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Financial and Managerial Accounting 3rd Edition Horngren, Harrison, Oliver - Solutions
Hollys DayCare has been in operation for several years. Consider the following costs:Requirement1. Identify the costs as variable (V), fixed (F), or mixed(M).
Martin owns a machine shop. In reviewing his utility bill for the last 12 months, he found that his highest bill of $2,800 occurred in August when his machines worked 1,400 machine hours. His lowest utility bill of $2,600 occurred in December when his machines worked 900 machine hours.
Story Park competes with Splash World by providing a variety of rides. Story sells tickets at $50 per person as a one-day entrance fee. Variable costs are $10 per person, and fixed costs are $240,000 per month.RequirementCompute the number of tickets Story must sell to break even. Perform a
Refer to Short Exercise 19-4.Requirements1. Compute Story Park’s contribution margin ratio. Carry your computation to two decimal places.2. Use the contribution margin ratio CVP formula to determine the sales revenue Story Park needs to break even.
Consider the following facts:Requirement1. Compute the missinginformation.
Refer to Short Exercise 19-4.Requirements1. Suppose Story Park cuts its ticket price from $50 to $40 to increase the number of tickets sold. Compute the new breakeven point in tickets and in sales dollars.2. Ignore the information in Requirement 1. Instead, assume that Story Park increases the
Refer to Short Exercise 19-4. Suppose Story Park reduces fixed costs from $240,000 per month to $170,000 per month.RequiremenCompute the new breakeven point in tickets and in sales dollars.
Refer to Short Exercise 19-4.RequirementIf Story Park expects to sell 6,200 tickets, compute the margin of safety in tickets and in sales dollars.
Wet Weekend Swim Park sells individual and family tickets, which include a meal, three beverages, and unlimited use of the swimming pools. Wet Weekend has the following ticket prices and variable costs for 2012:Wet Weekend expects to sell two individual tickets for every four family tickets. Wet
Refer to Short Exercise 19-10. For 2013, Wet Weekend expects a sales mix of two individual tickets for every three family tickets.Requirements1. Compute the new weighted-average contribution margin per ticket.2. Calculate the total number of tickets Wet Weekend must sell to break even.3. Calculate
Consider the following terms and definitions.______1. Costs that do not change in total despite wide changes in volume.______2. The sales level at which operating income is zero: Total revenues equal total costs.______3. Drop in sales a company can absorb without incurring an operating
The manager of Able Car Inspection reviewed his monthly operating costs for the past year. His costs ranged from $4,000 for 1,000 inspections to $3,600 for 600 inspections.Requirements1. Calculate the variable cost per inspection.2. Calculate the total fixed costs.3. Write the equation and
For its top managers, Worldwide Travel formats its income statement as follows:Worldwide's relevant range is between sales of $245,000 and $364,000.Requirements1. Calculate the contribution margin ratio.2. Prepare two contribution margin income statements: one at the $245,000 level and one at the
Trendy Toes, Co., produces sports socks. The company has fixed costs of $95,000 and variable costs of $0.95 per package. Each package sells for $1.90.Requirements1. Compute the contribution margin per package and the contribution margin ratio. (Round your answers to two decimal places.)2. Find the
Owner Yinan Song is considering franchising her Noodles restaurant concept. She believes people will pay $7.50 for a large bowl of noodles. Variable costs are $3.00 per bowl. Song estimates monthly fixed costs for a franchise at $9,000. Requirements1. Use the contribution margin ratio approach to
Gary’s Steel Parts produces parts for the automobile industry. The company has monthly fixed costs of $660,000 and a contribution margin of 75% of revenues.Requirements1. Compute Gary’s monthly breakeven sales in dollars. Use the contribution margin ratio approach.2. Use contribution margin
John Kyler is considering starting a Web-based educational business, e-Prep MBA. He plans to offer a short-course review of accounting for students entering MBA programs. The materials would be available on a password-protected Web site; students would complete the course through self-study. Kyler
Dependable Drivers Driving School charges $250 per student to prepare and administer written and driving tests. Variable costs of $100 per student include trainers’ wages, study materials, and gasoline. Annual fixed costs of $75,000 include the training facility and fleet of cars.Requirements1.
