Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 2,070 pizzas at an average selling price of $16 per pizza and for 230 deliveries.

Data concerning the pizzeria’s actual results in November were as follows:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,300 per month plus $0.06 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.70 per car washed.

The actual operating results for August appear below.

Required:

Prepare a flexible budget performance report including the master or planning budget that shows the company’s revenue and spending variances and activity 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.)

Costs that change abruptly at different levels of activity because the resources are available only in indivisible chunks are called ________.

A) mixed costs

B) variable costs

C) fixed costs

D) step costs

Answer:

A compensation plan where the sales force is paid salary plus commission is a ________.

A) purely variable cost

B) mixed cost

C) step cost

D) fixed cost

Answer:

The break-even point on the cost-volume-profit graph is where the ________.

A) total cost line intersects the net profit line

B) total cost line intersects the net loss line

C) revenue line intersects the total cost line

D) revenue line intersects the variable cost line

Answer:

Suppose a hotel has annual fixed costs applicable to its rooms of $2.0 million for its 300-room hotel. Average daily room rents are $50 per room and average variable costs are $10 for each room rented. It operates 365 days per year. If the hotel is completely full throughout the year, what is net income for one year?

A) $1,280,000

B) $2,380,000

C) $3,180,000

D) $4,380,000

Answer:

Murphy Company produces dolls. Each doll sells for $20.00. Variable costs per unit are $14.00 and total fixed costs for the period are $435,000. What is the break-even point in units?

A) 21,750

B) 31,071

C) 51,176

D) 72,500

Page Interiors, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Middleton Home and Garden Expo. The exhibit will cost the company $14,910 for space. At the show, Page Interiors will present a slide show on a laptop, pass out brochures that were printed previously (the company printed more than needed), and show its portfolio of previous jobs.

The company estimates that revenue will increase by $40,330 over the next year as a result of the exhibit. For the previous year, profit was as follows:

Assume that design supplies and travel other than depreciation are variable costs.

Calculate the impact of the exhibit on company profit. (Round intermediate calculations to 4 decimal places, e.g. 0.3215 and final answer to 0 decimal places, e.g. 125.)

Should the company exhibit at the home show?

Exercise 4-10

The following is information for Ayayai Corp. for the year ended December 31, 2017:

The effective tax rate is 25% on all items. Ayayai prepares financial statements in accordance with IFRS. The FV-OCI investments trade on the stock exchange. Gains/losses on FV-OCI investments are recycled through net income.

1. Prepare a multiple-step statement of comprehensive income for 2017, showing expenses by function. Ignore calculation of EPS.

2. Prepare the retained earnings section of the statement of changes in equity for 2017. (List items that increase retained earnings first following the adjustment of prior years.)

3. Prepare the journal entry to record the depreciation expense omitted by mistake in 2016. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

The New York city that has a 12/31 fiscal year end has adopted a policy of recognizing property tax revenue consistent with the 60-day rule allowable period under GAAP. Property taxes of $600,000 (of which none are estimated to be uncollectible) are levied in October 2016 to finance the activities of fiscal year 2017. Property taxes are due in two installments June 20 and December 20. Cash collections related to property taxes are as follows:

                2/15/17    for property taxes levied in 2015, due in 2016                            $ 25,000

                3/15/17    for property taxes levied in 2015, due in 2016                            $ 15,000

                4/15/17    for property taxes levied in 2015, due in 2016                            $ 10,000

                6/20/17    First installment of taxes levied in 2016, due 6/20/17                $350,000

                12/20/17   Second installment of taxes levied in 2016, due 12/20/17       $150,000

                1/15/18    for property taxes levied in 2016, due in 2017                            $ 15,000

                3/15/18    for property taxes levied in 2016, due in 2017                            $ 10,000

                4/15/18    for property taxes levied in 2016, due in 2017                            $    5,000

. The total amount of property tax revenue that should be recognized in the governmental fund financial statements in 2017 is:

The preliminary 2021 income statement of Alexian Systems, Inc., is presented below:

Additional information:

1. Selling and administrative expense includes $44 million in restructuring costs.
2. Included in other income is $110 million in income from a discontinued operation. This consists of $90 million in operating income and a $20 million gain on disposal. The remaining $9 million is from the gain on sale of investments.
3. Cost of goods sold was increased by $10 million to correct an error in the calculation of 2020’s ending inventory. The amount is material.

Required:
Prepare a revised income statement for 2021 reflecting the additional facts. Use a multiple-step format. Assume that an income tax rate of 25% applies to all income statement items, and that 10 million shares of common stock were outstanding throughout the year. (Enter your answers in millions rounded to 2 decimal places. Round EPS answers to 2 decimal places.)
  

4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw the budget line. Label it “budget line A.” Preferences are perfect complements: utility = min{X,Y}. Both X and Y are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers.

B. A consumer has $400. Good X costs $6 each. Good Y costs $7 each. Draw a new budget line, on a new graph. Label it “budget line B.” Once again, preferences are perfect complements: utility = min{X,Y}. Both are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers.

C. Herman Cain ran for president in the year 2000. He made the following policy proposal: Reduce the federal income tax, and make up the federal revenue shortfall with a new national sales tax charged, in addition to the state and local sales tax. Total federal tax revenue would be unchanged. Herman Cain stated that the average person would be better off. Use the objective of the consumer (utility maximization, as illustrated in parts A and B) to explain and evaluate if Herman Cain was right or wrong.

Identify the basic assumption or broad accounting principle that was violated in each of the following situations.

1. Pastel Paint Company purchased land two years ago at a price of $250,000 Because the value of the land has appreciated to $400,000 the company has valued the land at$400,000 in it's most recent balance sheet.  

2. Atwell Corp has not prepared financial statements for external users for over three years

3. The Klingon Company sells farm machinery Revenue from a large order of machinery from a new buyer was recorded the day the order was received

4. Don Smith is the sole owner of a company called Hardware City The company recently paid a $150 utility bill for Smith's personal residence and recorded a $150 expense

5. Golden Book Company purchased a large printing machine for $1,000,000 (a material amount) and recorded the purchase as an expense

6. Ace Appliance company is involved in a major lawsuit involving injuries sustained by some of it's employees in the manufacturing plant. The company is being sued for $2,000,000 a material amount an is not insured. The suit was not disclosed in the most recent financial statements because no settlement had been reached

Answer options are:

Expense recognition; materiality

Revenue recognition

The economic entity assumption

The full disclosure principle

The historical cost (original transaction value) principle

The periodicity assumption

Select one answer per question please