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Accounting 5th Edition Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones - Solutions
3. Carthage Research, which has a 12% required rate of return, has applied for a federal grant.There is a 25% chance that the grant will be fully funded, in which case it will provide $200,000 1 year from now. There is a 40% chance that the grant will be partially funded, in which case it will
2. Avalon Investments is considering a $10,000,000 investment in a company that has a 75%chance of success. If it is successful, it will earn income of $2,000,000 per year for the next 10 years. If it is not successful, it will earn income of only $300,000 per year for the next 10 years. Avalon
1. Hickle Oil Company is deciding whether to spend $35,000,000 to invest in a drilling site. There is a 40% chance that the land will contain plentiful oil, in which case the present value of future cash flows from the site will be $80,000,000, and a 60% chance that the land will contain a small
10. Willmer Corporation is performing real options analysis for a project under consideration. If the project is successful, the present value of future cash flows will be $4,000,000. If it is unsuccessful, the present value of future cash flows will be $(1,000,000). If the project is abandoned, it
11. Catoosa Company is performing real options analysis for a new product. If demand for the product is high, the present value of future cash flows will be $800,000. If demand for the product is low, the present value of future cash flows will be $200,000. Catoosa could expand the scope of its
12. Wild Corn, Inc., is considering building an ethanol plant. If economic conditions are favorable, the present value of future cash flows from operating the plant will be $3,500,000. If economic conditions are not favorable, the present value of future cash flows from operating the plant will be
22. Merriwether Developers, which has a 10% required rate of return, has the opportunity to purchase a parcel of land for $1,200,000, a bargain because the land is not zoned. If Merriwether does not take the opportunity, another firm will. The land is scheduled for a zoning hearing a year from now.
21. Robinson Manufacturing, which has a 12% required rate of return, is planning to invest in a new manufacturing facility. The facility would cost $2,000,000 to build, and would require fixed costs of $400,000 per year to operate. The facility would be used to produce goods that could generate a
20. Timpani, Inc., is considering investing in a new venture that will require $1,000,000 up front.The terms of the deal provide that Timpani will receive dividends of $400,000 per year for 5 years. However, Timpani believes that there is a 30% chance that the venture will go bankrupt after 2
19. JellaCo, which has a required rate of return of 14%, is considering selling a new product. If demand for the product is high, income from the product will be $700,000 per year over the product’s 8-year life. If demand for the product is low, income from the product will be $200,000 per year.
18. SuperSoft is considering developing a new operating system for cell phones. Because of the pace of technology, the software will be obsolete in 3 years, but there is a 20% chance that it will become obsolete after only 1 year. The operating system will cost $500,000 to develop, and will
17. Firquell Corporation, whose required rate of return is 8%, is considering entering into a 10-year contract with a supplier, who will supply direct materials for $10 less than current market price as long as market prices stay above $100. If market prices drop below $100, the savings will drop
16. Crusher Company, which requires a 10% return on its projects, is considering starting a new product line, which would require a $2,000,000 up-front investment, and would generate sales over 5 years. There is a 25% chance that the product could do poorly, in which case annual revenues would be
15. Creeks, Inc., is performing real options analysis on a project under consideration. There is a 25% chance that the present value of future cash flows will be $0 and a 75% chance that the present value of future cash flows will be $7,500,000. The investment will cost $5,000,000 up
14. Sillode Corporation is performing real options analysis on a project under consideration. There is a 40% chance that the present value of future cash flows will be $5,000,000 and a 60%chance that the present value of future cash flows will be $8,000,000. The investment will cost$7,000,000 up
Multicorp is considering marketing a new product that will require an investment of $1,000,000.The product will have a life of 5 years, and is expected to produce income of $450,000 each year.However, there is a 10% chance that a competitor will beat Multicorp to market with a similar product, in
Muschup Corporation produces wooden rocking horses. In the upcoming year, the sales department estimates the firm will be able to fill demand for their product, which should be 10,000 units.The firm tries to keep an inventory of 500 finished horses on hand at all times, but at the end of this year,
Redique, Inc., which manufactures sports drinks, is preparing its budget for next quarter. Redique plans to sell 400,000 bottles next quarter, and 500,000 the quarter after next, at a price of $1.25 per bottle. Each bottle requires 12 fluid ounces of drink ingredients, which costs $2.56 per
Your business manufactures sofas, and charges $2,000 per unit. You are expecting to sell 20,000 units this month, 30,000 next month, and 25,000 the following month. Each unit requires 40 board-feet of wood, 10 yards of padding, and 20 yards of upholstery material. Wood costs $6 per board-foot,
1. Carwood Company expects to sell 30,000 units next period at a selling price of $400 per unit.Prepare a revenue budget for next period.
