Hello there are 25 questions and I need all the answers within an hour and half.
1. Select the incorrect statement regarding costs and expenses. A. Some costs are initially recorded as expenses while others are initially recorded as assets. B. Expenses are incurred when assets are used to generate revenue. C. Manufacturing-related costs are initially recorded as expenses. D. Non-manufacturing costs should be expenses in the period in which they are incurred. 2. During its first year of operations, the Bloomington Cornbelters Corporation (BCC) paid $4,000 for direct materials and $8,500 for production workers’ wages. Lease payments and utilities on the production facilities amounted to $7,500 while general, selling, and administrative expenses totaled $3,000. The company produced 5,000 units and sold 4,000 units at a price of $7.50 a unit. What was BCC’s net income for the first year in operation? A. $11,000 B. $7,000 C. $14,000 D. $20,000 3. Toews’ Jersey and Associates incurred $30,000 of fixed cost and $40,000 of variable cost when 1,000 units of product were made and sold. If the company’s volume doubles, the cost per unit will A. Stay the same B. Double as well C. Increase but will not double D. Decrease 4. For 2014, Bob’s Machine Shack sold 100,000 units of its product for $20 each. The variable cost per unit was $12, and Bob’s margin of safety was 30,000 units. What was the amount of Bob’s total fixed costs? A. $560,000 B. $800,000 C. $1,200,000 D. $360,000 THE GEORGE WASHINGTON UNIVERSITY – Summer 2017 Final Exam Confidential Page 2 5/20/17 5. Here is some information about the Keith and Crowford Corporation’s (SCC) operations. Shaw and Crowford Corporation Direct raw materials used $17,000 Direct labor wages and salaries $33,000 Sales salaries $25,000 Depreciation on manufacturing equipment $3,000 Rent on manufacturing facilities $4,000 Administrative supplies and utilities $5,000 Sales revenue $105,000 Units produced 4,000 Units sold 4,000 SCC’s work in process inventory at the beginning of 2014 was $12,000, and work in process inventory at the end of 2014 was $10,000. SCC’s cost of goods manufactured in 2014 equals A. $77,000 B. $89,000 C. $59,000 D. $52,000 6. Here is some information from the internal records of Laxter Pharmaceutical Corporation. Item Value Total contribution margin at break even $550,000 Break even Value 105,000 units Sales revenue per unit $51 What is the leverage ratio at the breakeven point if the leverage ratio is defined as total fixed costs divided by total variable costs? A. 0.1145 B. 0.1375 C. 0.2157 D. 0.2750 E. None of these 7. Select the incorrect statement from the following: A. The cost object determines whether a cost is classified as direct or indirect B. The same cost cannot be classified as both direct and indirect C. Relevant costs can include direct and indirect costs D. Direct costs can display a fixed or variable behavior pattern THE GEORGE WASHINGTON UNIVERSITY – Summer 2017 Final Exam Confidential Page 3 5/20/17 8. At the beginning of 2014, Barksdale Corporation estimated that its total annual fixed overhead costs amount to $50,000. Further, Barksdale estimated that its volume of production would be 2,000 units of product. Based on these estimates, Barksdale computed a predetermined overhead rate that was used to allocate overhead costs to the products made in 2014. As predicted, actual fixed overhead costs did amount to $50,000. However, actual volume of production was only 1,800 units of product. Based on this information alone, A. Product costs used for decision-making in 2014 were accurate B. Product costs used for decision-making in 2014 overstated the costs C. Product costs used for decision-making in 2014 understated the costs D. The answer cannot be determined from the information provided 9. Which of the following statements is true? A. Any cost connected to a cost object is a direct cost, regardless of what the cost is B. Costs that do not have a strong cause-and-effect relationship with a cost driver are called direct costs C. A cost driver is used to allocate a direct cost when there is a causeand-effect relationship between the cost and the cost object D. Fixed costs that do not have a definitive cost driver are allocated using an allocation base that distributes a rational share of the cost to each product E. None of these 10. Dr. Meredith Gray, chief of outpatient clinics at Lexington Hospital System (LHS), has received an offer from an HMO which wishes to use available capacity at LHS’s Otter Peak Clinic. Here is some information about the clinic’s current costs and billings and the offer. At present, the average cost per visit at the