Rodney’s Repair Shop has a monthly target operating income of $15,000. Variable costs are 75% of sales, and monthly fixed costs are $10,000.Requirements1. Compute the monthly margin of safety in dollars if the shop achieves its income goal.2. Express Rodney’s margin of safety as a percentage of
Speedy’s Scooters plans to sell a standard scooter for $55 and a chrome scooter for $70. Speedy’s purchases the standard scooter for $30 and the chrome scooter for $40. Speedy expects to sell one standard scooter for every three chrome scooters. His monthly fixed costs are
The budgets of four companies yield the following information:Requirements1. Fill in the blanks for each missing value. (Round the contribution margin per unit to the nearest cent.)2. Which company has the lowest breakeven point in sales dollars?3. What causes the low breakevenpoint?
England Productions performs London shows. The average show sells 1,300 tickets at $60 per ticket. There are 150 shows a year. No additional shows can be held as the theater is also used by other production companies. The average show has a cast of 65, each earning a net average of $340 per show.
Kincaid Company sells flags with team logos. Kincaid has fixed costs of $583,200 per year plus variable costs of $4.80 per flag. Each flag sells for $12.00.Requirements1. Use the income statement equation approach to compute the number of flagsKincaid must sell each year to break even.2. Use the
National Investor Group is opening an office in Portland. Fixed monthly costs are office rent ($8,500), depreciation on office furniture ($2,000), utilities ($2,100), special telephone lines ($1,100), a connection with an online brokerage service ($2,800), and the salary of a financial planner
The contribution margin income statement of Delectable Donuts for August 2012 follows:Delectable sells four dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $4, with total variable cost of $1.60 per dozen. A dozen custard-filled donuts sells for $5, with
The budgets of four companies yield the following information:Requirements1. Fill in the blanks for each missing value. (Round the contribution margin to the nearest cent.)2. Which company has the lowest breakeven point in sales dollars?3. What causes the low breakevenpoint?
British Productions performs London shows. The average show sells 900 tickets at $65 per ticket. There are 155 shows a year. No additional shows can be held as the theater is also used by other production companies. The average show has a cast of 55, each earning a net average of $330 per show. The
Kincaid Company sells flags with team logos. Kincaid has fixed costs of $664,000 per year plus variable costs of $4.50 per flag. Each flag sells for $12.50.Requirements1. Use the income statement equation approach to compute the number of flagsKincaid must sell each year to break even.2. Use the
Diversified Investor Group is opening an office in Boise. Fixed monthly costs are office rent ($8,100), depreciation on office furniture ($1,600), utilities ($2,500), special telephone lines ($1,200), a connection with an online brokerage service ($2,700), and the salary of a financial planner
The contribution margin income statement of Dandy Donuts for May 2012 follows:Dandy sells three dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $6, with a variable cost of $3 per dozen. A dozen custard-filled donuts sells for $8, with a variable cost of $4
This exercise continues the Lawlor Lawn Service, Inc., situation from Exercise 18-36 of Chapter 18. Lawlor Lawn Service currently charges $100 for a standard lawn service and incurs $60 in variable cost. Assume fixed costs are $1,400 per month.Requirements1. What is the number of lawns that must be
This problem continues the Draper Consulting, Inc., situation from Problem 18-37 of Chapter 18. Draper Consulting provides consulting service at an average price of $175 per hour and incurs variable cost of $100 per hour. Assume average fixed costs are $5,250 a month.Requirements1. What is the
Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in the Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would
You have just begun your summer internship at Omni Instruments. The company supplies sterilized surgical instruments for physicians. To expand sales, Omni is considering paying a commission to its sales force. The controller, Matthew Barnhill, asks you to compute: (1) the new breakeven sales