2. Humbole, Inc., sells two products, a regular model and a deluxe model. Sales of the regular model next month are expected to be 400,000, while sales of the deluxe model are expected to be 100,000. The regular model sells for $14, and the deluxe model sells for $25.Prepare a revenue budget for
3. Bibbin Corporation manufactures a component it expects to be able to sell for $1,500 per unit.Expected sales next period are 10,000 units.Prepare a revenue budget for next period.
4. Loki Manufacturing expects to sell 50,000 units next period. Expected beginning finished goods inventory is 12,000 units, and expected ending finished goods inventory is 9,500 units.Prepare a production budget for next period.
5. Jimper Corporation expects to sell 10,000 units in April, 13,000 units in May, 9,000 units in June, and 11,000 units in July. Jimper’s finished goods inventory policy is to carry 15% of the following month’s sales as ending inventory.Prepare a production budget for second quarter.
6. Penke Company has projected sales for next month to be 10,000 and expects that sales will increase by 10% each month over the next year. Penke’s policy is to carry finished goods inventory equal to 10% of the following month’s sales.Prepare a production budget for each of the next 3 months.
7. Liaca Company has budgeted production of 20,000 units in June and 22,000 units in July. Each unit of product requires 2 feet of wood, which costs $5 per foot. Liaca’s policy is to end each month with 20% of the following month’s production needs in raw materials inventory.Prepare a direct
8. Evenson Corporation has budgeted production of 3,000 units in February and 2,800 units in March. Each unit requires 40 components costing $145 each, and a casing costing $5,000.Evenson carries 10% of the following month’s production needs as ending raw materials inventory.Prepare a direct
9. Hula Company is planning to produce 10,000 units this month, and then increase production by 10% the following month. Hula uses 14 yards of canvas costing $4.80 per yard and 30 embellishments costing $2.50 when producing a unit. Hula’s ending raw materials inventory policy is 15% of the
10. Quammel, Inc., plans to produce 100,000 units next period. Each unit requires 3 hours of direct labor to manufacture, and Quammel pays its direct labor $15 per hour.Prepare a direct labor budget for next period.
11. Veline Company has budgeted to produce 20,000 units in May. A worker earning $8 per hour can make 4 units in an hour.Prepare a direct labor budget for May.
12. Slidell, Inc., employs two kinds of direct labor: assembly workers, who are paid $8 per hour, and skilled workers, who are paid $15 per hour. Slidell expects to produce 400 units next period, each of which will require 4 hours of assembly time and 3 hours of skilled labor.Prepare a direct labor
13. Polkiss Corporation expects that variable overhead costs will be $17.50 per direct labor hour in November. Direct labor hours are budgeted to be 100,000, and fixed overhead costs are budgeted to be $2,300,000.Prepare a manufacturing overhead budget for November.
14. Culbreath and Sons expects that per-unit variable overhead cost, which it has always budgeted at $5 per machine hour, will increase next year by 10%. Fixed overhead costs, which were$130,000 last year, are expected to increase by 20% next year. Culbreath and Sons plans to use 80,000 machine
15. Spinker Company expects that variable overhead will cost 200% of direct labor cost, which is budgeted to be $800,000 next period. Fixed overhead is budgeted to be $3,000,000 next period.Prepare a manufacturing overhead budget for next period.
