from the molding department. The assembly department places the raw cosmetics into decorative containers and transfers them to the packaging department. The assem

> In its Form 10-K Match Group, Inc., describes itself as follows: Match Group, Inc., through its portfolio companies, is a leading provider of dating products available globally. Our portfolio of brands includes Tinder®, Match®, Meetic®, OkCupid®, Hinge®,

> Indicate which costing system (job-order, process, or hybrid) would be most appropriate for the type of product listed in the left-hand column. The first item is shown as an example. Type of Product: a. Coffee table b. Plastic storage containers c. TV s

> Brandon Manufacturing recorded the following amounts in its inventory accounts in Year 2. Required Determine the dollar amounts for (a), (b), (c), (d), and (e). Assume that underapplied and overapplied overhead is closed to Cost of Goods Sold.

> Danbury Corporation manufactures model airplanes. The company purchased for $228,000 automated production equipment that can make the model parts. The equipment has a $12,000 salvage value and a 10-year useful life. Required 1. Assuming that the equipmen

> Logan Company and Clayton Company assign manufacturing overhead to Work in Process Inventory using direct labor cost. The following information is available for the companies for the year: Required 1. Compute the predetermined overhead rate for each comp

> Tescott Company and Heizer Company both apply overhead to the Work in Process Inventory account using direct labor hours. The following information is available for both companies for the year. Required 1. Compute the predetermined overhead rate for each

> Pawhuska Company estimates that its overhead costs for Year 2 will be $720,000 and output in units of product will be 300,000 units. Required 1. Calculate Pawhuska’s predetermined overhead rate based on expected production. 2. If 24,000 units of product

> Aurora Inc. estimates manufacturing overhead costs for the Year 3 accounting period as follows. Equipment depreciation $344,000 Supplies 42,000 Materials handling 68,000 Property taxes 30,000 Production setup 42,000 Rent 70,000 Maintenance 60,000 Superv

> Use a horizontal statements model to indicate how each of the following independent accounting events affects the elements of the balance sheet and the income statement. Indicate whether the event increases (I), decreases (D), or does not affect (NA) eac

> Morland Company started Year 1 with $75,000 in its cash and common stock accounts. During Year 1, Morland paid $50,000 cash for employee compensation and $17,500 cash for materials. Required 1. Determine the total amount of assets and the amount of expen

> Dilia Company incurred manufacturing overhead cost for the year as follows. Direct materials $50/unit Direct labor $35/unit Manufacturing overhead Variable $ 15/unit Fixed ($25/unit for 1,500 units) $ 37,500 Variable selling and admin. expenses $ 10,500

> Use the 2019 Form 10-K for Southwest Airlines to complete the requirements below. To obtain the Form 10-K you can use either the EDGAR system, or it can be found under “Investor Relations,” which is under the “About Southwest” link on the company’s corpo

> Newcomb Manufacturing Company was started on January 1, Year 1, when it acquired $5,000 cash from the issue of common stock. During the first year of operation, $1,600 of direct raw materials was purchased with cash, and $1,200 of the materials was used

> Loveland Manufacturing Company was started on January 1, Year 1. The company was affected by the following events during its first year of operation. 1. Acquired $2,400 cash from the issue of common stock. 2. Paid $720 cash for direct raw materials. 3. T

> The following information pertains to Bairoil Manufacturing Company for March Year 3. Assume actual overhead equaled applied overhead. March 1 Inventory balances Raw materials $200,000 Work in process 240,000 Finished goods 156,000 March 31 Inventory

> Supply the missing information on the following schedule of cost of goods manufactured.