Amanda Jackson loved reading obituaries. She was retired, but she had worked many bookkeeping jobs in her day and had made herself an expert in creating false invoices and opening bank accounts for fake companies. The scam was easy. When someone dies, the whole family is in grief, and one of the
FASTPACK Manufacturing produces filament packaging tape. In 2014, FASTPACK produced and sold 15,000,000 rolls of tape. The company has recently expanded its capacity, so it now can produce up to 30,000,000 rolls per year. FASTPACK’s accounting records show the following results from 2014:Sale
You are trying to decide whether to trade in your inkjet printer for a more recent model. Your usage pattern will remain unchanged, but the old and new printers use different ink cartridges.Requirement1. Indicate if the following items are relevant or irrelevant to your decision:a. The price of the
Mount Snow operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to earn a 16% return on the company’s $109,375,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. Mount
Consider Mount Snow from Short Exercise 20-2. Assume that Mount Snow’s reputation has diminished and other resorts in the vicinity are only charging $80 per lift ticket. Mount Snow has become a price-taker and will not be able to charge more than its competitors. At the market price, Mount Snow
Deela Fashions operates three departments: Mens, Womens, and Accessories. Departmental operating income data for the third quarter of 2012 are as follows:Assume that the fixed expenses assigned to each department include only direct fixed costs of the department:
StoreAll produces plastic storage bins for household storage needs. The company makes two sizes of bins: large (50 gallon) and regular (35 gallon). Demand for the product is so high that StoreAll can sell as many of each size as it can produce. The company uses the same machinery to produce both
Suppose a Roasted Olive restaurant is considering whether to (1) bake bread for its restaurant in-house or (2) buy the bread from a local bakery. The chef estimates that variable costs of making each loaf include $0.52 of ingredients, $0.24 of variable overhead (electricity to run the oven), and
Priscilla Nailey manages a fleet of 375 delivery trucks for Jones Corporation. Nailey must decide if the company should outsource the fleet management function. If she outsources to Fleet Management Services (FMS), FMS will be responsible for maintenance and scheduling activities. This alternative
Cocoaheaven processes cocoa beans into cocoa powder at a processing cost of $9,500 per batch. Cocoaheaven can sell the cocoa powder as is or it can process the cocoa powder further into either chocolate syrup or boxed assorted chocolates. Once processed, each batch of cocoa beans would result in
Dan Jacobs, production manager for GreenLife, invested in computer-controlled production machinery last year. He purchased the machinery from Superior Design at a cost of $3,000,000. A representative from Superior Design has recently contacted Dan because the company has designed an even more
Suppose the Baseball Hall of Fame in Cooperstown, New York, has approached Hobby-Cardz with a special order. The Hall of Fame wishes to purchase 57,000 baseball card packs for a special promotional campaign and offers $0.41 per pack, a total of $23,370. Hobby-Cardzs total production
San Jose Sunglasses sell for about $157 per pair. Suppose that the company incurs the following average costs per pair:San Jose has enough idle capacity to accept a one-time-only special order from Washington Shades for 25,000 pairs of sunglasses at $80 per pair. San Jose will not incur any
Stenback Builders builds 1,500 square-foot starter tract homes in the fast-growing suburbs of Atlanta. Land and labor are cheap, and competition among developers is fierce. The homes are a standard model, with any upgrades added by the buyer after the sale. Stenback Builders’ costs per developed
Top managers of Movie Street are alarmed by their operating losses. They are considering dropping the VCR-tape product line. Company accountants have prepared the following analysis to help make this decision:Total fixed costs will not change if the company stops selling VCR tapes.Requirement1.
Refer to Exercise 20-13. Assume that Movie Street can avoid $41,000 of fixed expenses by dropping the VCR-tape product line (these costs are direct fixed costs of the VCR product line).Requirement1. Prepare an incremental analysis to show whether Movie Street should stop selling VCR tapes.
