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business
fundamental accounting

Fundamental Accounting Principles Volume 2 21st Edition John Wild, Ken Shaw, Barbara Chiappetta - Solutions

Describe and record the flow of overhead costs in job or¬ der cost accounting
A company’s predetermined overhead allocation rate is 150% of its direct labor costs. How much overhead is applied to a job that requires total direct labor costs of $30,000?a. $15,000b. $30,000c. $45,000d. $60,000e. $75,000
A company’s cost accounting system uses direct labor costs to apply overhead to goods in process and finished goods invento¬ ries. Its production costs for the period are: direct materials, $45,000; direct labor, $35,000; and overhead applied, $38,500. What is its predetermined overhead
A company’s ending inventory of finished goods has a total cost of $10,000 and consists of 500 units. If the overhead applied to these goods is $4,000, and the predetermined overhead rate is 80% of direct labor costs, how much direct materials cost was incurred in producing these 500 units?a.
Acompany’s Goods in Process Inventory T-account follows.The cost of units transferred to Finished Goods inventory isa. $193,000b. $211,800c. $185,000d. $144,600e. $176,200 Goods in Process Inventory Beginning balance 9,000 Direct materials 94,200 Direct labor 59,200 Overhead applied 31,600 ?
At the end of its current year, a company learned that its overhead was underapplied by $1,500 and that this amount is not consid¬ ered material. Based on this information, the company shoulda. Close the $1,500 to Finished Goods Inventory.b. Close the $1,500 to Cost of Goods Sold.c. Carry the
Determine which products are most likely to be manufactured as a job and which as a job lot.1. Hats imprinted with company logo. 4. A 90-foot motor yacht.2. Little League trophies. 5. Wedding dresses for a chain of stores.3. A hand-crafted table. 6. A custom-designed home.
Match the terms below with their definitions. 1. Cost accounting system 2. Target cost 3. General accounting system 4. Job 5. Job order production 6. Job lot a. Production of products in response to customer orders. b. A system that records manufacturing costs using a periodic in- ventory system.
The left column lists the titles of documents and accounts used in job order cost accounting. The right column presents short descriptions of the purposes of the documents. Match each document in the left column to its numbered description in the right column. A. Time ticket B. Materials ledger
The following information is available for Lock-Safe Company, which produces special-order security products and uses a job order cost accounting system.Compute the following amounts for the month of May.1. Cost of direct materials used. 4. Cost of goods sold.*2. Cost of direct labor used. 5. Gross
Use information in Exercise 19-7 to prepare journal entries for the following events for the month of May.1. Raw materials purchases for cash. 3. Indirect materials usage.2. Direct materials usage.
Use information in Exercise 19-7 to prepare journal entries for the following events for the month of May.1. Factory payroll costs in cash. 3. Indirect labor usage.2. Direct labor usage.
In December 2012, Infovision established its predetermined overhead rate for movies produced during year 2013 by using the following cost predictions: overhead costs, $1,680,000, and direct labor costs, $480,000. At year end 2013, the company’s records show that actual overhead costs for the year
In December 2012, Cardozo Company established its predetermined overhead rate for jobs produced during year 2013 by using the following cost predictions: overhead costs, $750,000, and direct labor costs, $625,000. At year end 2013, the company’s records show that actual overhead costs for the
Widmer Watercraft’s predetermined overhead rate for year 2013 is 200% of direct labor. Information on the company’s production activities during May 2013 follotvs.a. Purchased raw materials on credit, $200,000.b. Paid $126,000 cash for factory wages.c. Paid $15,000 cash to a computer consultant
In December 2012, Yerbury Company’s manager estimated next year’s total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of $25 per hour. The manager also estimated the following manufacturing overhead costs for year 2013.At the end of 2013,
Sager Company manufactures variations of its product, a technopress, in response to custom orders from its customers. On May 1, the company had no inventories of goods in process or finished goods but held the following raw materials.On May 4, the company began working on two technopresses: Job 102
Swisher Company’s computer system generated the following trial balance on December 31, 2013. The company’s manager knows that the trial balance is wrong because it does not show any balance for Goods in Process Inventory but does show balances for the Factory Payroll and Factory Overhead
Prescott Company’s predetermined overhead rate is 200% of direct labor. Information on the company’s production activities during September 2013 follows.a. Purchased raw materials on credit, $125,000.b. Paid $84,000 cash for factory wages.c. Paid $11,000 cash for miscellaneous factory overhead
In December 2012, Pavelka Company’s manager estimated next year’s total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of $15 per hour. The manager also estimated the following manufacturing overhead costs for year 2013.At the end of 2013,
King Company produces variations of its product, a megatron, in response to custom orders from its cus¬ tomers. On June 1, the company had no inventories of goods in process or finished goods but held the following raw materialsOn June 3, the company began working on two megatrons: Job 450 for
Polaris’ financial statements and notes in Appendix A provide evidence of growth potential in its sales.Required 1. Identify at least two types of costs that will predictably increase as a percent of sales with growth in sales.2. Explain why you believe the types of costs identified for part 1
Which of the following statements is typically true? (a) Variable cost per unit increases as volume increases, {b) fixed cost per unit decreases as volume increases, or (c) a curvilinear cost includes both fixed and variable elements.
