A shoe department experienced the following merchandise activity for the first quarter of the year. A) Determine the departmental turnover for the period. Then, B) Interpret your numerical answer in words (i.e. For every $1.00 invested.....).

BOM (retail) (the numbers)

January $9,500

February $11,800

March $9,700

April $12,300

Gross sales $9200

Returns 8%

Cumulative markup 51%

QUESTION 4

State whether each of the following are TRUE or FALSE, and explain your reasoning for the answer:

1. The binomial distribution is defined by its mean and standard deviation.

2. As the sample size increases, the standard error of the mean decreases.

3. If the population distribution is unknown, in most cases the sampling distribution of the mean can be approximated by the normal distribution if the samples contain at least 10 observations.

(b)       Suppose the following trend line and seasonal indices were obtained from four (4) years of sales data (in $ million) for a multinational grocery chain from 2012 to 2015.

Trend line:        y_t = 112 + 2.6t

Seasonal Effect:

1. Interpret fully the seasonal indices for the first and second quarters.

   (1 mark)

2. Forecast the sales value in the fourth quarter for the next year (2016).

(1 mark)

Suppose that you are the auditor of a major retail client who has reported the following income before taxes (IBT) for the first two quarters of the year:

1st quarter = $1,200,000

2nd quarter = $1,500,000

You are in the process of establishing overall materiality for the client. Based on prior years, the client has a 10% decline in IBT from the 2nd quarter to the 3rd quarter. You also know IBT in the 4th quarter historically increases by 25% over the 3rd quarter.

Determine the amount of overall materiality for the audit based on these preliminary amounts.

1. How can the use of a personal spending diary assist you in achieving financial goals?
   
2. Which categories did you include for your spending diary? Also, indicate why you did or did not choose to track additional items on a separate basis.
   
3. What did your spending diary reveal about your spending habits during the time period covering this first installment?
   
4. What areas of spending would you consider changing?
   
5. How can your spending diary assist you with career planning activities?
   
6. How can your spending diary assist you with decisions about monetary asset products/accounts?
   
7. How can your spending diary assist in building and maintaining your credit reputation?

Weller Company's budgeted unit sales for the upcoming fiscal year are provided below:

The company’s variable selling and administrative expense per unit is $3.40. Fixed selling and administrative expenses include advertising expenses of $12,000 per quarter, executive salaries of $53,000 per quarter, and depreciation of $34,000 per quarter. In addition, the company will make insurance payments of $5,000 in the first quarter and $5,000 in the third quarter. Finally, property taxes of $8,200 will be paid in the second quarter.

Required:

Prepare the company’s selling and administrative expense budget for the upcoming fiscal year. (Round "Per Unit" answers to 2 decimal places.)

Weller Company's budgeted unit sales for the upcoming fiscal year are provided below:

The company’s variable selling and administrative expense per unit is $1.50. Fixed selling and administrative expenses include advertising expenses of $9,000 per quarter, executive salaries of $35,000 per quarter, and depreciation of $15,000 per quarter. In addition, the company will make insurance payments of $4,000 in the first quarter and $4,000 in the third quarter. Finally, property taxes of $6,000 will be paid in the second quarter.

Required:

Prepare the company’s selling and administrative expense budget for the upcoming fiscal year. (Round "Per Unit" answers to 2 decimal places.)

STANDARD COSTING

MULTIPLE CHOICE

1. A primary purpose of using a standard cost system is
   1. to make things easier for managers in the production facility.
   2. to provide a distinct measure of cost control.
   3. to minimize the cost per unit of production.
   4. b and c are correct.

2. The standard cost card contains quantities and costs for
   1. direct material only.
   2. direct labor only.
   3. direct material and direct labor only.
   4. direct material, direct labor, and overhea

3. In a standard cost system, Work in Process Inventory is ordinarily debited with
   1. actual costs of material and labor and a predetermined overhead cost for overhead.
   2. standard costs based on the level of input activity (such as direct labor hours worked).
   3. standard costs based on production output.
   4. actual costs of material, labor, and overhea

4. A large labor efficiency variance is prorated to which of the following at year-end?

        WIP     FG

Cost of Goods Sold Inventory        Inventory

1. no              no         no
2. no              yes        yes
3. yes             no         no
4. yes             yes        yes  

5. At the end of a period, a significant material quantity variance should be
   1. closed to Cost of Goods Sold.
   2. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold.
   3. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.
   4. carried forward as a balance sheet account to the next perio  

6. When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a a. combined price-quantity variance.
   2. price variance.
   3. quantity variance.
   4. mix variance.  