16. Each unit that Godfrey Industries manufactures requires 3 feet of wood, 2 feet of steel, and 4 hours of labor. Wood costs $6 per foot, steel costs $8 per foot, and labor costs $12 per hour.Manufacturing overhead is applied at a rate of $7 per direct labor hour. Finished goods inventory is
17. Flagman Enterprises manufactures a product that uses 2 ounces of Chemical A, which costs$2.50 per ounce, 4 ounces of Chemical B, which costs $4 per ounce, and packaging that costs $0.50 per unit. Direct labor works on each unit for 0.5 hour, and is paid $25 per hour.Manufacturing overhead is
18. Bailey Company uses 3 feet of plastic to manufacture 1 unit of product. Direct labor can make 4 units per hour. Plastic costs $0.40 per foot, direct labor is paid $8 per hour, and manufacturing overhead is applied at a rate of $4 per direct labor hour. Finished goods inventory is budgeted to be
19. Direct materials usage is budgeted to cost $450,000 in February. Direct labor is budgeted to cost $500,000. Manufacturing overhead is budgeted to cost $380,000. Finished goods inventory value is budgeted to be $200,000 February 1, and $270,000 February 28.Prepare a cost of goods sold budget for
20. Marquis Corporation prepared the following budgets for next month:Direct materials usage $14,000,000 Direct labor 10,500,000 Manufacturing overhead 12,000,000 Beginning finished goods 7,000,000 Ending finished goods 6,230,000 Prepare a cost of goods sold budget for next month.
21. Casson Industries expects August direct materials costs to total $50,600, direct labor costs to total $38,100, and manufacturing overhead costs to total $41,600. Finished goods inventory is expected to increase by $7,300 during August.Prepare a cost of goods sold budget for next month.
22. Mason Industries expects that selling expenses will be $500,000 next month, and general and administrative expenses will be $1,300,000.Prepare a period expenses budget for next month.
23. Carter Company pays its salespeople a commission of 10% of sales value. Other selling costs are expected to be $200,000 in July, and general and administrative costs are expected to be$850,000 in July. Budgeted revenue for July is $7,300,000.Prepare a period expenses budget for July.
24. Infaria Corporation expects that selling expenses will be $8,000,000 next year, and that general and administrative costs will increase 5% over last year’s cost of $5,300,000.Prepare a period expenses budget for next year.
25. Budgeted revenues for fourth quarter are $18,000,000. Cost of goods sold is budgeted to be$12,000,000. Budgeted period expenses are $5,500,000.Prepare a budgeted income statement for the fourth quarter.
26. Imbeni Corporation prepared the following budgets for April:Budgeted revenues $800,000 Budgeted cost of goods sold 620,000 Budgeted period expenses 100,000 Prepare a budgeted income statement for April.
27. For next period, Lombard Company budgeted revenues of $2,000,000, cost of goods sold of$1,200,000, and period expenses of $370,000.Prepare a budgeted income statement for next period.
28. Murqua Enterprises manufactures many products, including wooden spoons. Each spoon requires 1.5 feet of wood, costing $1 per foot. An assembly worker can supervise the machine carving and sanding process of 20 spoons an hour. Assembly labor is paid $9 per hour. Variable overhead is applied at a