Lifemaster produces two types of exercise treadmills: regular and deluxe. The exercise craze is such that Lifemaster could use all its available machine hours to produce either model. The two models are processed through the same production departments. Data for both models is as
Klintan sells both designer and moderately priced fashion accessories. Top management is deciding which product line to emphasize. Accountants have provided the following data:The Klintan store in Grand Junction, Colorado, has 9,000 square feet of floor space. If Klintan emphasizes moderately
Each morning, Ned Stenback stocks the drink case at Ned’s Beach Hut in Myrtle Beach, South Carolina. The drink case has 115 linear feet of refrigerated drink space. Each linear foot can hold either six 12-ounce cans or three 20-ounce bottles.Ned’s Beach Hut sells three types of cold drinks:1.
Fiber Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit:Another company has offered to sell Fiber Systems the switch for $18.50 per unit. If Fiber Systems buys the switch from the outside supplier, the manufacturing
Refer to Exercise 20-18. Fiber Systems needs 84,000 optical switches. By outsourcing them, Fiber Systems can use its idle facilities to manufacture another product that will contribute $253,000 to operating income. Requirements1. Identify the incremental costs that Fiber Systems will incur to
Naturalmaid processes organic milk into plain yogurt. Naturalmaid sells plain yogurt to hospitals, nursing homes, and restaurants in bulk, one-gallon containers. Each batch, processed at a cost of $800, yields 600 gallons of plain yogurt. Naturalmaid sells the one-gallon tubs for $7 each and spends
Buoy manufactures flotation vests in Charleston, South Carolina. Buoy's contribution margin income statement for the month ended December 31, 2012, contains the following data:Suppose Overboard wishes to buy 3,900 vests from Buoy. Acceptance of the order will not increase Buoy's variable marketing
Green Thumb operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Green Thumb has $4,800,000 in assets. Its yearly fixed costs are $600,000, and the variable costs for the potting soil, container, label, seedling, and labor for each gallon-size
Members of the board of directors of Safe Zone have received the following operating income data for the year ended May 31, 2012:Members of the board are surprised that the industrial systems product line is losing money. They commission a study to determine whether the company should drop the
Brik, located in Port St. Lucie, Florida, produces two lines of electric toothbrushes: deluxe and standard. Because Brik can sell all the toothbrushes it can produce, the owners are expanding the plant. They are deciding which product line to emphasize. To make this decision, they assemble the
Outdoor Life manufactures snowboards. Its cost of making 2,000 bindings is as follows:Suppose Lancaster will sell bindings to Outdoor Life for $14 each. Outdoor Life would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.70 per
Smith Petroleum has spent $204,000 to refine 62,000 gallons of petroleum distillate, which can be sold for $6.40 a gallon. Alternatively, Smith can process the distillate further and produce 56,000 gallons of cleaner fluid. The additional processing will cost $1.75 per gallon of distillate. The
Safe Sailing manufactures flotation vests in Tampa, Florida. Safe Sailings contribution margin income statement for the month ended December 31, 2012, contains the following data:Suppose Overtown wishes to buy 3,800 vests from Safe Sailing. Acceptance of the order will not increase Safe
Nature Place operates a commercial plant nursery, where it propagates plants for garden centers throughout the region. Nature Place has $5,100,000 in assets. Its yearly fixed costs are $650,000 and the variable costs for the potting soil, container, label, seedling, and labor for each gallon-size
Members of the board of directors of Control One have received the following operating income data for the year ended March 31, 2012:Members of the board are surprised that the industrial systems product line is losing money. They commission a study to determine whether the company should drop the
Breit, located in San Antonio, Texas, produces two lines of electric toothbrushes: deluxe and standard. Because Breit can sell all the toothbrushes it can produce, the owners are expanding the plant. They are deciding which product line to emphasize. To make this decision, they assemble the
