Question

Which of the following statements is true?

		Managers may choose to retain an unprofitable product line if the line helps sell other products.
		A danger in allocating traceable fixed costs is that such allocations can make a product line look less profitable than it really is.
		Product lines that do not cover all costs, including common fixed costs, should be dropped.
		Allocating common fixed costs among product lines is necessary to determine which product lines are profitable.

3 points   

QUESTION 12

What guideline should be used in determining whether a joint product should be sold at the split-off point or processed further?

		If the incremental revenue from further processing exceeds the incremental costs of further processing, the product should be processed further.
		If the incremental revenue from further processing exceeds the joint costs, the product should be processed further.
		If the incremental costs from further processing exceed the incremental revenue of further processing, the product should be processed further.
		If the incremental costs from further processing exceeds the joint costs, the product should be processed further.

3 points   

QUESTION 13

Frank's Drapery Cleaning is estimating the following sales figures for the next four months:

	Cash Sales	Credit Sales	Total Sales
Jan	$1500	$18000	$19500
Feb	$2200	$26400	$28600
March	$1800	$21600	$23400
April	$2000	$24000	$26000

Frank has the following collection pattern on credit sales: 60% in month of sale; 30% in month after sale; 10% in second month after sale. What are Frank's budgeted cash receipts for March?

		$24,080
		$24,480
		$23,920
		$24,570

4 points   

QUESTION 14

Kathy's budgeted production figures (in units) for sweatshirts for next quarter are shown below:

July August September

Budgeted production 3,600 4,100 5,000

Kathy uses 1.2 yards of fabric per sweatshirt and pays $0.75 per yard. Kathy likes to have half of the next month's fabric needs in ending inventory. What is the expected cost of fabric to be purchased in August?

		$4,095
		$4,550
		$5,460
		$3,285

4 points   

QUESTION 15

The following information is from the October cash budget of Daniel's Pet Accessories Shop:

Excess of Cash available over disbursements $800

Cash Balance on Oct. 1 $10,100

Total Cash Disbursements $32,500

Daniel is required to maintain a minimum cash balance of $10,000, how much money should he plan to borrow in October?

		$10,000
		$22,400
		$9,200
		$21,600

4 points   

QUESTION 16

The following information is available for Park Corporation for the month of July:

Cash collections $63,800

Dividends paid in July $4,000

Selling expenses $33,400

Administrative expenses $29,000

Depreciation expense on equipment $2,000

Cash Balances July 1 $900

Park does not have any accounts receivable or accounts payable. What will be the amount of cash disbursements for the month of July and the excess or deficiency of cash for the month of July, respectively?

		$68,400 cash disbursed and $3,700 deficiency of cash
		$68,400 cash disbursed and $4,600 deficiency of cash
		$66,400 cash disbursed and $1,700 deficiency of cash
		$62,400 cash disbursed and $2,300 excess cash

Answer 1

Q-11)	True statement is:
	Managers may choose to retain an unprofitable product line if the line helps sell other products.
Q-12)	If the incremental revenue from further processing exceeds the incremental costs of further processing, the product should be processed further.
Q-13)	60% of March credit sale of $21600+30% of February credit sale $26400+10% of January credit saleof $18000+March cash sale of $1800 =
	=60%*21600+30%*26400+10%*18000+1800 =	$ 24,480
Q-14)		July	August	September
	Budgeted production in units	3600	4100	5000
	Fabric required in yards for production at 1.2 yards/unit	4320	4920	6000
	Desired ending inventory of fabrics	2460	3000
	Total inventory needs	6780	7920
	Less: Beginning inventory of fabrics		2460
	Purchases of fabric in yards		5460	Answer
Q-15)	10100+800-32500 = $21,600
Q-16)	Cash available = 63800+900 = 64700
	Cash disbursements = 4000+33400+29000 = 66400
	Deficiency of cash = 66400-64700 = 1700
	Answer:
	$66,400 cash disbursed and $1,700 deficiency of cash