clinic is $65 at a projected volume of 10,000 visits. The variable cost per visit is $30. The clinic bills and receives an average of $60/visit. The HMO guarantees 5,000 visits and is willing to pay $50 per visit. Accepting the offer will increase the clinic’s variable costs by $2/HMO visit (no change in variable cost for current patients); the fixed costs will increase by $120,000. Dr. Gray asks for an answer to two questions: If it accepts the offer, will LHS have a net incremental B-Benefit or L-Loss? Circle one: B/L [you’ll be able to enter B or L in Balckboard] What is the $ amount of the incremental benefit or loss? Answer: _______________ [enter as a positive number, no dollar sign, no commas] THE GEORGE WASHINGTON UNIVERSITY – Summer 2017 Final Exam Confidential Page 4 5/20/17 Use the following project quarterly amounts at Universal Uniforms Corporation (UUC) for the next three questions. UUC stocks inventory of uniforms which it buys from suppliers. UUC customers buy uniforms for their employees. Uniform Uniforms Corporation (UUC) Budget Information Q1 Q2 Q3 Q4 Estimated Revenue ($) 2,317,500 2,832,500 3,090,000 2,060,000 Cost of Goods sold ($) 1,509,545 1,845,000 2,008,500 1,339,000 Ending inventory ($) 1,200,000 1,110,000 1,340,000 1,150,000 11. The receivables collection policy at UUC is to collect 60% of current sales in the current period and the remaining 40% in the next period. Beginning receivables in Q1 is $450,000. Which of the following statements is true? A. Q3 ending receivables were $1,236,000 B. Q3 ending receivables were $1,133,000 C. Q3 ending receivables were $3,090,000 D. Q3 ending receivables were $2,987,000 12. UUC estimates its quarterly selling, general, and admin (SGA) costs to have two components – a fixed component of $30,000 and a variable component with a rate of 15% of revenue. The company pays 90% of its SGA costs in the quarter incurred and the remaining 10% in the next quarter. What should be the SGA expense budget in Q2? A. $261,750 B. $409,388 C. $454,875 D. $686,625 13. UUC’s policy is to pay 80% of its total accounts payable to suppliers (beginning accounts payables + cost of inventory purchased) each quarter. The Q2 beginning accounts payable to suppliers was $280,000. Which of the following statements regarding Q2’s pro forma financial information is true? A. The estimated cost of purchases = $1,755,000; ending accounts payable = $407,000 B. The estimated cost of purchases = $645,000; ending accounts payable = $185,000 C. The estimated cost of purchases = $1,800,000; ending accounts payable = $407,000 D. The estimated cost of purchases = $1,755,000; ending accounts payable = $185,000 THE GEORGE WASHINGTON UNIVERSITY – Summer 2017 Final Exam Confidential Page 5 5/20/17 14. The Scooby Doo Corporation has budgeted the following information for June: Cash Budgeting Parameters Cash receipts $542,000 Beginning cash balance $10,000 Cash payments $560,000 Desired ending cash balance $50,000 If there is a cash shortage, the company borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments and interest is paid monthly at 1% on the first day of the following month. The company had no debt before June 1st. The amount of interest paid on July 1 would be A. $800 B. $580 C. $500 D. $442 15. My Back Aches Corporation expects to begin operating on January 1. On that day, it plans to purchase $25,000 of depreciable equipment, with salvage value of $1,000 and estimated life of 4 years. The company’s master budget contained the following operating expense budget: Expenses Budget January February March Salary Expense $18,000 $18,000 $18,000 Sales commissions, 5% of sales $15,000 $16,000 $12,000 Utilities $1,400 $1,400 $1,400 Depreciation Expense $500 $500 $500 Rent $3,600 $3,600 $3,600 Miscellaneous $900 $900 $900 Total operating expenses $39,400 $40,400 $36,400 All expense items requiring cash payment are paid in the month in which they are recognized. The amount of net depreciable assets appearing on the company’s March 31 pro forma balance sheet is A. $6,000 B. $19,000 C. $23,500 D. $22,500 THE GEORGE WASHINGTON UNIVERSITY – Summer 2017 Final Exam Confidential Page 6 5/20/17 16. The Please Don’t Break’Em Company manufactures and sells two lines of china. During the most recent accounting period, the Faux line and the Traditional Line sold 15,000 and 2,000 units, respectively. The company’s most recent financial statements are shown below: Faux Traditional Sales $800,000 $200,000 Less: costs of goods sold (all direct costs of each line) $620,000 $140,000 Gross Profit $180,000 $60,000 Less: Operating expenses SG&A (all direct costs of each line) $30,000 $35,000 Corporate