> Rockeagle Corporation began fiscal Year 2 with the following balances in its inventory accounts. Raw Materials $30,000 Work in Process 45,000 Finished Goods 14,000 During the accounting period, Rockeagle purchased $125,000 of raw materials and issued $12

> Stoneham Manufacturing estimated its product costs and volume of production for Year 3 by quarter as follows. Stoneham Company sells a souvenir item at various resorts across the country. Its management uses the product’s estimated quar

> Cray Company started Year 2 with $60,000 in its cash and common stock accounts. During Year 2 Cray paid $45,000 cash for employee compensation. Assume this is the only transaction that occurred in Year 2. Required 1. Determine the total amount of assets

> Gerty Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the company’s cash outflow for operating expenses by $640,000 per year. The cost of the equipment is $3,932,522.88. Gerty expects it to ha

> To open a new store, Enid Tire Company plans to invest $320,000 in equipment expected to have a four-year useful life and no salvage value. Enid expects the new store to generate annual cash revenues of $400,000 and to incur annual cash operating expense

> Rolla Company has a choice of two investment alternatives. The present value of cash inflows and outflows for the first alternative is $125,000 and $100,000, respectively. The present value of cash inflows and outflows for the second alternative is $300,

> In a month when it sold 200 units of product, Queen Manufacturing Company (QMC) produced the following internal income statement. Revenue $8,000 Variable costs (4,800) Contribution margin 3,200 Fixed costs (2,400) Net income $ 800 QMC has the opport

> Aaron Heath is seeking part-time employment while he attends school. He is considering purchasing technical equipment that will enable him to start a small training services company that will offer tutorial services over the Internet. Aaron expects deman

> Monterey Company is considering investing in two new vans that are expected to generate combined cash inflows of $30,000 per year. The vans’ combined purchase price is $93,000. The expected life and salvage value of each are four years and $23,000, respe

> The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels compelled to earn an 8 percent return on the investment of

> Gail Trevino expects to receive a $500,000 cash benefit when she retires five years from today. Ms. Trevino’s employer has offered an early retirement incentive by agreeing to pay her $325,000 today if she agrees to retire immediately. Ms. Trevino desire

> Larry Mattingly turned 20 years old today. His grandfather had established a trust fund that will pay him $120,000 on his next birthday. However, Larry needs money today to start his college education, and his father is willing to help. Mr. Mattingly has

> Garrison Rentals can purchase a van that costs $54,000; it has an expected useful life of three years and no salvage value. Garrison uses straight-line depreciation. Expected revenue is $36,000 per year. Assume that depreciation is the only expense assoc

> Rainbow Painting Company is considering whether to purchase a new spray paint machine that costs $16,000. The machine is expected to save labor, increasing net income by $1,200 per year. The effective life of the machine is 15 years according to the manu

> Currie Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on deman

> North Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $12,000,000; it will enable the company to increase its annual cash infl

> Barbara Harvey is angry with Martin Cochran. He is behind schedule developing supporting material for tomorrow’s capital budget committee meeting. When she approached him about his apparent lackadaisical attitude in general and his tardiness in particula

> As the data on the partial income statements shown as follows reveal, Netflix, Inc., increased its revenues by 72 percent from 2017 to 2019, while its operating income during this period increased by 211 percent. Table Summary: A table shows the Partial

> Indicate which of the following items will result in cash inflows and which will result in cash outflows. The first one is shown as an example. Item: a. Initial investment b. Salvage value c. Recovery of working capital d. Incremental expenses e. Work

> Climax Corporation has a desired rate of return of 7.50 percent. William Tobin is in charge of one of Climax’s three investment centers. His center controlled operating assets of $4,000,000 that were used to earn $480,000 of operating income. Required Co

> Eastevan Company calculated its return on investment as 10 percent. Sales are now $300,000, and the amount of total operating assets is $320,000. Required 1. If expenses are reduced by $28,000 and sales remain unchanged, what return on investment will re

> An investment center of Tribune Corporation shows an operating income of $7,500 on total operating assets of $125,000. Required Compute the return on investment. Round the computation to two decimal points.

> Helen Kaito, the president of Gladstone Toys Corporation, is trying to determine this year’s pay raises for the store managers. Gladstone Toys has seven stores in the southwestern United States. Corporate headquarters purchases all toys from different ma

> Muskrat Medical Equipment Company makes a blood pressure measuring kit. Jason McCoy is the production manager. The production department’s static budget and actual results for Year 3 follow. Required 1. Convert the static budget into a

> Dunlop Company has provided the following Year 2 data. Required Prepare in good form a budgeted and actual income statement for internal use. Separate operating income from net income in the statements.

> Pagwa Company has employees with the following job titles: - President of the company - Vice president of marketing - Product manager - Controller - Vice president of manufacturing - Treasurer - Regional sales manager - Personnel manager - Cashier - Vice

> Airdrie Department Store is divided into three major departments: Men’s Clothing, Women’s Clothing, and Home Furnishings. Each of these three departments is supervised by a manager who reports to the general manager. The departments are subdivided into d

> Siwa Company makes and sells a decorative ceramic statue. Each statue costs $50 to manufacture and sells for $75. Siwa spends $3 to ship the statue to customers and pays salespersons a $2 commission for each statue sold. The remaining annual expenses of

> The Rolling Parts Division of Delk Company plans to set up a facility with the capacity to make 20,000 units annually of a webcam for laptop computers. The avoidable cost of making the webcam is as follows. Required 1. Assume that Delk’

> Kelowna Company has two divisions, A and B. Division A manufactures 12,000 units of product per month. The cost per unit is calculated as follows. Variable costs $ 10 Fixed costs 20 Total cost $30Page 431 Division B uses the product created by Division A

> Lumberton Home Maintenance Company (LHMC) earned operating income of $6,000,000 on operating assets of $62,500,000 during Year 2. The Tree Cutting Division earned $1,000,000 on operating assets of $10,000,000. LHMC has offered the Tree Cutting Division $

> The Monarch Division of Allgood Corporation has a current ROI of 12 percent. The company’s target ROI is 8 percent. The Monarch Division has an opportunity to invest $4,800,000 at 10 percent but is reluctant to do so because its ROI will fall to 11.25 pe

> Supply the missing information in the following table for Unify Company. Sales $605,000 ROI ? Operating assets ? Operating income ? Turnover 2.2 Residual income ? Operating profit margin 0.08 Desired rate of return 10%

> Gletchen Cough Drops operates two divisions. The following information pertains to each division for Year 1. Required 1. Compute each division’s residual income. 2. Which division increased the company’s profitability

> The production manager is responsible for the assembly, cleaning, and finishing departments. The executive vice president reports directly to the president but is responsible for the activities of the production department, the finance department, and th

> Roanoke Company expected to sell 400,000 of its outdoor cameras during Year 2. It set the standard sales price for the camera at $60 each. During June, it became obvious that the company would be unable to attain the expected volume of sales. Roanoke’s c

> Wapella Manufacturing Company set its standard variable manufacturing cost at $60 per unit of product. The company planned to make and sell 4,000 units of product during Year 3. More specifically, the master budget called for total variable manufacturing

> Secor Educational Services had budgeted its training service charge at $120 per hour. The company planned to provide 30,000 hours of training services during Year 3. By lowering the service charge to $114 per hour, the company was able to increase the ac

> Charlie Stork rented a truck for his business on two previous occasions. Since he will soon be renting a truck again, he would like to analyze his bills and determine how the rental fee is calculated. His two bills for truck rental show that on September

> According to its original plan, Topeka Consulting Services Company plans to charge its customers for service at $120 per hour in Year 2. The company president expects consulting services provided to customers to reach 45,000 hours at that rate. The marke

> Exercise 8-5A Determining flexible budget variances Use the standard price and cost data provided in Exercise 8-1A. Assume that the actual sales price is $11.76 per unit and that the actual variable cost is $6.90 per unit. The actual fixed manufacturing

> Use the information provided in Exercise 8-1A. 1. Determine the sales and variable cost volume variances. 2. Classify the variances as favorable (F) or unfavorable (U). 3. Comment on the usefulness of the variances with respect to performance evaluation

> Compute variances for the following items and indicate whether each variance is favorable (F) or unfavorable (U).

> Indicate whether each of the following variances is favorable or unfavorable. The first one has been done as an example.