7. A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if
   1. the mix of workers used in the production process was more experienced than the normal mix.
   2. the mix of workers used in the production process was less experienced than the normal mix.
   3. workers from another part of the plant were used due to an extra heavy production schedule.
   4. the purchasing agent acquired very high quality material that resulted in less spoilage.
8. If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n)
   1. favorable variable overhead spending variance exists.
   2. favorable variable overhead efficiency variance exists.
   3. favorable volume variance exists.
   4. unfavorable volume variance exists.  

9. The standard predominantly used in Western cultures for motivational purposes is a(n) ____ standard.
   1. expected annual
   2. Ideal
   3. Practical
   4. Theoretical  

10. Which of the following standards can commonly be reached or slightly exceeded by workers in a motivated work environment?

Ideal            Practical          Expected annual

1. no        no             no
2. no        yes            yes
3. yes       yes            no
4. no        yes            no

11. A company has a favorable variable overhead spending variance, an unfavorable variable overhead efficiency variance, and underapplied variable overhead at the end of a period. The journal entry to record these variances and close the variable overhead control account will show which of the following?

VOH spending          VOH efficiency         

variance    variance           VMOH

1. debit            credit       credit
2. credit           debit        credit
3. debit            credit       debit
4. credit           debit        debit   

12. Bailey Corporation. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Bailey Corporation applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance a. will be unfavorable.
    2. will be favorable.
    3. will depend upon the capacity measure selected to assign overhead to production.
    4. is impossible to determine without additional information.

13. A variable overhead spending variance is caused by
    1. using more or fewer actual hours than the standard hours allowed for the production achieved.
    2. paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base.
    3. larger/smaller waste and shrinkage associated with the resources involved than expected.
    4. both b and c are causes.   

14. Which of the following are considered controllable variances?

VOH spending Total overhead budget            Volume

1. yes                yes              yes
2. no                 no               yes
3. no                 yes              no
4. yes                yes              no  

15. A company may set predetermined overhead rates based on normal, expected annual, or theoretical capacity. At the end of a period, the fixed overhead spending variance would a. be the same regardless of the capacity level selected.
    2. be the largest if theoretical capacity had been selected.
    3. be the smallest if theoretical capacity had been selected.
    4. not occur if actual capacity were the same as the capacity level selecte

16. The variance least significant for purposes of controlling costs is the
    1. material quantity variance.
    2. variable overhead efficiency variance.
    3. fixed overhead spending variance.
    4. fixed overhead volume variance.

17. Fixed overhead costs are
    1. best controlled on a unit-by-unit basis of products produced.
    2. mostly incurred to provide the capacity to produce and are best controlled on a total basis at the time they are originally negotiated.
    3. constant on a per-unit basis at all different activity levels within the relevant range.
    4. best controlled as to spending during the production process.  

18. The variance most useful in evaluating plant utilization is the
    1. variable overhead spending variance.
    2. fixed overhead spending variance.
    3. variable overhead efficiency variance.
    4. fixed overhead volume variance.  

19. A favorable fixed overhead volume variance occurs if
    1. there is a favorable labor efficiency variance.
    2. there is a favorable labor rate variance.
    3. production is less than planned.
    4. production is greater than planne  

20. The fixed overhead application rate is a function of a predetermined activity level. If standard hours allowed for good output equal the predetermined activity level for a given period, the volume variance will be a. zero.
    2. favorable.
    3. unfavorable.
    4. either favorable or unfavorable, depending on the budgeted overhea d

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter:

As of December 31, (the end of the prior quarter), the company%u2019s general ledger showed the following account balances:

Cash $47,000
Accounts receivable $205,600
Inventory $58,800
Buildings and equipment, net $357,000
Accounts payable $87,225
Common stock $500,000
Retained earnings $81175

Actual sales for December and budgeted sales for the next four months are as follows:

December $257,000

January $392,000,

February $589,000,

March $303,000

April $200,000.

Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales.

The company gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)

Monthly expenses are budgeted as follows: salaries and wages, $22,000 per month; advertising, $62,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $43,220 per quarter.

Each month ending inventory should equal 25% of the following month cost of goods sold.

One half of the month inventory purchases is paid for in the month of purchase; the other half is paid in the following month.

During February, the company will purchase a new copy machine for $1,700 cash. During March, other equipment will be purchased for cash at a cost of $73,500.

During January, the company will declare and pay $45,000 in cash dividends.

Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required:

Using the data above, complete the following statements and schedules for the first quarter:

1. Schedule of expected cash collections:

2-a. Merchandise purchases budget:

2-b. Schedule of expected cash disbursements for merchandise purchases:

3. Cash budget:

4. Prepare an absorption costing income statement for the quarter ending March 31.

5. Prepare a balance sheet as of March 31.

Schedule of expected cash collections

Merchandise purchases budget:

*$392,000 sales x 60% cost ratio = $235,200
** $353,400 x 25% = $88,350

Complete the following cash budget: