MULTIPLE CHOICE QUESTIONS

1. Kayaks-For-Fun produces two kayak models, "River" and "Sea". The River model sells for $500 and has variable costs of $100 per unit. The Sea model sells for $600 and has variable costs of $450 per unit. Allocated fixed costs per unit are $300 for the River model and $50 for the Sea model per unit. Which statement about their production and sales mix is true?

A. They would prefer to produce and sell the River model because its unit contribution margin is highest.

B. They would prefer to produce and sell the River model because it has the highest selling price.

C. They are indifferent about which model to produce and sell because the full cost is the same for both models.

D. They would prefer to produce and sell the Sea model because its unit contribution is highest.

E. None of the other answers are correct.

2. Kayaks-For-Fun produces two kayak models, "River" and "Sea". The River model sells for $500 and has variable costs of $100 per unit. The Sea model sells for $600 and has variable costs of $450 per unit. Allocated fixed costs per unit are $300 for the River model and $50 for the Sea model per unit. Kayaks-For-Fun has a total of 320 labor hours available each month. The specialized skills required to build the kayaks makes it difficult for management to find additional workers. Assume the River model requires 4 labor hours per unit and the Sea model requires 1 labor hour per unit (most of the variable cost for the Sea model is related to expensive materials required for production). Kayaks-For-Fun sells everything it produces. Which statement is true?

A. None of the other answers are correct

B. They would be indifferent between selling the River and the Sea model.

C. 20% of their sales should be the Sea model and 80% should be the River model.

D. They would prefer to sell the River model.

E. They would prefer to sell the Sea model

3. Kayaks-For-Fun produces two kayak models, "River" and "Sea". The River model sells for $500 and has variable costs of $100 per unit. The Sea model sells for $600 and has variable costs of $450 per unit. Allocated fixed costs per unit are $300 for the River model and $50 for the Sea model per unit.Assume Kayaks-For-Fun found additional labor, thereby eliminating that resource constraint. However, the company now faces limited available machine hours. It has a total of 3,000 machine hours available each month. The River model requires 16 machine hours per unit, and the Sea model requires 10 machine hours per unit. Kayaks-For-Fun sells everything it produces.Which statement is true about Kayaks-For-Fun?

A. It would prefer to sell the River model.

B. It would be indifferent about which model it sells.

C. None of the other answers are correct

D. It would prefer to sell the Sea model.

E. Machine hours should be used for allocating fixed manufacturing overhead.

4. Which of the following statements regarding relevant costs and sunk costs is incorrect?

A. Isolating relevant costs is desirable because only rarely will enough information be available to prepare a detailed income statement for multiple alternatives.

B. A sunk cost is a cost which cannot be avoided because it has already been incurred.

C. The type of cost presented to management for an equipment replacement decision should be limited to relevant costs.

D. Relevant costs can be studied using a differential approach but should not be considered with a total approach.

Why are Not for Profits susceptible to sophisticated scams?

In a responsibility accounting reporting system, as one moves up each level of responsibility in information. True or false