Describe the behavior of a fixed cost.
If cost per unit of activity remains constant (fixed), why is it called a variable cost?
Which of the following methods is likely to yield the most precise estimated line of cost behavior? (a) High-low, (b) least-squares regression, or (c) scatter diagram.
What is the primary weakness of the high-low method?
Using conventional CVP analysis, a mixed cost should be (a) disregarded, [b) treated as a fixed cost, or (c) separated into fixed and variable components.
Fixed cost divided by the contribution margin ratio yields the (a) break-even point in dollars, ib) contribution margin per unit, or (c) break-even point in units.
A company sells a product for $90 per unit with variable costs of $54 per unit. What is the contribution margin ratio?
Refer to Quick Check (8). If fixed costs for the period are $90,000, what is the break-even point in dollars?
What is a company's margin of safety?
What three basic assumptions are used in CVP analysis?
A company has fixed costs of $50,000 and a 25% contribution margin ratio. What dollar sales are necessary to achieve an after-tax net income of $120,000 if the tax rate is 20%?(a) $800,000, (b) $680,000, or (c) $600,000.
If a company's contribution margin ratio decreases from 50% to 25%, what can be said about the unit sales needed to achieve the same target income level?
The sales mix of a company's two products, X and Y, is 2:1. Unit variable costs for both products are $2, and unit sales prices are $5 for X and $4 forY. What is the contribution margin per composite unit? (a) $5, {b) $10, or (c) $8.
What additional assumption about sales mix must be made in doing a conventional CVP analysis for a company that produces and sells more than one product?
Sport Caps Co. manufactures and sells caps for different sporting events. The fixed costs of operating the company are $150,000 per month, and the variable costs for caps are $5 per unit. The caps are sold for $8 per unit. The fixed costs provide a production capacity of up to 100,000 caps per
Describe different types of cost behavior in relation to pro¬ duction and sales volume
Describe several applications of cost-volume-profit analysis
Compute the contribution margin and describe what it reveals about a company’s cost structure
Analyze changes in sales using the degree of operating leverage
Using information from question 1, what is the company’s contribution margin ratio?a. 662/3%b. 100%c. 50%d. 0%e. 331/3%
Using information from question 1, what is the company’s break-even point in units?a. 500 unitsb. 750 unitsc. 1,500 unitsd. 3,000 unitse. 1,000 units
A company’s forecasted sales are $300,000 and its sales at break-even are $180,000. Its margin of safety in dollars isa. $180,000.b. $120,000.c. $480,000.d. $60,000.e. $300,000.
A product sells for $400 per unit and its variable costs per unit are $260. The company’s fixed costs are $840,000. If the com¬ pany desires $70,000 pretax income, what is the required dol¬ lar sales?a. $2,400,000b. $200,000c. $2,600,000d. $2,275,000e. $1,400,000
How is cost-volume-profit analysis useful?
Arctic Cat produces snowmobiles for sale.Identify some of the variable and fixed product costs associated with that production.[Hint: Limit costs to product costs.]
Determine whether each of the following is best described as a fixed, variable, or mixed cost with respect to product units.1. Rubber used to manufacture athletic shoes.2. Maintenance of factory machinery.3. Packaging expense.4. Wages of an assembly-line worker paid on the basis of acceptable units
Refer to the information from QS 21-6. How will the break-even point in units change in response to each of the following independent changes in selling price per unit, variable cost per unit, or total fixed costs? Use I for increase and D for decrease. (It is not necessary to compute new
Refer to QS 21-6. Determine the (1) contribution margin ratio and (2) break-even point in dollars.
Refer to QS 21-6. Assume that SBD Phone Co. is subject to a 30% income tax rate. Compute the units of product that must be sold to earn after-tax income of $140,000. (Round to the nearest whole unit.)
Which one of the following is an assumption that underlies cost-volume-profit analysis?1. The selling price per unit must change in proportion to the number of units sold.2. All costs have approximately the same relevant range.3. For costs classified as variable, the costs per unit of output must
A recent income statement for Volkswagen reports the following (in € millions). Assume 75 percent of the cost of sales and 75 percent of the selling and administrative costs are variable costs, and the remaining 25 percent of each is fixed. Compute the contribution margin (in € millions).
