Questions and Answers of Fundamental Accounting Principles 25th

What is an out-of-pocket cost? What is an opportunity cost? Are opportunity costs recorded in the accounting records?
Chip Company produces three products, Kin, Ike, and Bix. Each product uses the same direct material. Kin uses 4 pounds of the material, Ike uses 3 pounds of the material, and Bix uses 6 pounds of the
A company has already spent $5,000 to harvest tomatoes. The tomatoes can be sold as is for $90,000. Instead, the company could incur further processing costs of $48,000 and sell the resulting salsa
Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $300,000 of its fixed costs are
Rosa Company produced 1,000 defective phones due to a production error. The phones had cost $60,000 to produce. A salvage company will buy the defective phones as scrap for $30,000. It would cost
Lopez Co. is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and a remaining useful life of five years. It can be sold now for $52,000.
A company’s normal selling price is $100 per unit. Describe a situation in which the company would accept a special offer at a selling price of $80 per unit.
Estela Company produces skateboards and scooters. Their per unit selling prices and variable costs follow. Skateboards require 2 machine hours per unit. Scooters require 3 machine hours per unit. For
Skull Co. makes snowboards and uses the total cost method in setting product price. Its costs for producing 10,000 units follow. The company targets a 12.5% markup on total cost.1. Compute the total
Explain how a price-setter differs from a price-taker.
Surf Company can sell all of the two surfboard models it produces, but it has only 400 direct labor hours available. The Glide model requires 2 direct labor hours per unit. The Ultra model requires 4
A segment of a company reports the following loss for the year. All $140,000 of its variable costs are avoidable, and $75,000 of its fixed costs are avoidable. (a) Compute the income increase or
Pardo Company produces a single product and has capacity to produce 120,000 units per month. Costs to produce its current monthly sales of 80,000 units follow. The normal selling price of the product
A company is considering two alternative machines with different net cash flows and salvage values. Present value amounts are calculated using Excel and the results follow.a. Compute the net present
For the current period, an ice cream producer added raw materials to production that should have produced 50,000 gallons of ice cream. Actual production was 47,000 gallons of (nondefective) ice
RSTN Co. produces its product in two sequential processing departments. During October, the first process finished and transferred 150,000 units of its product to the second process. Of these units,
College Life produces sweatshirts for college organizations and uses hybrid costing. It reports the following for its fabrication process. Customers choose screen-printed or embroidered logos.a.
Sun Co.’s monthly data for the past year follow. Management wants to use these data to predict future variable and fixed costs.Required1. Estimate both the variable costs per unit and the total
Alden Co.’s monthly data for the past year follow. Management wants to use these data to predict future variable and fixed costs.Required1. Estimate both the variable costs per unit and the total
Apple offers extended service contracts that provide repair coverage for its products. Assume its repair division reports the following annual results.Required1. Compute the repair division’s
The following costs result from the production and sale of 12,000 LEGO sets manufactured by LEGO Company for the year ended December 31. The LEGO sets sell for $20 each.Required1. Prepare a
Both Apple and Google sell electronic devices, and each of these companies has a different product mix. Assume the following data are available for both companies.Required1. Compute income for each
Following are costs for eight different items. Costs are shown for three different levels of units produced and sold. Classify each of the eight cost items as either variable, fixed, or mixed. Costs
Following are four series of costs measured at various volume levels. Identify each series as either fixed, variable, mixed, or step-wise. A D E Volume (Units) Series A Series B Series C Series D $
Assumed data for Samsung and Apple follow.Required1. Compute the degree of operating leverage for each company.2. Based on the degree of operating leverage, which company’s income will increase
SmartSweets, launched by entrepreneur Tara Bosch as described in this chapter’s opener, makes gummy candy without sugar and from all-natural ingredients.Required1. Identify at least two fixed costs
Classify each of the following costs as either variable, fixed, or mixed. Costs are from a manufacturer of portable basketball hoops.1. Factory supervisor salary, $4,000 per month2. Utilities, $50
This scatter diagram shows past units produced and their corresponding maintenance costs.1. Review the scatter diagram and classify maintenance costs as either fixed, variable, or mixed.2. If 3,000
Compute the contribution margin ratio and fixed costs using the following data. $5,000 Variable costs ... $3,000 Income..... $400 Sales ...... .....
