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									Question 1



Lyons Company consists of two divisions, A and B. Lyons Company reported a
contribution margin of $50,000 for Division A and had a contribution margin ratio of 30%
in Division B, when sales in Division B were $200,000. Net operating income for the
company was $25,000, and traceable fixed expenses were $40,000. Lyons Company's
common fixed expenses were


Question 2

Super Drive is a computer hard-drive manufacturer. The company's balance sheet for the fiscal
year ended on November 30 appears below:

                                       Super Drive, Inc.
                                Statement of Financial Position
                                For the year ended November 30
Assets:
Cash                                               $52,000
Accounts receivable                                150,000
Inventory                                           315,000
Property, plant, and equipment                   1,000,000
Total Assets                                    $1,517,000
Liabilities and stockholders' equity:
Accounts payable                                  $175,000
Common stock                                       900,000
Retained earnings                                  442,000
Total liabilities and
stockholders' equity                             $1,517,000

Additional information regarding Super Drive's operations appears below:

• Sales are budgeted at $520,000 for December and $500,000 for January.
• Collections are expected to be 60% in the month of sale and 40% in the month following sale.
There are no bad debts.
• 80% of the disk-drive components are purchased in the month prior to the month of the sale,
and 20% are purchased in the month of the sale. Purchased components comprise 40% of the
cost of goods sold.
• Payment for components purchased is made in the month following the purchase.
• Assume that the cost of goods sold is 80% of sales.

The budgeted cash collections for the upcoming December should be
Question 3

Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has
developed standard costs for one bag of Fastgro as follows:

                                 Standard                Standard Cost
                                 Quantity                     per bag
Direct material               20 pounds                      $8.00
Direct labor                    0.1 hours                     $1.10
Variable overhead              0.1 hours                     $0.40

The company had no beginning inventories of any kind on January 1. Variable overhead
is applied to production on the basis of standard direct-labor hours. During January, the
company recorded the following activity:

• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds


The total variance (both rate and efficiency) for variable overhead for January is

Question 4

Last year, the House of Orange had sales of $826,650, net operating income of
$81,000, and operating assets of $84,000 at the beginning of the year and $90,000 at
the end of the year. What was the company's turnover rounded to the nearest tenth?

Question 5

Moorhouse Clinic uses client visits as its measure of activity. During December, the
clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client
visits. The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for December:

Data used in budgeting:
                                    Fixed element               Variable element
                                    per month                     per client-visit

Revenue                             ____-____                          $25.10
Personnel expenses                  $27,100                             $7.10
Medical supplies                      1,500                              4.50
Occupancy expenses                    6,000                              1.00
Administrative expenses              3,000                               0.10
Total expenses                     $37,600                          $12.70

Actual results
for December:
Revenue                            $96,299
Personnel expenses                $51,009
Medical supplies                  $17,425
Occupancy expenses                 $9,240
Administrative expenses            $3,239



The personnel expenses in the planning budget for December would be closest to




Question 6

The Charade Company is preparing its Manufacturing Overhead budget for the fourth quarter of
the year. The budgeted variable factory overhead is $5.00 per direct-labor hour; the budgeted
fixed factory overhead is $75,000 per month, of which $15,000 is factory depreciation. If the
budgeted direct-labor time for December is 8,000 hours, then total budgeted factory overhead
per direct-labor hour (rounded) is




Question 7

Vandall Corporation manufactures and sells a single product. The company uses units
as the measure of activity in its budgets and performance reports. During April, the
company budgeted for 7,300 units, but its actual level of activity was 7,340 units. The
company has provided the following data concerning the formulas used in its budgeting
and its actual results for April:
Data used in budgeting:
                                    Fixed element            Variable element
                                     per month                     per unit

Revenue                               ___-___                       $35.40
Direct labor                             0                           $3.30
Direct materials                        0                            15.90
Manufacturing overhead                49,200                          1.20
Selling and
administrative expenses                26,600                         0.10
Total expenses                        $75,800                       $20.50
Actual results
for April:
Revenue                           $254,146
Direct labor                       $24,722
Direct materials                  $116,496
Manufacturing overhead             $59,608
Selling and
administrative expenses            $26,494

The overall revenue and spending variance (i.e., the variance for net operating income
in the revenue and spending variance column on the flexible budget performance
report) for April would be closest to

Question 8

Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has
developed standard costs for one bag of Fastgro as follows:

                                Standard             Standard Cost
                                Quantity                  per bag
Direct material              20 pounds                   $8.00
Direct labor                   0.1 hours                  $1.10
Variable overhead             0.1 hours                  $0.40

The company had no beginning inventories of any kind on January 1. Variable overhead
is applied to production on the basis of standard direct-labor hours. During January, the
company recorded the following activity:

• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds


The labor efficiency variance for January is
Question 9



Moorhouse Clinic uses client visits as its measure of activity. During December, the
clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client
visits. The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for December:

Data used in budgeting:
                                    Fixed element               Variable element
                                    per month                     per client-visit

Revenue                              ____-____                         $25.10
Personnel expenses                  $27,100                             $7.10
Medical supplies                       1,500                             4.50
Occupancy expenses                     6,000                             1.00
Administrative expenses               3,000                              0.10
Total expenses                      $37,600                           $12.70

Actual results
for December:
Revenue                             $96,299
Personnel expenses                 $51,009
Medical supplies                   $17,425
Occupancy expenses                  $9,240
Administrative expenses             $3,239



The medical supplies in the flexible budget for December would be closest to


Question 10

Werber Clinic uses client visits as its measure of activity. During January, the clinic
budgeted for 2,700 client visits, but its actual level of activity was 2,730 client visits. The
clinic has provided the following data concerning the formulas used in its budgeting and
its actual results for January:

Data used in budgeting:
                                    Fixed element               Variable element
                                    per month                     per client-visit
Revenue                             ___-___                           $33.60
Personnel expenses                  $22,100                           $8.70
Medical supplies                      1,100                              6.60
Occupancy expenses                    5,600                             1.60
Administrative expenses              3,700                              0.40
Total expenses                      $32,500                           $17.30

Actual results
for January:
Revenue                             $93,408
Personnel expenses                 $46,251
Medical supplies                   $19,348
Occupancy expenses                   $9,508
Administrative expenses             $4,772



The activity variance for administrative expenses in January would be closest to


Question 11



Moorhouse Clinic uses client visits as its measure of activity. During December, the
clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client
visits. The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for December:

Data used in budgeting:
                                    Fixed element               Variable element
                                    per month                     per client-visit

Revenue                              ____-____                         $25.10
Personnel expenses                  $27,100                             $7.10
Medical supplies                       1,500                             4.50
Occupancy expenses                     6,000                             1.00
Administrative expenses               3,000                              0.10
Total expenses                      $37,600                           $12.70

Actual results
for December:
Revenue                             $96,299
Personnel expenses                 $51,009
Medical supplies                   $17,425
Occupancy expenses                  $9,240
Administrative expenses             $3,239
The activity variance for personnel expenses in December would be closest to




Question 12



Werber Clinic uses client visits as its measure of activity. During January, the clinic
budgeted for 2,700 client visits, but its actual level of activity was 2,730 client visits. The
clinic has provided the following data concerning the formulas used in its budgeting and
its actual results for January:

Data used in budgeting:
                                    Fixed element               Variable element
                                    per month                     per client-visit
Revenue                              ___-___                          $33.60
Personnel expenses                  $22,100                           $8.70
Medical supplies                       1,100                             6.60
Occupancy expenses                     5,600                            1.60
Administrative expenses               3,700                             0.40
Total expenses                      $32,500                          $17.30

Actual results
for January:
Revenue                             $93,408
Personnel expenses                 $46,251
Medical supplies                   $19,348
Occupancy expenses                   $9,508
Administrative expenses             $4,772



The activity variance for net operating income in January would be closest to


Question 13

The company plans to sell 22,000 units of Product WZ in June. The finished-goods inventories
on June 1 and June 30 are budgeted to be 100 and 400 units, respectively. The direct labor
hours are 11,000 and the direct labor rate is $10.50. Budgeted direct-labor costs for June
woulbe be
Question 14



Division X of Charter Corporation makes and sells a single product which is used by
manufacturers of fork lift trucks. Presently it sells 12,000 units per year to outside customers at
$24 per unit. The annual capacity is 20,000 units and the variable cost to make each unit is $16.
Division Y of Charter Corporation would like to buy 10,000 units a year from Division X to use in
its products. There would be no cost savings from transferring the units within the company
rather than selling them on the outside market. What should be the lowest acceptable transfer
price from the perspective of Division X?



Question 15

Coles Company, Inc. makes and sells a single product, Product R. Three yards of
Material K are needed to make one unit of Product R. Budgeted production of Product R
for the next five months is as follows:

August                        14,000 units
September                     14,500 units
October                       15,500 units
November                      12,600 units
December                      11,900 units


The company wants to maintain monthly ending inventories of Material K equal to 20%
of the following month's production needs. On July 31, this requirement wasn't met
because only 2,500 yards of Material K were on hand. The cost of Material K is $0.85
per yard. The company wants to prepare a Direct Materials Purchase Budget for the
rest of the year.

The total cost of Material K to be purchased in August is



Question 16

Ignore income taxes in this problem.) Purvell Company has just acquired a new
machine. Data on the machine follow:

Purchase cost       $50,000
Annual cost savings $15,000
Life of the machine 8 years


The company uses straight-line depreciation and a $5,000 salvage value. (The
company considers salvage value in making depreciation deductions.) Assume cash
flows occur uniformly throughout a year.

