ACC 2203 PRACTICE PROBLEMS FOR CHAPTERS 6, 7, 8, 9, AND 10

| December 11, 2017

1ACC 2203 PRACTICE PROBLEMS FOR CHAPTERS 6, 7, 8, 9, AND 10Diltex Farm Supply is located in a small town in the rural west. Data regarding the store’s operations follow:• Sales are budgeted at $220,000 for November, $200,000 for December, and $210,000 for January.• Collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 3%uncollectible.• The cost of goods sold is 65% of sales.• The company desires to have an ending merchandise inventory at the end of each month equal to 50% of the nextmonth’s cost of goods sold. Payment for merchandise is made in the month following the purchase.1. Expected cash collections in December are:A. $59,400B. $140,000C. $199,400D. $200,0002. December cash disbursements for merchandise purchases would be:A. $136,500B. $68,250C. $133,250D. $130,0003. The accounts receivable balance, net of uncollectible accounts, at the end of December would be:A. $82,000B. $113,400C. $60,000D. $54,0004. Accounts payable at the end of December would be:A. $65,000B. $68,250C. $130,000D. $133,25025. Caba Corporation’s sales budget for the first half of the year is as follows:Budgeted SalesJanuary $ 115,000February $ 198,000March $ 220,000April $ 250,000May $ 210,000June $ 290,000Total: $ 1,283,000Sales are 30% cash and 70% on account. Sales on account are to be collected over a three-month period, with 20%collected in the month of the sale, 65% collected in the first month following the sale, and 15% collected in thesecond month following the sale. What is the budgeted balance in the Accounts Receivable account as of June 30?a. $184,450b. $263,500c. $249,400d. $232,0006. Reyes Merchandising Company has created the following sales forecast for the beginning of the upcomingfiscal year:January February March AprilBudgeted unit sales 15,400 18,500 16,200 17,600The company expects to start the year with 1,970 units in merchandise inventory. Managementdesires an ending merchandise inventory in each month equal to 15% of next month’s budgeted unit sales. Howmany units of merchandise does Reyes expect to purchase for March?a. 18,840b. 16,410c. 16,200d. 18,1553Deluca Manufacturing prepared the following cost control report for the prior month:Planning Budget Actual Results VariancesDirect labor hours 30,000 33,000Direct materials $45,000 $55,000 $10,000 UDirect labor wages $480,000 $520,000 $40,000 UMaintenance $125,000 $136,000 $11,000 UUtilities $82,000 $86,000 $4,000 URent $65,000 $65,000 $0Depreciation $27,000 $27,000 $0Total: $824,000 $889,000 $65,000 UDirect materials and direct labor wages are variable costs; rent and depreciation are fixed costs; and maintenance andutilities are mixed costs. The fixed component of the budgeted maintenance cost is $35,000; the fixed component ofthe budgeted utilities cost is $13,000.7. What is the activity variance for Maintenance?a. $9,000 Ub. $9,000 Fc. $2,000 Ud. $2,000 F8. What is the spending variance for Utilities?a. $6,900 Fb. $6,900 Uc. $2,900 Fd. $2,900 U4Outdoor Adventures, Inc. offers guided jeep tours for small groups in Denali National Park. The company bases itsbudget on two cost drivers: jeeps and guests. Data concerning the company’s costs is as follows:Fixed Costper MonthCost perJeepCost perGuestTour guide $20,000 $150 $0Vehicle expenses $3,500 $35 $15Meal expenses $13,000 $0 $20First aid expenses $2,000 $24 $10Administrative expenses $2,500 $0 $8In June, the company budgeted for 60 jeeps and 600 guests at an average tour price of $250 per guest.Data concerning the company’s operations in June appear below:Actual ResultsJeeps 65Guests 700Revenue $202,000Tour guide $32,000Vehicle expenses $7,000Meal expenses $30,000First aid expenses $5,000Administrative expenses $3,5009. What is the activity variance for Vehicle expenses?a. $9,275 Fb. $9,275Uc. $1,675 Fd. $1,675U10. What is the spending variance for First aid expenses?a. $5,560Ub. $5,560 Fc. $1,120Ud. $1,120 F511. The Keystone Company has three divisions: A, B, and C . Assume the following data for Division A for March:Sales $1,200,000Variable expenses $600,000Traceable fixed costs $120,000Allocated common fixed costs $60,000Average operating assets $2,000,000Minimum required return 15%How much is Division A’s residual income?12. Uchimura Corp. has two divisions: the AFE Division and the GBI Division. The corporation’s net income is$42,000. The AFE Division’s segment profit is $24,300 and the GBI Division’s segment profit is $175,400.What is the amount of the common fixed expense not traceable to the individual divisions?A. $148,000B. $157,700C. $217,400D. $161,100E. None of the above613. The Freed Company produces three products, X, Y, Z, from a single raw material input. Product Y can be soldat the split-off point for total revenues of $50,000, or it can be processed further at a total cost of $16,000 andthen sold for $68,000. Product Y:a. Should be sold at the split-off point, rather than processed further.b. Would increase the company’s overall net operating income by $18,000 if processed further and then sold.c. Would increase the company’s overall net operating income by $68,000 if processed further and then sold.d. Would increase the company’s overall net operating income by $2,000 if processed further and then sold.e. None of the above14. Campion Company has two divisions, A and B. The following data pertain to operations in May:If common fixed expenses were $10,000, total fixed expenses