Solve for the missing amounts a through f for the following separate cases. Sales price Variable costs Contribution Contribution margin per unit (a) $10 margin ratio (b) (d) 20% per unit $16 Case per
Patriot Co. manufactures flags in two sizes, small and large. The company has total fixed costs of $240,000 per year. Additional data follow.The company is considering buying new equipment that would
Milano Co. manufactures backpacks in two sizes, small and large. The company has total fixed costs of $520,000 per year. Additional data follow.The company is considering buying new equipment that
Viva sells its waterproof phone case for $90 per unit. Fixed costs total $162,000, and variable costs are $36 per unit. Determine the (1) Contribution margin per unit and (2) Break-even
Compute the missing amounts a through j for the contribution margin income statements below. Company A Company B Number of units sold.... 1,975 Total Per unit Total Per unit Sales .. Variable
Viva sells its waterproof phone case for $90 per unit. Fixed costs total $162,000, and variable costs are $36 per unit. Determine the (1) Contribution margin ratio and (2) Break-even point
Sunn Co. manufactures a single product that sells for $180 per unit and whose variable costs are $135 per unit. The company’s annual fixed costs are $562,500. Compute (a) Contribution margin
Sunn Co. manufactures a single product that sells for $180 per unit and whose variable costs are $135 per unit. The company’s annual fixed costs are $562,500.1. Prepare a contribution margin income
Hudson Co. reports the following contribution margin income statement. Compute (1) Break-even point in units and (2) Break-even point in sales dollars. Contributlon Margin Income Statement
What is the relevant range of operations? How is it important in CVP analysis?
Solve for the missing amounts a through d for the following separate cases. Sales price Variable costs Total Break-even in units (a) 5,000 9,000 8,000 Fixed costs per unit $16 Case per unit $20
Refer to the information in Exercise 21-11.1. Assume Hudson has a target income of $162,000. What amount of sales dollars is needed to produce this target income?2. If Hudson achieves its target
Coors Company expects sales of $340,000 (4,000 units at $85 per unit). The company’s total fixed costs are $175,000 and its variable costs are $35 per unit. Compute (a) Break-even in units
Sunn Co. manufactures a single product that sells for $180 per unit and whose variable costs are $135 per unit. The company’s annual fixed costs are $562,500. Management targets an annual income of
Match the descriptions 1 through 5 with labels a through e on the CVP chart.1. Break-even point 2. Total sales line 3. Loss area 4. Profit area 5. Total costs line $25,000 (d)
Sunn Co. manufactures a single product that sells for $180 per unit and whose variable costs are $135 per unit. The company’s annual fixed costs are $562,500. The sales manager predicts that next
In cost-volume-profit analysis, what is the estimated income at the break-even point?
Refer to the CVP chart in QS 21-14 and solve for each of the items below.1. Units produced at break-even point2. Dollar sales at break-even point3. Capacity in units 4. Are fixed costs greater
Zulu sells its waterproof phone case for $90 per unit. Fixed costs total $200,000, and variable costs are $40 per unit. (a) Compute its break-even in units. (b) Will the break-even point in
Zulu sells its waterproof phone case for $90 per unit. Fixed costs total $200,000, and variable costs are $40 per unit. Compute the units that must be sold to get a target income of $216,000.
Refer to the information in Exercise 21-11. The marketing manager believes that increasing advertising costs by $81,000 will increase the company’s sales volume to 11,000 units. Prepare a
Refer to the information in Exercise 21-11. If the company raises its selling price to $240 per unit, compute its (1) Contribution margin per unit, (2) Contribution margin ratio, (3)
Refer to the information in Exercise 21-11. The company is considering buying a new machine that will increase its fixed costs by $40,500 per year and decrease its variable costs by $9 per unit.
A manufacturer’s contribution margin income statement for the year follows. Prepare a contribution margin income statement if the number of units sold (a) Increases by 200 units and (b)
A manufacturer’s contribution margin income statement for the year follows. Prepare contribution margin income statements for each of the three separate cases below.1. The 10,000 units sold and
US-Mobile manufactures and sells two products, tablet computers (60% of sales) and smartphones (40% of sales). Fixed costs are $500,000, and the weighted-average contribution margin per unit is $125.
Vintage Company reports the following information. Compute its product cost per unit under absorption costing. Direct materials...... Direct labor..... Units produced.... $10 per unit $10 per unit
Information for two companies follows. (1) Compute the degree of operating leverage (DOL) for each company. (2) Which company is expected to produce a greater percent increase in income
Refer to the information in Exercise 21-11.1. Compute the company’s degree of operating leverage.2. If sales decrease by 5% in the next year, what will be the company’s income?3. Prepare a
For each of the following indicate yes if the item is an important budgeting guideline or no if it is not.1. Employees should have the opportunity to explain differences from budgeted amounts.2.
Santana Rey expects second quarter 2022 net income of Business Solutions’s line of computer furniture to be the same as the first quarter’s net income (reported below) without any changes in
Apple provides customer service and device repair through its AppleCare program. In preparing its monthly master budget, assume Apple’s AppleCare division reports the data below.RequiredPrepare a
For each of the following indicate yes if it describes a potential benefit of budgeting or no if it describes a potential negative outcome of budgeting.1. Budgets help coordinate activities across
MM Co. budgets sales of $30,000 for May. MM’s production manager discovered a way to use more sustainable packaging. As a result, MM’s product will receive better placement on store shelves and
Built-Tight is preparing its master budget. Budgeted sales and cash payments follow.Sales to customers are 20% cash and 80% on credit. Sales in June were $56,250. All credit sales are collected in
Data below are from recent annual reports for Apple and Google.Required1. Compute revenue per employee for both Apple and Google for the current year. Round answers to the nearest dollar.2. Using
HOG Company makes its product for $60 per unit and sells it for $130 per unit. The sales staff receives a commission of 10% of sales. Its June income statement follows.Management expects June’s
Data below are from recent annual reports for Samsung, Apple, and Google.Required1. Compute revenue per employee for Samsung for the current year and the prior year.2. Using revenue per employee, did
Scora Inc. sells a single product for $50 per unit. Budgeted sales units for the next three months follow. Prepare a sales budget for the months of January, February, and March. January February
Ellis Island Tropical Tea manufactures and sells tea. Founder Nailah Ellis-Brown stresses the importance of planning and budgeting for business success.Required1. How can budgeting help Nailah
Oneida Company’s operations began in August. August sales were $215,000 and purchases were $125,000. The beginning cash balance for September is $5,000. Oneida’s owner approaches the bank for a
Sony Stereo began operations in March. March sales were $180,000 and purchases were $100,000. The beginning cash balance for April is $3,000. Sony’s owner approaches the bank for an $80,000 loan to
Rida Inc. is preparing its direct materials budget for the second quarter. It budgets production of 240,000 units in the second quarter and 52,500 units in the third quarter. Each unit requires 0.60
Zira Co. reports the following production budget for the next four months. Each finished unit requires five pounds of direct materials, and the company wants to end each month with direct materials
Dimsdale Sports, a merchandising company, reports the following balance sheet at December 31.To prepare a master budget for January, February, and March, use the following information.a. The
Isle Corp., a merchandising company, reports the following balance sheet at December 31.To prepare a master budget for January, February, and March, use the following information.a. The company’s
Hockey Pro budgets 320 hours of direct labor during May. The company applies variable overhead at the rate of $18 per direct labor hour. Budgeted fixed overhead equals $46,000 per month. Prepare a
Garden Yeti manufactures garden sculptures. Each sculpture requires 8 pounds of direct materials at a cost of $3 per pound and 0.5 direct labor hour at a rate of $18 per hour. Variable overhead is
Jasper Company has 70% of its sales on credit and 30% for cash. All credit sales are collected in full in the first month following the sale. The company budgets sales of $525,000 for April, $535,000
Zisk Co. purchases direct materials on credit. Budgeted purchases are April, $80,000; May, $110,000; and June, $120,000. Cash payments for purchases are: 70% in the month of purchase and 30% in the
Karim Corp. requires a minimum $8,000 cash balance. Loans taken to meet this requirement cost 1% interest per month (paid at the end of each month). Any preliminary cash balance above $8,000 is used
Motors Corp. manufactures motors for dirt bikes. The company requires a minimum $30,000 cash balance at each month-end. If necessary, the company borrows to meet this requirement at a cost of 2%
Foyert Corp. requires a minimum $30,000 cash balance. Loans taken to meet this requirement cost 1% interest per month (paid at the end of each month). Any preliminary cash balance above $30,000 is
Fortune Inc. is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are budgeted at 150,000 for the first quarter. Cost
Walker Company prepares monthly budgets. Company policy is to end each month with merchandise inventory equal to 15% of budgeted unit sales for the following month. Budgeted sales and merchandise
Raider-X Company budgets sales of 18,000 units for April and 20,000 units for May. Beginning inventory on April 1 is 3,600 units, and the company wants to have 20% of next month’s unit sales in
Lamonte Co. reports the following budgeted December 31 adjusted trial balance. Prepare the budgeted income statement for the current year ended December 31. Ignore income taxes. Debit Credit
Use the budgeted information in Exercise 22-28, and the ending year balance of Retained Earnings of $78,000 on December 31, to prepare Lamonte Co.’s budgeted balance sheet as of December 31.Data
Hardy Co. reports budgeted merchandise purchases below. For those purchases, 40% of a month’s purchases is paid in the month of purchase, and 60% is paid in the first month after purchase. Prepare
Castor Inc. is preparing its master budget. Budgeted sales and cash payments for merchandise purchases for the next three months follow.Sales are 50% cash and 50% on credit. Sales in March were
Prepare a budgeted balance sheet at March 31 using the following information from Zimmer Company.a. The cash budget for March shows an ending loan balance of $10,000 and an ending cash balance of
Render CPA is preparing direct labor budgets for the current year. The partners budget billable hours for the year as follows:The company budgets $15 per hour to data-entry clerks, $30 per hour to
Resset Co. had the following results for April’s operations: F indicates favorable and U indicates unfavorable. In applying management by exception, the company investigates all variances of $400
Toho Company reports the following fixed budget. It is based on an expected production and sales volume of 20,000 units.Required1. Classify all items listed in the fixed budget as variable or fixed.
Business Solutions’s second-quarter 2022 fixed budget performance report for its computer furniture operations follows. The $156,000 budgeted expenses include $108,000 in variable expenses for
Apple offers sales price discounts to college students. Apple can use sales variance analysis to assess the effects of these sales discounts. Assumed data for a local college follow.Required1.
JPAK manufactures and sells mountain bikes. Classify each of the following costs as fixed or variable with respect to the number of bikes made.a. Bike framesb. Screws for assemblyc. Assembly worker
Setting standards is challenging. If standards are set too low, companies might purchase inferior products and employees might not work to their full potential. If standards are set too high,
Refer to the information in Problem 23-1B. Toho Company reports actual amounts for the year below. Actual sales were 24,000 units.RequiredPrepare a flexible budget performance report for the
Apple and Google use historical sales growth rates in estimating future sales. Data below are for one product segment for each company (Apple: iPhone; and Google: Apps, Hardware, and Cloud
The fixed budget for 20,000 units of production shows sales of $400,000; variable costs of $80,000; and fixed costs of $150,000. If the company actually produces and sells 26,000 units, calculate the

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