Accounting Final Flashcards
Schuepfer Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 1,300 units are planned to be sold in March. The variable selling and administrative expense is $4.20 per unit. The budgeted fixed selling and administrative expense is $19,240 per month, which includes depreciation of $3,380 per month. The remainder of the fixed selling and administrative expenses represents current cash flows. The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget should be:
a.
$24,700
b.
$15,860
c.
$5,460
d.
$21,320
Selling & Admin Expense Budget
d. $21,320
Note: Depreciation is subtracted from variable and fixed S&A.
Tracie Corporation manufactures and sells women’s skirts. Each skirt (unit) requires 2.2 yards of cloth. Selected data from Tracie’s master budget for next quarter are shown below:
July August September
Budgeted sales (in units) 7,000 9,000 11,000
Budgeted production (in units) 8,000 10,500 13,000
Each unit requires 0.8 hours of direct labor, and the average hourly cost of Tracie’s direct labor is $18. What is the cost of Tracie Corporation’s direct labor in September?
a.
$158,400
b.
$187,200
c.
$234,000
d.
$198,000
Direct Labor Budget
b. $187,200
Sedita Inc. is working on its cash budget for July. The budgeted beginning cash balance is $46,000. Budgeted cash receipts total $175,000 and budgeted cash disbursements total $174,000. The desired ending cash balance is $50,000. The excess (deficiency) of cash available over disbursements for July will be:
a.
$45,000
b.
$1,000
c.
$221,000
d.
$47,000
Cash Budget
d. $47,000
What is Budgetary Slack?
A limitation of the self-imposed or participative budget approach where revenues can be underestimated, and costs can be overestimated.
What is the Sequence of Budgets?
Sales
Production
DM - DL - MOH
Ending FGI
COGS
Cash
Balance Sheet
Cash Flow
Two products, QI and VH, emerge from a joint process. Product QI has been allocated $9,600 of the total joint costs of $12,000. A total of 9,000 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $13 per unit, or it can be processed further for an additional total cost of $54,000 and then sold for $18 per unit. If product QI is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point?
a.
($18,600)
b.
($9,000)
c.
$600
d.
$108,000
Split-Off Point
b. ($9,000)
Banfield Corporation makes three products that use compound W, the current constrained resource. Data concerning those products appear below:
VP YI WX
Selling price per unit $ 248.04 $ 230.66 $ 505.44
Variable cost per unit $ 190.71 $ 172.14 $ 388.80
Centiliters of compound W 3.90 3.80 8.10
Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized.
a.
WX, YI, VP
b.
VP, WX, YI
c.
YI, VP, WX
d.
WX, VP, YI
Production Bottleneck Ranking = CMU / Bottleneck
c. YI, VP, WX
The Bharu Violin Corporation has the capacity to manufacture and sell 5,000 violins each year but is currently only manufacturing and selling 4,800. The following data relate to annual operations at 4,800 units:
Per Violin
Selling price $ 600
Manufacturing costs:
Variable $ 130
Fixed $ 270
Selling and administrative costs:
Variable $ 20
Fixed $ 40
Woolgar Symphony Orchestra is interested in purchasing Bharu’s excess capacity of 200 units but only if they can get the violins for $350 each. This special order would not affect regular sales or the total fixed costs.
If the special order from Woolgar Symphony Orchestra is accepted, the financial advantage (disadvantage) Bharu for the year should be:
a.
($10,000)
b.
($22,000)
c.
$40,000
d.
($28,000)
Special Order
1) Capacity Check
2) Positive CM?
3) Compare Costs/Rev
CM +/- Additional Costs/Rev = Actual Benefit/Disadvantage
c. $40,000
Lusk Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be:
a.
($40,000)
b.
$40,000
c.
$30,000
d.
($30,000)
Keeping/Eliminating a Product/Dep/Segment
Rev - Relevant Costs = Adv/Disadv.
d. ($30,000)
What are Relevant/Irrelevant Costs?
Relevant Costs: Costs that differ between alternatives. They can be eliminated (can also be fixed costs).
Irrelevant Costs: Fixed costs that cannot be eliminated by choosing either alternative.
Zee Corporation was operating at 100% of capacity during its first month of operations with the following results:
Sales (160 units) $204,000
Production costs (200 units):
Direct materials $100,000
Direct labor 60,000
Variable factory overhead 40,000
Fixed factory overhead 1,000
201,000
Operating expenses:
Variable operating expenses $ 12,000
Fixed operating expenses 2,000
14,000
What is the amount of the manufacturing margin that would be reported on the variable costing income statement?
a.
$38,800
b.
$44,000
c.
$30,000
d.
$4,000
Cost of Goods Sold Using Variable Costing
Fixed MOH & OpEx are not included in MM
b. $44,000
Nocum Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.
Sales (3,000 units) $ 120,000
Variable expenses 90,000
Contribution margin 30,000
Fixed expenses 21,000
Net operating income $ 9,000
If sales decline to 2,900 units, the net operating income would be closest to:
a.
$8,000
b.
$29,000
c.
$8,700
d.
$1,000
Contribution Margin Per Unit
CM / Units = CMU
CMU x Decline Units = Answer
c. $8,000
What is the impact of Units Produced & Sold on Absorption Costing v. Variable Costing Income?
Units Produced = Units Sold = Op. Income is same in Absorption & Variable Costing
Units Produced > Units Sold = Absorption Op Income > Variable Op Income
Units Produced < Units Sold = Absorption Op Income < Variable Op Income
Supply costs at Coulthard Corporation’s chain of gyms are listed below:
Client-
Visits Supply Cost March 12,855 $ 23,598 April 12,283 $ 23,278 May 13,104 $ 23,742 June 12,850 $ 23,607 July 12,493 $ 23,415 August 12,794 $ 23,562 September 12,686 $ 23,496 October 12,765 $ 23,541 November 13,018 $ 23,687
Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first, rounding off using three decimal places. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are closest to:
a.
$1.850 per client-visit; $23,547 per month
b.
$1.700 per client-visit; $557 per month
c.
$0.565 per client-visit; $16,338 per month
d.
$0.550 per client-visit; $16,579 per month
High Low Method
Calculating Total Cost [TC = FC + UVC X U]
$23,278 = $0.565 x 12,283 + TFC
c. $0.565 per client visit; $16,338 per month
How are Total & Unit Variable Costs impacted by changes in Activity?
Total Variable Costs (TVC) change in total with changes in activity.
Unit Variable Costs (UVC or VC/U) do not change as activity changes; aka marginal costs.