were:A. $10,000B. $30,500C. $40,500D. $65,50015. Maroni & Sons is a plumbing and heating company. A contribution margin format segmented income statement(by division) for the most recent year is given below:DivisionPlumbing Heating Total CompanySales $506,000 100% $624,000 100% $1,130,000 100%Variable expenses $328,900 65% $149,760 24% $478,660 42%Contribution margin $177,100 35% $474,240 76% $651,340 58%Traceable fixed expenses $91,080 18% $262,080 42% $353,160 31%Segment margin $86,020 17% $212,160 34% $298,180 26%Common fixed expenses $88,000 8%Net operating income $210,180 19%To increase sales in the Plumbing division next year, Maroni & Sons is considering starting an intense advertisingcampaign in that division. This campaign would cost $15,000 and would be expected to increase sales in thePlumbing division by $120,000. If the company were to adopt the advertising campaign, what would be the impacton the total company’s profit?a. Profit would increase by $105,000b. Profit would decrease by $105,000c. Profit would increase by $27,000d. Profit would decrease by $27,000716. Which of the following costs are always irrelevant in decision making?a. avoidable costsb. sunk costsc. opportunity costsd. fixed costs17. In deciding whether to manufacture a part or buy it from an outside supplier, which of the following costs arerelevant?Fixed overhead that will continueeven if the part is bought from anoutside supplierFreight charges paid by thepurchaser only if the part isbought from an outside suppliera. Yes Yesb. Yes Noc. No Yesd. No No18. Greenland Co., an organic products retailer, has two departments: Housewares and Gardenwares. Thecompany’s most recent monthly contribution margin format income statement is as follows:DepartmentHousewares Gardenwares Total CompanySales $603,000 $362,000 $965,000Variable expenses $231,000 $150,000 $381,000Contribution margin $372,000 $212,000 $584,000Fixed expenses $64,000 $218,000 $282,000Net operating income (loss) $308,000 ($6,000) $302,000Internal reports indicate that $38,100 of the fixed expenses being charged to Gardenwares are allocated costs thatwill continue even if the Gardenwares Department is dropped. Also, eliminating the Gardenwares Department willresult in a 19% decrease in sales for the Housewares Department.What is the impact to the total company’s profit if the Gardenwares Department is dropped?a. Profit would decrease by $146,670b. Profit would decrease by $102,780c. Profit would decrease by $32,100d. Profit would increase by $6,000819. Dipuisto Inc. manufactures radios at an annual production level of 50,000 units. At this production level, thecost per unit for a radio is as follows:Direct materials $2.10Direct labor $3.70Variable manufacturing overhead $8.40Supervisor’s salary $6.65Fixed manufacturing overhead $9.15Total cost: $30.00An outside supplier has offered to sell the radios to Dipuisto Inc. for $26.20 per unit. If Dipuisto Inc. accepts thisoffer, then they will not need to employ the supervisor. Also, if the radios are purchased from the outside supplier,then 40% of the fixed manufacturing overhead costs can be eliminated. Assuming that there are no other uses for thefacility space that Dipuisto uses to manufacture the radios, what is the annual impact to the company’s profit if itbuys the radios from the supplier instead of manufacturing them?a. Profit would decrease by $84,500b. Profit would increase by $84,500c. Profit would decrease by $190,000d. Profit would increase by $190,00020. Marjess Corp. manufactures shirts, and it is considering whether or not it should accept a special order for 5,000shirts. The normal selling price of a shirt is $45 and its unit product cost is $36 as shown below:Direct materials $8.00Direct labor $16.00Manufacturing overhead $12.00Unit product cost $36.00Most of the manufacturing overhead is fixed; however, 30% of it is variable with respect to the number of shirtsproduced. The special order will require customizing the shirts for the customer with an additional direct materialscost of $5 per shirt and an additional direct labor cost of $4 per shirt. If it accepts this order, Marjess will have torent special equipment to handle the shirt customization at a cost of $22,000. The order would have no effect onMarjess Corporation’s regular sales and it could be fulfilled using the company’s existing capacity without affectingany other order.What is the minimum (i.e., the break-even) sales price per unit that Marjess should charge for this special order?a. $17.00b. $49.40c. $32.00d. $41.00921. Norel Sports makes three products: frisbees, bats, and balls. All three products require the same direct material(plastic), which Norel purchases from its supplier for $1.50 per pound; however, Norel can’t obtain all theplastic that it needs to fill the current orders for its products due to a strike at the supplier’s plant. The companyhas provided the following data for one unit of each product it makes:ProductFrisbee Bat BallSelling price $26.00 $19.00 $7.00Variable expenses:Direct materials $3.00 $6.00 $2.25Other variable expenses $16.50 $3.50 $2.30Contribution margin ratio 25% 50% 35%In what order should Norel Sports manufacture its products, starting with the most profitable product (first product)and ending with the least profitable product (third product)?Manufacturing OrderFirst product Second product Third producta. Bat Ball Frisbeeb. Frisbee Bat Ballc. Bat Frisbee Balld. Ball Frisbee Bat

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