29. Prepare all budgets necessary to result in a budgeted income statement for March.
30. Prepare all budgets necessary to result in a budgeted income statement for April.
31. Prepare all budgets necessary to result in a budgeted income statement for May.
32. Jenfries Corporation manufactures robots that sell for $3,800. Each robot contains raw materials costing $1,500, and requires 12 hours of labor to manufacture. Labor is paid $20 per hour.Variable manufacturing overhead is applied to products at a rate of $50 per hour. Fixed manufacturing
33. Monker Dining Room Furniture manufactures two models of dining table sets: Traditional and Contemporary. Manufacturing requirements are as follows:This year, Monker sold 1,000 Traditional sets at $2,500 each and 900 Contemporary sets at $3,000 each. Fixed manufacturing overhead was $500,000,
34. Caroline manufactures pillar candles in three sizes, which she sells directly from a website. Sixinch candles require 1 pound of wax, 0.5 ounce of fragrance, and 8 inches of wick. Nine-inch candles require 1.5 pounds of wax, 0.75 ounce of fragrance, and 11 inches of wick. Twelve-inch candles
The following information pertains to your firm:Sales for the next 5 months are expected to be as follows:Your firm’s beginning cash balance on May 1 is $0. There are no beginning or ending inventories of any kind. Historically, half of revenues have been paid in cash at the time of sale. Credit
Your firm’s master budget for the period is as follows:Prepare a flexible budget for 15,000 units. Units sold Master Budget 12,000 Revenues $1,440,000 Variable costs Direct materials $ 720,000 Direct labor $ 192,000 Variable MOh $ 144,000 Total Contribution margin Fixed costs Operating income
Your firm currently has fixed overhead costs of $500,000 per month. Your firm hopes to continuously reduce this cost at a rate of 1% per month.Prepare a Kaizen budget for fixed overhead for the next 6 months.
1. Virginia Corporation expects to earn revenues of $3,000,000 in October, $3,500,000 in November, and $3,800,000 in December. Half of Virginia’s sales are cash and half credit. Of the credit sales, 60% are collected in the month of sale, 25% in the month following sale, 10%in the second month
2. Blue Haven earned revenues of $400,000 last month (January), and expects revenues to increase by 10% each month. Blue Haven makes all sales on credit; historically, 75% of Blue Haven’s customers pay in the month of sale, 15% in the month following sale, and 10% in the second month following
3. Post Company has budgeted revenues of $200,000 for March, $350,000 for April, $400,000 for May, and $375,000 for June. Twenty percent of sales are in cash, and the remainder are on credit. Post collects on 50% of its credit sales in the month following sale, 40% in the second month following
4. Beeser Corporation has budgeted the following costs for July and AugustBeeser pays 50% down when it purchases direct materials, then pays the remainder in the following month. Direct labor is paid in the month incurred. All other expenses are paid for in the month after they are
5. Heady Manufacturing spends $50 per unit for direct materials and $30 per unit for direct labor, and incurs $200,000 in manufacturing overhead (all fixed) and $250,000 in operating expenses(all fixed) each month. Heady plans to sell 40,000 units in September and 45,000 in October.Direct materials
6. Emvee Company plans to spend the following in the second quarter:Emvee has a payment plan scheduled with its suppliers that calls for payments of one-third during the month of purchase, one-third during the month after purchase, and one-third during the second month after purchase. Direct labor
7. Lemons, Inc., had a beginning cash balance of $830,000. Cash disbursements are budgeted to be $713,000, and cash collections are budgeted to be $750,000.Calculate the ending cash balance.
8. Marsoni Corporation began June with $400,000 in the bank. Cash collections are budgeted to be $1,200,000, and cash disbursements are budgeted to be $1,350,000.Calculate the ending cash balance.
9. Welling, Inc., has $100,000 in the bank. Welling anticipates that it will collect $418,000 from customers next month, and pay $403,000 for expenses next month.Calculate the ending cash balance.