The left column lists several cost classifications. The right column presents short definitions of those costs. In the blank space beside each of the numbers in the right column, write the letter of the cost best described by the definition. A. Total cost B. Mixed cost C. Variable cost D.
Refer to the information in Exercise 21-10. Prepare a CVP chart for the company.
Refer to Exercise 21-10. (1) Prepare a contribution margin income statement for Blanchard Company showing sales, variable costs, and fixed costs at the break-even point. (2) If the company’s fixed costs increase by $135,000, what amount of sales (in dollars) is needed to break even? Explain
Blanchard Company management (in Exercise 21-10) targets an annual after-tax income of $810,000. The company is subject to a 20% income tax rate. Assume that fixed costs remain at $562,500. Compute the (1) unit sales to earn the target after-tax net income and (2) dollar sales to earn the target
Blanchard Company’s sales manager (in Exercise 21-10) predicts that annual sales of the company’s prod¬ uct will soon reach 40,000 units and its price will increase to $200 per unit. According to the production manager, the variable costs are expected to increase to $140 per unit but fixed
Refer to the information from Exercise 21-19. Use the information to determine the (1) weighted- average contribution margin, (2) break-even point in units, and (3) number of units of each product that will be sold at the break-even point.
The following costs result from the production and sale of 1,000 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $500 each. The company has a 25% income tax rate.Required 1. Prepare a contribution margin income statement for the company.2.
Astro Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2014’s activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several
This year Bertrand Company sold 40,000 units of its only product for $25 per unit. Manufacturing and selling the product required $200,000 of fixed manufacturing costs and $325,000 of fixed selling and administrative costs. Its per unit variable costs follow.Next year the company will use new
Rivera Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the cur¬ rent year as shown here. During a planning session for year 2014’s activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates
This year Best Company earned a disappointing 5.6% after-tax return on sales (net income/sales) from marketing 100,000 units of its only product. The company buys its product in bulk and repackages it for resale at the price of $20 per unit. Best incurred the following costs this year.The marketing
Access and review the entrepreneurial infonnation at Business Owner’s Toolkit rToolkit.coml. Access and review its New Business Cash Needs Checklist under the Start Up menu bar or similar worksheets related to controls of cash and costs.Required Write a one-half page report that describes the
Multiproduct break-even analysis is often viewed differently when actually applied in prac¬ tice. You are to visit a local fast-food restaurant and count the number of items on the menu. To apply multiproduct break-even analysis to the restaurant, similar menu items must often be fit into groups.
Pepper Company completed the following selected transactions and events during March of this year.(Terms of all credit sales for the company are 2/10, n/30.)Mar. 4 Sold merchandise on credit to Jennifer Nelson, Invoice No. 954, for $16,800 (cost is $12,200).6 Purchased $1,220 of office supplies on
Identify the principles and components of accounting information systems.
Explain the goals and uses of special journals.
Describe the use of controlling accounts and subsidiary ledgers.
The sales journal is used to recorda. Credit salesb. Cash salesc. Cash receiptsd. Cash purchasese. Credit purchases
The purchases journal is used to recorda. Credit salesb. Cash salesc. Cash receiptsd. Cash purchasese. Credit purchases
subsidiary ledger that contains a separate account for each supplier (creditor) to the company is thea. Controlling accountb. Accounts payable ledgerc. Accounts receivable ledgerd. General ledgere. Special journal
Enterprise resource planning softwarea. Refers to programs that help manage company operations.b. Is another name for spreadsheet programs.c. Uses batch processing of business information.d. Is substantially declining in use.e. Is another name for database programs.
Enter the letter of each system principle in the blank next to its best description.A. Control principle D. Flexibility principle B. Relevance principle E. Cost-benefit principle C. Compatibility principle 1. 2. 3. 4. 555 5. - The principle prescribes the accounting information system to help
Fill in the blanks to complete the following descriptions.1. With_processing, source documents are accumulated for a period and then processed all at the same time, such as once a day, week, or month.2. A computer_allows different computer users to share access to data and programs.3. A_isan input
Identify the most likely role in an accounting system played by each of the numbered items 1 through 12 by assigning a letter from the list A through E on the left.A. Source documents B. Input devices C. Information processors D. Information storage E. Output devices 1. Computer keyboard 2.
Wilcox Electronics uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements journal, and a general journal as illustrated in this chapter. Wilcox recently completed the following trans¬ actions a through h. Identify the journal in which each transaction should be
Peachtree Company uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements journal, and a general journal. The following transactions occur in the month of May.Prepare headings for a purchases journal like the one in Exhibit 7.9. Journalize the May transactions that
Refer to QS 7-7 and for each of the May transactions identify the journal in which it would be recorded. QS 7-8 Assume the company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal as illustrated in this chapter.