This problem is based on the transactions for the Sweet Homes Company in your text. Prepare journal entries for each transaction and identify the financial statement impact of each entry. The financial statements are automatically generated based on the journal entries recorded. Dec. 1 On December 1, Mike Sweet forms a consulting business, named Sweet Homes. Sweet Homes receives $68,000 cash from Mike Sweet as an owner contribution. Dec. 2 Sweet Homes pays $4,400 cash for supplies. The company's policy is to record all prepaid expenses in asset accounts. Dec. 3 Sweet Homes pays $52,000 cash for equipment. Dec. 4 Sweet Homes purchases $10,000 of supplies on credit from a supplier, CalTech Supply. Dec. 5 Sweet Homes provides consulting services and immediately collects $6,100 cash. Dec. 6 Sweet Homes pays $2,900 cash for December rent. Dec. 7 Sweet Homes pays $1,400 cash for employee salary. Dec. 8 Sweet Homes provides consulting services of $4,300 and rents its test facilities for $3,000. The customer is billed $7,300 for these services. Dec. 9 Sweet Homes receives $7,300 cash from the client billed on December 8. Dec. 10 Sweet Homes pays CalTech Supply $2,800 cash as partial payment for its December 4 $10,000 purchase of supplies. Dec. 11 Mike Sweet withdraws $1,300 cash from Sweet Homes for personal use. Dec. 12 Sweet Homes receives $4,100 cash in advance of providing consulting services to a customer. The company's policy is to record fees collected in advance in a balance sheet account. Dec. 13 Sweet Homes pays $4,300 cash (insurance premium) for a 24-month insurance policy. Coverage begins on December 1. The company's policy is to record all prepaid expenses in a balance sheet account. Dec. 14 Sweet Homes pays $2,020 cash for supplies. Dec. 15 Sweet Homes pays $2,205 cash for December utilities expense. Dec. 16 Sweet Homes pays $1,650 cash in employee salary for work performed in the latter part of December.

A comparative statement of financial position for Sheffield Industries Inc. follows:

Additional information:

(a) Prepare a statement of cash flows using the indirect method.

E6-5 Calculating Contribution Margin and Contribution Margin Ratio; Identifying Break-Even Point, Target Profit [LO 6-1, 6-2]

Sandy Bank, Inc., makes one model of wooden canoe. Partial information for it follows:

Required:
1. Complete the following table. (Round your "Cost per Unit" answers to 2 decimal places.)

2. Suppose Sandy Bank sells its canoes for $510 each. Calculate the contribution margin per canoe and the contribution margin ratio. (Round your intermediate calculations and final answers to 2 decimal places. Round your "percentage" answer to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))

3. This year Sandy Bank expects to sell 840 canoes. Prepare a contribution margin income statement for the company. (Round your intermediate calculations to 2 decimal places.)

4. Calculate Sandy Bank’s break-even point in units and in sales dollars. (Round final answers to the nearest whole number).

5. Suppose Sandy Bank wants to earn $72,000 profit this year. Calculate the number of canoes that must be sold to achieve this target. (Round Unit Contribution Margin to 2 decimal places. Round your answer to the next whole number.)

Why are tangible assets depreciated? Briefly described two or three depreciation methods and how they work.

Please consider the following, and offer three (3) responses between one (1) and three (3) sentences in length.

Scenario: You read in the local newspaper (ok, probably on your iPhone) that Genitempo-Cardoza Drilling (GC-D), the division of PEMEX specializing in light, sweet crude, has tapped another substantial deposit. This discovery and access means major profits for GC-D, and also new contracting opportunities for various support companies. Schlumberger and Morgan-Ali-Perry Corporation (MAP Corp) are competing to provide cementing field services and related support. You are a consultant to GC-D and MAP Corp and have been given a waiver (possible conflicts of interest, right?) to advise both clients in a joint meeting on three (3) issues.

If GC-D contracts with both Schlumberger and MAP Corp to provide services as independent contractors:

1) Should GC-D carry both Schlumberger and MAP Corp under its employment insurance?

2) If Schlumberger is providing only labor/people to operate and MAP Corp is providing only equipment, will Schlumberger and MAP Corp need to establish contracts with each other/between their two companies, or just GC-D independently?

3) If MAP Corp is shipping its equipment from its Texas base to Mexico, what entities (government and private) might be involved in that transfer?

Assume you are a new employee at Payroll Inc. a company which process payroll, advises small businesses on payroll issues, and remits all withheld funds to the government along with payroll forms required. Processing payroll and completing forms is a routine process which is repeated for each client and payroll period. Payroll advising is unique to each client.

In your initial post discuss the aspects of Payroll Inc.'s processes that lend themselves to process costing and which processes would more closely align with job order costing. How would you set up Payroll Inc.'s accounting system? Would you use job order or process costing? Or some other type of system? Why?