level facility expenses (fixed allocated costs) $26,000 $26,000 Net Income (loss) $124,000 ($1,000) Based on this information, the company should A. Eliminate the Traditional line because it is operating at a loss B. Keep the Traditional line because it contributes $25,000 to total profitability C. Keep the Traditional line because it contributes $55,000 to total profitability D. Keep the Traditional line because it contributes $50,000 to total profitability 17. Kifer and Kifer has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $200,000. The old machines presently have a book value of $120,000 and a market value of $12,000. The are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $100,000 and have operating expenses of $18,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $30,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $10,000 a year. Select the true statement. A. The company will be $28,000 better off over the 5-year period if it keeps the old equipment B. The company will be $40,000 better off over the 5-year period if it keeps the old equipment C. The company will be $22,000 better off over the 5-year period if it replaces the old equipment D. The company will be $12,000 better off over the 5-year period if it replaces the old equipment THE GEORGE WASHINGTON UNIVERSITY – Summer 2017 Final Exam Confidential Page 7 5/20/17 18. Contribution margin would be one of the most important measurements used in evaluating the performance of a(an) A. Cost center B. Profit center C. Investment center D. Organizational center 19. Here is Chicago Cricket Corporation’s (CCC) static budget prepared for a volume of sales of 20,000 units. Static Budget 20X1 Sales Revenue $200,000 Less variable costs Manufacturing costs $70,000 SG&A costs $40,000 Less: fixed costs Manufacturing costs $22,000 SG&A costs $17,000 Operating Income $51,000 What is the volume variance of operating income if CCC produces and sells 18,000 units in 20X1? Answer: _______________ [Enter a positive number (whether the variance is favorable or unfavorable), no $ signs, no commas] Is the volume variance F=Favorable or U=Unfavorable. Circle one: F/U [you’ll be able to enter F or U in Blackboard] 20. The I Am Running Out of Creative Names Company’s static budget is based on a planned activity level of 25,000 units. Later, the company’s management accountant prepared a budget based on 30,000 units. The company actually produced and sold 29,000 units. In evaluating its performance, management should compare the company’s actual revenues and costs which of the following budgets? A. A budget based on 29,000 units B. A budget based on 30,000 units C. A budget based on 25,000 units D. Either A or C THE GEORGE WASHINGTON UNIVERSITY – Summer 2017 Final Exam Confidential Page 8 5/20/17 21. Select the correct statement concerning the human factor of performance evaluation. A. Variances should not be used to single out managers for punishment B. Variances must be analyzed carefully to ensure that they are fully understood C. Just because a cost variance is labeled as favorable doesn’t necessarily mean that the manager should be commended for a job well done. D. All of these Use the values of the following parameters used at Harman Hospital’s Pediatric Section for the next two questions. Harman Hospital: Schedule of Pediatric Section Nursing Costs – June 20X1 Item Budgeted Actual Patient days 600 624 RN hours per patient day 6 8 Hourly pay rate RNs $40 $45 22. What is the flexible budget variance for nursing labor at Harman Hospital’s pediatric section? A. $74,880U B. $5,750U C. $80,640F D. $74,880F E. $5,760F 23. What is the per unit usage variance of nursing labor at Harman’s pediatric section? A. $30U B. $40U C. $80U D. $30F E. $40F 24. Desired Products provided the following selected information about its consumer products division for 2012: Desired ROI 10% Net Income $150,000 Residual Income $50,000 Based on this information, the division’s investment amount (amount of operating assets) was A. $700,000 B. $1,000,000 C. $4,000,000 D. $20,000,000 THE GEORGE WASHINGTON UNIVERSITY – Summer 2017 Final Exam Confidential Page 9 5/20/17 25. Watch More Movie Chains has invested in Italian snack bars for their stores, where individual pizzas are prepared and sold. The investment cost the company $45,000. The company expects a sales volume for the new product to be 12,000 pizzas a year. Variable materials, preparation, and marketing costs are expected to be $1.50 a unit and fixed costs are estimated at $15,000 a year. Based on a desired 12% ROI, what should Watch More Movies charge as the selling price per pizza? A. $4.50 B. $2.75 C. $3.20 D. $5.20