10. Grandview, Inc., has the following budget for next period, when it expects to sell 130,000 units:Copy fixed expenses from the master budget to a flexible budget for unit sales 5% and 10%above and below expectations. Sales revenue Cost of goods sold Direct materials Direct labor Variable
11. Seldi Corporation has budgeted the following:Sales (in units) 50,000 Selling price $149 per unit Direct materials cost 1 pound per unit at $15 per pound Direct labor cost 1.5 hours per unit at $20 per hour Variable overhead 100% of direct labor cost Fixed overhead $650,000 Variable period costs
12. Smart Enterprises has prepared the following budget for next period, when it expects to sell 140,000 units:Cost of goods sold is 20% fixed and 80% variable. Operating expenses are 40% fixed and 60%variable.Copy the fixed expenses from the master budget to a flexible budget for unit sales 10%
13. Grand River Manufacturing has prepared the following master budget:Find sales revenues and variable costs for a flexible budget for unit sales 5% and 10% above and below expectations. Sales revenue (for 60,000 units) Cost of goods sold Direct materials Direct labor $1,800,000 1,200,000 Variable
14. Skipper Corporation has budgeted the following:Sales (in units) 20,000 Selling price $282 per unit Direct materials cost 2 pounds per unit at $14 per pound Direct labor cost 0.5 hour per unit at $22.60 per hour Variable overhead 150% of direct labor Fixed overhead $360,000 Variable period costs
15. Texine Enterprises has prepared the following budget for next period, when it expects to sell 40,000 units:Cost of goods sold is 30% fixed and 70% variable. Operating expenses are 50% fixed and 50%variable.Find sales revenues and variable costs for a flexible budget for unit sales 10% and 20%
16. Airide Company has prepared the following flexible budget for its expected sales and for sales 5% and 10% above and below expectations.Calculate subtotals and total operating income. Expected 10% below 5% below 5% above 10% above Units 50,000 45,000 47,500 52,500 55,000 Revenue $14,100,000
17. Greenlee Company has prepared the following flexible budget for its expected sales and for sales 15% and 30% above and below expectations.Calculate subtotals and total operating income Expected 30% below 15% below 15% above 30% above Units 120,000 84,000 102,000 138,000 156,000 Revenue
18. Stoughton Corporation has prepared the following flexible budget for its expected sales and for sales 5% and 10% above and below expectationsCalculate subtotals and total operating income. Expected 10% below 5% below 5% above Units 350,000 315,000 332,500 367,500 Revenue $65,100,000 $58,590,000
19. Eagleston Company currently spends $1,000,000 on fixed overhead each month. Eagleston hopes to continuously improve spending on fixed overhead by 2% per month.Prepare a Kaizen budget for fixed overhead for the next 6 months.
20. Messelburg and Sons is trying to reduce the amount of time direct labor spends on assembling products. Currently, each unit requires 3 hours to manufacture, costing $40 per hour. Messelburg has planned sales of 20,000 units in June, 25,000 in July, 23,000 in August, and 30,000 in September.
21. Hightower Company hopes to reduce direct materials cost per unit by 15%, and wants to achieve this reduction through continuous improvement over the course of the year. Currently, Hightower manufactures 20,000 units per month during the first quarter, 25,000 units per month during the second
22. Gemm Company has prepared the following budget for January:Selling price per unit, variable cost per unit, total fixed costs, work-in-process inventory, and finished goods inventory are anticipated to remain constant each month. Raw materials inventory is always 10% of the following month’s
23. Marquay Company has prepared the following budget for June:Unit sales, selling price per unit, variable cost per unit, total fixed costs, and all inventories are anticipated to remain constant each month. Unit sales were in 32,000 in May.The cash balance at the beginning of June is $950,000.
24. Anirack Company has prepared the following budget for January:Unit sales, selling price per unit, variable cost per unit, total fixed costs, and all inventories are anticipated to remain constant each month. Unit sales were 54,000 in December and 49,000 in November.The cash balance at the
25. JaeCorp has prepared the following budget for September:Cost of goods sold is three-fourths variable, and period costs are two-thirds variable. Sales are planned as follows:July 28,000 August 31,000 September 30,000 JaeCorp keeps all inventory balances constant. JaeCorp collects 80% of each
26. Gates Industries prepared the following budget for July as part of its master budget for the calendar year:Gates plans that sales will remain constant each month for the first 6 months of the year, then go down 10% each month in the third quarter, and go up again by 20% each month in the fourth