Cool Boards manufactures snowboards. Its cost of making 2,100 bindings is as follows:Suppose Lewis will sell bindings to Cool Boards for $15 each. Cool Boards would pay $1 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.40 per
Cole Petroleum has spent $206,000 to refine 63,000 gallons of petroleum distillate, which can be sold for $6.30 a gallon. Alternatively, Cole can process the distillate further and produce 53,000 gallons of cleaner fluid. The additional processing will cost $1.80 per gallon of distillate. The
This exercise continues the Lawlor Lawn Service, Inc., situation from Exercise 19-32 of Chapter 19. Lawlor Lawn Service currently charges $100 for a standard lawn service and incurs $60 in variable cost. Assume fixed costs are $1,400 per month. Lawlor has been offered a special contract for $80
This problem continues the Draper Consulting, Inc., situation from Problem 19-33 of Chapter 19. Draper Consulting provides consulting service at an average price of $175 per hour and incurs variable costs of $100 per hour. Assume average fixed costs are $5,250 a month. Draper has developed new
BKFin.com provides banks access to sophisticated financial information and analysis systems over the Web. The company combines these tools with benchmarking data access, including e-mail and wireless communications, so that banks can instantly evaluate individual loan applications and entire loan
Mary Tan is the controller for Duck Associates, a property management company in Portland, Oregon. Each year Tan and payroll clerk Toby Stock meet with the external auditors about payroll accounting. This year, the auditors suggest that Tan consider outsourcing Duck Associates’ payroll accounting
Frank Perdue had built up a successful development company. When he became City Commissioner, everyone said it was good to have a businessman on the Commission. Businessmen know how to control costs and make sound economic decisions, they said, and Frank could help the city tighten its belt. One of
John Menard is the founder and sole owner of Menards. Analysts have estimated that his chain of home improvement stores scattered around nine midwestern states generate about $3 billion in annual sales. But how can Menards compete with giant Home Depot?Suppose Menard is trying to decide whether to
Consider the budget for any business.Requirement1. List the three key benefits companies get from preparing the budget.
The following are some of the components included in the master budget.a. Budgeted balance sheetb. Sales budgetc. Capital expenditures budgetd. Budgeted income statemente. Cash budgetf. Inventory, purchases, and cost of goods sold budgetg. Budgeted statement of cash flowsRequirement1. List in order
Grippers sells its rock-climbing shoes worldwide. Grippers expects to sell 8,500 pairs of shoes for $180 each in January, and 3,500 pairs of shoes for $190 each in February. All sales are cash only.Requirement1. Prepare the sales budget for January and February.
Review your results from S22-3. Grippers expects cost of goods sold to average 60% of sales revenue, and the company expects to sell 4,100 pairs of shoes in March for $260 each. Grippers’ target ending inventory is $10,000 plus 50% of the next month’s cost of goods sold.Requirement1. Use this
Refer to the Grippers sales budget that you prepared in S22-3. Now assume that Grippers’ sales are collected as follows:November sales totaled $400,000 and December sales were $425,000.50% in the month of the sale30% in the month after the sale18% two months after the sale2% never
Refer to the Grippers inventory, purchases, and cost of goods sold budget your prepared in S22-4. Assume Grippers pays for inventory purchases 50% in the month of purchase and 50% in the month after purchase.Requirement1. Prepare a schedule for the budgeted cash payments for purchases for January
Grippers has $12,500 in cash on hand on January 1. Refer to S22-5 and S22-6 for cash collections and cash payment information. Assume Grippers has cash payment for operating expenses including salaries of $50,000 plus 1% of sales, all paid in the month of sale. The company requires a minimum cash
Refer to the Grippers cash collections from customers budget that you prepared in S22-5. Now assume that Grippers’ sales are collected as follows:Requirement60% in the month of the sale30% in the month after the sale8% two months after the sale2% never collected1. Prepare a revised schedule for
Maplehaven Sporting Goods Store has the following sales budget:Suppose June sales are expected to be $80,000 rather than $64,000.Requirement1. Revise Maplehavens salesbudget.
Consider the following list of responsibility centers and phrases.A cost center......... A revenue centerAn investment center..... LowerA profit center......... HigherA responsibility centerRequirement1. Fill in the blanks with the phrase that best completes the sentence.a. The maintenance
Wham-O is a distributor of board games and water toys manufactured by other companies. The company utilizes a shared Testing Facility where toys are safety tested. The Board Games division uses 3,000 testing hours a month. The Water Toys division uses 6,000 testing hours a month. The additional
Doug Ramirez owns a chain of travel goods stores. Last year, his sales staff sold 20,000 suitcases at an average sale price of $190. Variable expenses were 75% of sales revenue, and the total fixed expense was $250,000. This year, the chain sold more expensive product lines. Sales were 15,000
Sarah Edwards, division manager for Pillows Plus, is speaking to the controller, Diana Rothman, about the budgeting process. Sarah states, “I’m not an accountant, so can you explain the three main parts of the master budget to me and tell me their purpose?”Requirement1. Answer Sarah’s
Tremont, Inc., sells tire rims. Its sales budget for the nine months ended September 30 follows:In the past, cost of goods sold has been 40% of total sales. The director of marketing and the financial vice president agree that each quarters ending inventory should not be below $20,000
Consider the facts presented in E22-14. Tremont’s operating expenses include the following:Rent, $2,000 a monthSalary, $3,000 a monthCommissions, 3% of salesDepreciation, $1,000 a monthMiscellaneous expenses, 1% of salesRequirement1. Prepare an operating expenses budget for each of the three
Agua Pure is a distributor of bottled water.Requirement1. For each of the Items a. through c., compute the amount of cash receipts or payments Agua Pure will budget for September. The solution to one item may depend on the answer to an earlier item.a. Management expects to sell equipment that cost
Ling Auto Parts, a family-owned auto parts store, began January with $10,200 cash. Management forecasts that collections from credit customers will be $11,700 in January and $15,000 in February. The store is scheduled to receive $7,000 cash on a business note receivable in January. Projected cash
You recently began a job as an accounting intern at Reilly Golf Park. Your first task was to help prepare the cash budget for April and May. Unfortunately, the computer with the budget file crashed, and you did not have a backup or even a paper copy. You ran a program to salvage bits of data from
Consider the following June actual ending balances and July 31, 2012, budgeted amounts for Oleans.com:a. June 30 inventory balance, $17,750b. July payments for inventory, $4,300c. July payments of accounts payable and accrued liabilities, $8,200d. June 30 accounts payable balance, $10,600e. June
Consider the following:a. The bakery department of a Publix supermarket reports income for the current year.b. Pace Foods is a subsidiary of Campbell Soup Company.c. The personnel department of State Farm Insurance Companies prepares its budget and subsequent performance report on the basis of its
Love My Phone is based in Kingswood, Texas. The merchandising company has two divisions: Cell Phones and MP3 Players. The Cell Phone division has two main product lines: Basic and Advanced. The Basic product line includes phones whose primary function is storing contacts and making/receiving calls.
Thumbtacks March 31, 2012, budgeted balance sheet follows:The budget committee of Thumbtack Office Supply has assembled the following data.a. Sales in April were $40,000. You forecast that monthly sales will increase 2% over Aprils sales in May. Junes sales will
Refer to P22-22A.Requirements1. Prepare the schedule of budgeted cash collections from customers for April and May.2. Prepare the schedule of budgeted cash payments for purchases for April and May.3. Prepare the schedule of budgeted cash payments for operating expenses for April and May.4. Prepare
Refer to P22-22A and P22-23A.Requirements1. Prepare a budgeted balance sheet as of May 31, 2012.2. Prepare the budgeted statement of cash flows for the two months ended May 31, 2012.
Class Printing Supply of Baltimore has applied for a loan. Bank of America has requested a budgeted balance sheet at April 30, 2012, and a budgeted statement of cash flows for April. The March 31, 2012, budgeted balance sheet follows:As Class Printings controller, you have assembled the
Refer to your results from P22-22A, P22-23A, and P22-24A. Assume the following changes to the original facts:a. Collections of receivables are 60% in the month of sale, 38% in the month following the sale, and 2% are never collected. Assume the March receivables balance is net of the allowance for
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