Warton Company posts its sales invoices directly and then binds them into a Sales Journal. The company had the following credit sales to these customers during July.Required 1. Open an accounts receivable subsidiary ledger having a T-account for each customer. Post the invoices to the' subsidiary
Nestle, a Switzerland-based company, uses a sales journal, a purchases Journal, a cash receipts journal, a cash disbursements journal, and a general journal in a manner similar to that explained in this chapter. Jour¬ nalize the following summary transactions of Nestle transactions that should be
A company that records credit purchases in a purchases journal and records purchases returns in a general journal made the following errors. Indicate when each error should be di.scovered.1. Made an addition en'or in totaling the Office Supplies column of the purchases journal.2. Made an addition
The April transactions of Wiset Company are described in Problem 7-1 A.Required 1. Prepare a general journal, a purchases journal like that in Exhibit 7.9, and a cash disbursements journal like that in Exhibit 7.11. Number all journal pages as page 3. Review the April transactions of Wiset Company
Acorn Industries completes these transactions during July of the current year (the terms of all its credit sales are 2/10, n/30).July 1 Purchased $6,500 of merchandise on credit from Teton Company, invoice dated June 30, terms 2/10, n/30.3 Issued Check No. 300 to The Weekly for advertising expense,
Required 1. Prepare a sales journal like that in Exhibit 7.5 and a cash receipts journal like that in Exhibit 7.7. Num¬ ber both journals as page 3. Then review the transactions of Acorn Industries and enter those transac¬ tions that should be journalized in the sales journal and those that
The July transactions of Acorn Industries are described in Problem 7-lB.Required 1. Prepare a general journal, a purchases journal like that in Exhibit 7.9, and a cash disbursements journal like that in Exhibit 7.11. Number all journal pages as page 3. Review the July transactions of Acorn
Assume it is Monday, May 1, the first business day of the month, and you have just been hired as the ac¬ countant for Colo Company, which operates with monthly accounting periods. All of the company’s accounting work is completed through the end of April and its ledgers show April 30 balances.
Refer to Polaris’s financial statements in Appendix A to answer the following.1. Identify the note that reports on Polaris’ business segments.2. Describe the focus and activities of each of Polaris’ business segments.Fast Forward 3. Access Polaris’ annual report for fiscal years ending
Umlauf’s comparative balance sheets, income statement, and additional information follow.Additional Informationa. Equipment costing $21,375 with accumulated depreciation of $11,100 is sold for cash.b. Equipment purchases are for cash.c. Accumulated Depreciation is affected by depreciation expense
Distinguish between operating, investing, and flnancing ” activities, and describe how noncash investing and financing activities are disclosed.
Acompany uses the indirect method to determine its cash flows from operating activities. Use the following information to de¬ termine its net cash provided or used by operating activities.Netincome. $15,200 Depreciationexpense. 10,000 Cash payment on note payable. 8,000 Gain on sale of land. 3,000
A machine with a cost of $175,000 and accumulated depre¬ ciation of $94,000 is sold for $87,000 cash. The amount re¬ ported as a source of cash under cash flows from investing activities isa. $81,000.b. $6,000.c. $87,000.d. Zero; this is a financing activity.e. Zero; this is an operating activity.
A company settles a long-term note payable plus interest by paying $68,000 cash toward the principal amount and $5,440 cash for interest. The amount reported as a use of cash under cash flows from financing activities isa. Zero; this is an investing activity.b. Zero; this is an operating activityc.
The following information is available regarding a company’s annual salaries and wages. What amount of cash is paid for salaries and wages?Salaries and wages expense.$255,000 Salaries and wages payable, prior year-end.8,200 Salaries and wages payable, current year-end.10,900a. $252,300b.
The following information is available for a company. What amount of cash is paid for merchandise for the cument year?Cost of goods sold.$545,000 Merchandise inventory, prior year-end. 105,000 Merchandise inventory, current year-end. II 2,000 Accounts payable, prioryear-end. 98,500 Accounts
Use the following balance sheets and income statement to answer1. How much cash is received from sales to customers for year 2013?2. What is the net increase or decrease in cash for year 2013? CRUZ, INC. Comparative Balance Sheets December 31, 2013 2013 2012 Assets Cash $ 94,800 $ 24.000 Accounts
Hampton Company reports the following information for its recent calendar year.Required Prepare the operating activities section of the statement of cash flows for Hampton Company using the indirect method. Sales.... $160,000 Expenses Cost of goods sold 100,000 Salaries expense 24,000 Depreciation
Arundel Company disclosed the following information for its recent calendar year.Required 1. Prepare the operating activities section of the statement of cash flows using the indirect method.2. What were the major reasons that this company was able to report a net loss but positive cash flow from

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