Middletown Corporation has set the following standards for production:Direct materials 5 pounds at $3 per pound Direct labor 2 hours at $10 per hour Middletown applies variable overhead at a rate of $7 per direct labor hour, and has budgeted fixed costs at $4,000,000. This period, Middletown
1. Tero Industries based its operating budget on a sales volume of 30,000 units, but actually sold 34,000 units. Its operating budget and actual results were as follows:The standard price of a gallon of material is $3, the standard wage rate is $11 per hour, and the standard variable overhead
2. Haschita Enterprises planned to sell 500,000 units last period for $5 per unit, but only sold 485,000 for total revenue of $2,600,000. Haschita’s production standards are 5 pounds of materials per unit at $0.24 per pound and 10 minutes of labor at $10 per hour. Variable overhead is applied at
3. Clemman Company planned to sell 2,000 units at $5,000 each. The product uses two kinds of direct materials: Material 1, which is used at a rate of 200 pounds per unit at $3.50 per pound, and Material 2, which is used at a rate of 50 pieces per unit at $20 per piece. Clemman anticipates using 150
4. Chickadee Corporation completed the following chart:Calculate all nine variances and label them as favorable or unfavorable. Standard cost of Static budget Flexible budget actual quantity Actual Rev. $1,260,000 $1,250,000 DM 336,000 $344,400 327,180 DL 294,000 285,600 314,160 Voh 235,200 228,480
5. Arte Corporation completed the following chart:Calculate all nine variances and label them as favorable or unfavorable. Standard cost of Static budget Flexible budget actual quantity Actual Rev. $950,000 $ 969,000 DM DL 205,200 $204,000 212,500 209,000 220,000 210,000 VOh 190,000 200,000 225,000
6. Persephone Corporation completed the following chart:Calculate all nine variances and label them as favorable or unfavorable. Standard cost of Static budget Flexible budget actual quantity Actual Rev. $810,000 $ 800,000 CM 180,000 $175,000 189,000 270,000 280,000 266,000 VOh 216,000 224,000
7. Sparta Corporation had the following variances this period:Income was budgeted to be $14,000. Actual income was $12,800.Double-check the accuracy of the variance calculations by ensuring that their net equals the difference between budgeted and actual income. Revenue sales price variance $4,000
8. Starmer Company had the following variances this period:Revenue sales price variance $12,000 unfavorable Direct materials efficiency variance $800 favorable Direct materials price variance $1,100 favorable Direct labor efficiency variance $8,000 unfavorable Direct labor price variance $6,000
9. Abingdon Corporation had the following variances this period:Revenue sales price variance $5,000 favorable Direct materials efficiency variance $3,000 favorable Direct materials price variance $1,200 unfavorable Direct labor efficiency variance $1,800 unfavorable Direct labor price variance
10. For Russell, Inc., direct materials standards are 5 pounds at $15 per pound, direct labor standards are 2 hours at $25 per hour, and variable overhead is applied at a rate of $50 per hour. Russell budgeted to manufacture and sell 280,000 units for $550 per unit, but actually manufactured and
11. Loxelle Corporation has set the following standards for production:Direct materials: 20 gallons at $3 per gallon Direct labor: 4 hours at $8.50 per hour Loxelle yy Budgeted fixed costs at $200,000 yy Applies variable overhead at a rate of $4 per direct labor hour yy Produced and sold 10,000
12. Bonchi Company produced 8,000 units this month, which it sold for $162,000, and incurred the following costsBonchi budgeted to produce and sell 7,800 units this month for $20 per unit. Standards call for 1 pound of direct materials and 1 hour of direct labor per unit, costing $5 per pound of
13. Flommer Company has set the following standards for production:Direct materials: 10 pounds at $150 per pound Direct labor: 20 hours at $10 per hour Flommer yy Budgeted to produce and sell 4,800 units this year at $2,500 per unit yy Budgeted fixed overhead of $1,800,000 yy Applies variable
14. Nakamura Corporation had the following static budget:Units 100,000 Revenues $18,000,000 Direct materials 2,500,000 Direct labor 4,000,000 Variable overhead 6,000,000 Fixed costs 5,000,000 Nakamura actually sold 120,000 units. Nakamura’s standard price for direct materials is $12.50 per pound,
15. Nola Company manufactured and sold 10,000 units last year for $175 per unit, although it had budgeted to sell 12,000 units for $180 per unit. Nola purchased and used 20,000 feet of direct materials for $400,000. Nola paid direct labor $300,000 for 15,000 hours. Manufacturing overhead cost
16. Cabonet Corporation provided the following information about units, selling price, and manufacturing costs this period:All overhead is allocated based on direct labor cost.Calculate all nine variances and indicate whether they are favorable or unfavorable. Budgeted Sold Direct materials Direct
Identify the accounts debited and credited to account for uncollectibles under (a) the allowance method, and (b) the direct writeall method.
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