The Financial Accounting Standards Board (FASB) is responsible for the Generally Accepted Accounting Principles (GAAP). Select a Concept or Principle and explain how it impacts business.

On January 1, 2017, Windsor Corporation sold a building that cost $254,700 and that had accumulated depreciation of $105,950 on the date of sale. Windsor received as consideration a $244,700 non-interest-bearing note due on January 1, 2020. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type on January 1, 2017, was 9%. At what amount should the gain from the sale of the building be reported? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

On January 1, 2017, Windsor Corporation purchased 350 of the $1,000 face value, 9%, 10-year bonds of Walters Inc. The bonds mature on January 1, 2027, and pay interest annually beginning January 1, 2018. Windsor purchased the bonds to yield 11%. How much did Windsorpay for the bonds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Windsor Corporation bought a new machine and agreed to pay for it in equal annual installments of $5,280 at the end of each of the next 10 years. Assuming that a prevailing interest rate of 6% applies to this contract, how much should Windsorrecord as the cost of the machine? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Windsor Corporation purchased a special tractor on December 31, 2017. The purchase agreement stipulated that Windsor should pay $19,010 at the time of purchase and $4,500 at the end of each of the next 8 years. The tractor should be recorded on December 31, 2017, at what amount, assuming an appropriate interest rate of 12%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Windsor Corporation wants to withdraw $119,850 (including principal) from an investment fund at the end of each year for 9 years. What should be the required initial investment at the beginning of the first year if the fund earns 11%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,075 hours each month to produce 2,150 sets of covers. The standard costs associated with this level of production are:

During August, the factory worked only 800 direct labor-hours and produced 2,500 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 3.0 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

You suggest that the Villige Pharmacy should use a flexible budget to assist decision making, planning and control.

The company expects to issue prescriptions 20,000 over the coming year.  

Assuming that the first 10,000 prescriptions require 0.10 direct labour hours to dispense and the remainder require 0.15 direct labour hours and that overheads are absorbed on the basis of direct labour hours.

The budgeted semi-variable costs for each of the four overhead items are split as follows:

1. Prepare an overhead budget for the expected activity level for the coming year.

2. Prepare an overhead budget that reflects activity that is 10 per cent higher than expected.

are share price always reflective of the underlying performance of a company? provide arguments for and against. at the aggregate level, does the stock market always reflect the underlying performance of all firms? provide examples if possible.

The first financial instrument was a loan. On January 1, the company borrowed 5million on a key shareholder at rate of 3%, at that time when the market rate of interest was 5%. In order to convince the shareholder to lend the money to the company at a rate lower the the market rate of interest, the company agreed that, in 5 years the shareholder would have the option of either accepting full repayment of the debt, or receiving 500,000 shares in the company. The second financial instrument was a compensatory stock option plan that was granted to 10 key management positions for the first time. The company wanted to provide these employees with additional compensation and due to financial constraints could not increase salaries. The plan allowed these management employees to purchase 5,000 options each to purchase shares at $50 each when they were actually worth $100. The options were granted on January 1, 2017 and were exercisable within a two year period. Total compensation was estimated to be $550,000. And the expected period of benefit was one year beginning on the grant date. No other management employees exercised their options during the year but you exercised all of your options on December 31st 2017. The final transaction. The company decided to enter a contract to purchase U.S currency (December 15 2017). The company agreed to buy $7 million in U.S. currency for $7,070,000 (U.S. $1 = Canadian $1.01) from foreign currency inc. using a 90 day forward contract. Any changes to the Canadian dollars will be transferred to the company. On December 31, 2017 the new value was U.S. $1 = Canadian $ 1.02. Assume fair value of contract was 50,000$ at December 31, 2017

Required:

B) determine the carrying amount of each statement of financial portion at near end, December 31, 2017