Question 1
Super Drive is a computer hard-drive manufacturer. The company’s balance sheet for the fiscal year ended on November 30 appears below:
Super Drive, Inc.
Statement of Financial Position
For the year ended November 30
Assets:
Cash $52,000
Accounts receivable 150,000
Inventory 315,000
Property, plant, and equipment 1,000,000
Total Assets $1,517,000
Liabilities and stockholders’ equity:
Accounts payable $175,000
Common stock 900,000
Retained earnings 442,000
Total liabilities and
stockholders’ equity $1,517,000
Additional information regarding Super Drive’s operations appears below:
• Sales are budgeted at $520,000 for December and $500,000 for January.
• Collections are expected to be 60% in the month of sale and 40% in the month following sale. There are no bad debts.
• 80% of the disk-drive components are purchased in the month prior to the month of the sale, and 20% are purchased in the month of the sale. Purchased components comprise 40% of the cost of goods sold.
• Payment for components purchased is made in the month following the purchase.
• Assume that the cost of goods sold is 80% of sales.
The budgeted cash collections for the upcoming December should be
Question 2
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds
The labor efficiency variance for January is
Question 3
Werber Clinic uses client visits as its measure of activity. During January, the clinic budgeted for 2,700 client visits, but its actual level of activity was 2,730 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ___-___ $33.60
Personnel expenses $22,100 $8.70
Medical supplies 1,100 6.60
Occupancy expenses 5,600 1.60
Administrative expenses 3,700 0.40
Total expenses $32,500 $17.30
Actual results
for January:
Revenue $93,408
Personnel expenses $46,251
Medical supplies $19,348
Occupancy expenses $9,508
Administrative expenses $4,772
The activity variance for net operating income in January would be closest to
Question 4
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds
The materials price variance for January is
Question 5
Last year, the House of Orange had sales of $826,650, net operating income of $81,000, and operating
assets of $84,000 at the beginning of the year and $90,000 at the end of the year. What was the company’s turnover rounded to the nearest tenth?
Question6
A company’s average operating assets are $220,000, and its net operating income is $44,000. The
company invested in a new project, increasing average assets to $250,000 and increasing its net operating income to $49,550. What is the project’s residual income if the required rate of return is 20%?
Question 7
Werber Clinic uses client visits as its measure of activity. During January, the clinic budgeted for 2,700 client visits, but its actual level of activity was 2,730 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ___-___ $33.60
Personnel expenses $22,100 $8.70
Medical supplies 1,100 6.60
Occupancy expenses 5,600 1.60
Administrative expenses 3,700 0.40
Total expenses $32,500 $17.30
Actual results
for January:
Revenue $93,408
Personnel expenses $46,251
Medical supplies $19,348
Occupancy expenses $9,508
Administrative expenses $4,772
The activity variance for administrative expenses in January would be closest to
Question 8
. The company plans to sell 22,000 units of Product WZ in June. The finished-goods inventories on June 1 and June 30 are budgeted to be 100 and 400 units, respectively. The direct labor hours are 11,000 and the direct labor rate is $10.50. Budgeted direct-labor costs for June would be
Question 9
Coles Company, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows:
August
14,000 units
September
14,500 units
October
15,500 units
November
12,600 units
December
11,900 units
The company wants to maintain monthly ending inventories of Material K equal to 20% of the following month’s production needs. On July 31, this requirement wasn’t met because only 2,500 yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year.
The total cost of Material K to be purchased in August is
Question 10
Division X of Charter Corporation makes and sells a single product which is used by manufacturers of
fork lift trucks. Presently it sells 12,000 units per year to outside customers at $24 per unit. The annual
capacity is 20,000 units and the variable cost to make each unit is $16. Division Y of Charter Corporation
would like to buy 10,000 units a year from Division X to use in its products. There would be no cost
savings from transferring the units within the company rather than selling them on the outside market.
What should be the lowest acceptable transfer price from the perspective of Division X?