> Reardan Company established a predetermined fixed overhead cost rate of $29 per unit of product. The company planned to make 7,000 units of product but actually produced only 6,500 units. Actual fixed overhead costs were $212,000. Required 1. Determine t

> Cheney Company established a predetermined variable overhead cost rate at $21.00 per direct labor hour. The actual variable overhead cost rate was $19.20 per hour. The planned level of labor activity was 76,000 hours of labor. The company actually used 8

> Pella Car Wash Inc. expected to wash 2,000 cars during the month of August. Washing each car was expected to require 0.2 hour of labor. The company actually used 420 hours of labor to wash 1,880 cars. The labor usage variance was $880 unfavorable. Requir

> Russell and Sons, a CPA firm, established the following standard labor cost data for completing what the firm referred to as a Class 2 tax return. Russell expected each Class 2 return to require 4.0 hours of labor at a cost of $30 per hour. The firm actu

> Lucas Manufacturing Company incurred a favorable labor price variance and an unfavorable labor usage variance. Required 1. Describe a scenario in which the personnel manager is responsible for the unfavorable usage variance. 2. Describe a scenario in whi

> Advances in biological technology have enabled two research companies, Bio Labs, Inc., and Scientific Associates, to develop an insect-resistant corn seed. Neither company is financially strong enough to develop the distribution channels necessary to bri

> Fulton Fruit Basket Company makes baskets of assorted fruit. The standard and actual costs of oranges used in each basket of fruit follow. Fulton actually produced 25,000 baskets. Required 1. Determine the materials price variance and indicate whether it

> Monique’s Florals produced a special Mother’s Day arrangement that included eight roses. The standard and actual costs of the roses used in each arrangement follow. Monique’s Florals planned to make 7

> Misty McDougall is the manager of the Fowler Bagel Shop. The corporate office had budgeted her store to sell 3,000 ham sandwiches during the week beginning July 17. Each sandwich was expected to contain 6 ounces of ham. During the week of July 17, the st

> Cherokee Manufacturing Company established the following standard price and cost data. Cherokee planned to produce and sell 2,000 units. Actual production and sales amounted to 2,200 units. Required 1. Prepare the pro forma income statement in contributi

> Nunn Company, which sells electric razors, had $200,000 of cost of goods sold during the month of June. The company projects a 5 percent increase in cost of goods sold during July. The inventory balance as of June 30 is $15,000, and the desired ending in

> Dickey Books buys books and magazines directly from publishers and distributes them to grocery stores. The wholesaler expects to purchase the following inventory. Dickey Books’ accountant prepared the following schedule of cash payments

> Lumpkin Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Lumpkin’s policy is to maintain an ending inventory balance equal to 10 percent of the followi

> Ozark Company operates a candy store located in a large shopping mall. Required Write a brief memo describing the sales pattern that you would expect Ozark to experience during the year. In which months will sales likely be high? In which months will sal

> Carmen’s Dress Delivery operates a mail-order business that sells clothes designed for frequent travelers. It had sales of $400,000 in December. Because Carmen’s Dress Delivery is in the mail-order business, all sales are made on account. The company exp

> Axon Corporation, which has three divisions, is preparing its sales budget. Each division expects a different growth rate because economic conditions vary in different regions of the country. The growth expectations per quarter are 4 percent for Cummings

> Candice Sterling is a veterinarian. She has always been concerned for the pets of low-income families. These families love their pets but frequently do not have the means to provide them proper veterinary care. Dr. Sterling decides to open a part-time ve

> The budget director of Heather’s Florist has prepared the following sales budget. The company had $50,000 in accounts receivable on July 1. Heather’s Florist normally collects 100 percent of accounts receivable in the

> Magnificent Modems has excess production capacity and is considering the possibility of making and selling security tokens. The following estimates are based on a production and sales volume of 1,000 security tokens. Unit-level manufacturing costs are ex

> Use the same transaction data for Magnificent Modems, Inc. Required 1. Use the following partially completed form to prepare an income statement using the contribution margin format. Sales revenue $600,000 Variable costs Contribution margin 225,000 Fixe

> Use the same transaction data for Magnificent Modems, Inc. Required 1. Based on these data, identify each cost incurred by the company as (1) fixed versus variable relative to the number of units produced and sold; and (2) product versus selling, general

> Why are the salaries of production workers accumulated in an inventory account instead of being expensed on the income statement?

> Magnificent Modems, Inc., makes modem cards that are used in notebook computers. The company completed the following transactions during Year 1. All purchases and sales were made with cash. 1. Acquired $750,000 of cash from the owners. 2. Purchased $270,

> What does the statement “costs can be assets or expenses” mean?

> How does product costing used in financial accounting differ from product costing used in managerial accounting?