The simple rate of return would be closest to

Question 17

The most recent balance sheet and income statement of Teramoto Corporation appear
below:

                        Comparative Balance Sheet            Ending     Beginning
                                                            Balance      Balance
Assets:
Cash and cash equivalents                                         $43        $35
Accounts receivable                                                53         59
Inventory                                                          73         69
Plant and equipment                                               582        490
Less accumulated depreciation                                     301        286
Total assets                                                     $450       $367
Liabilities and stockholders' equity
Accounts payable                                                  $57        $48
Wages payable                                                      21         18
Taxes payable                                                      15         13
Bonds payable                                                      21         20
Deferred taxes                                                     20         21
Common stock                                                       55         50
Retained earnings                                                 261        197
Total liabilities and stockholders' equity                       $450       $367




                              Income Statement

Sales                                                        $893
Cost of good sold                                             587
Gross margin                                                  306
Selling and administrative expense                            189
Net operating income                                          117
Income taxes                                                   35
Net income                                                    $82




The net cash provided by (used by) operations for the year was

Question 18

Financial statements for Larkins Company appear below:

Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
                                                              Year 2        Year 1
Current assets:
 Cash and marketable securities                                $180             $180
 Accounts receivable, net                                       210              180
 Inventory                                                      130              120
 Prepaid expenses                                                50               50
Total current assets                                            570              530
Noncurrent assets:
 Plant & equipment, net                                        1,540         1,480
Total assets                                                  $2,110        $2,010


Current liabilities:
 Accounts payable                                                 $100          $130
 Accrued liabilities                                                60            60
 Notes payable, short term                                          90           120
Total current liabilities                                          250           310
Noncurrent liabilities:
 Bonds payable                                                     480           500
Total liabilities                                                  730           810
Stockholders' equity:
 Preferred stock, $20 par, 10%                                     120         120
 Common stock, $10 par                                             180         180
 Additional paid-in capital--common stock                          240         240
 Retained earnings                                                 840         660
Total stockholders' equity                                       1,380       1,200
Total liabilities & stockholders' equity                        $2,110      $2,010


Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)


Sales (all on account)                                       $2,760
Cost of goods sold                                            1,930
Gross margin                                                    830
Selling and administrative expense                              330
Net operating income                                            500
Interest expense                                                 50
Net income before taxes                                         450
Income taxes (30%)                                              135
Net income                                                     $315


Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. The market price of a share of common stock on December 31, Year 2 was
$150.



Larkins Company's price-earnings ratio on December 31, Year 2 was closest to:
Question 19

Centerville Company's debt-to-equity ratio is 0.60 Total assets are $320,000, current
assets are $170,000, and working capital is $80,000. Centerville's long-term liabilities
must be

Question 20

Brittman Corporation makes three products that use the current constraint-a particular
type of machine. Data concerning those products appear below:

                                              IP              NI              YD
Selling price per unit                        $183.57         $207.74         $348.15
Variable cost per unit                        $144.42         $155.04         $269.50
Minutes on the constraint                     2.90            3.40            5.50


Assume that sufficient constraint time is available to satisfy demand for all but the least
profitable product. Up to how much should the company be willing to pay to acquire
more of the constrained resource?



Question 21

Products A, B, and C are produced from a single raw material input. The raw material costs
$90,000, from which 5,000 units of A, 10,000 units of B, and 15,000 units of C can be produced
each period. Product A can be sold at the split-off point for $2 per unit, or it can be processed
further at a cost of $12,500 and then sold for $5 per unit. Product A should be

Question 22

Degner Inc. has some material that originally cost $19,500. The material has a scrap
value of $13,300 as is, but if reworked at a cost of $2,100, it could be sold for $14,000.
What would be the incremental effect on the company's overall profit of reworking and
selling the material rather than selling it as is as scrap?

Question 23

The most recent balance sheet and income statement of Teramoto Corporation appear
below:

                  Comparative Balance Sheet                        Ending         Beginning
                                                                  Balance          Balance
Assets:
Cash and cash equivalents                                       $43         $35
Accounts receivable                                              53          59
Inventory                                                        73          69
Plant and equipment                                             582         490
Less accumulated depreciation                                   301         286
Total assets                                                   $450        $367
Liabilities and stockholders' equity
Accounts payable                                                $57         $48
Wages payable                                                    21          18
Taxes payable                                                    15          13
Bonds payable                                                    21          20
Deferred taxes                                                   20          21
Common stock                                                     55          50
Retained earnings                                               261         197
Total liabilities and stockholders' equity                     $450        $367




                    Income Statement

Sales                                                         $893
Cost of good sold                                              587
Gross margin                                                   306
Selling and administrative expense                             189
Net operating income                                           117
Income taxes                                                    35
Net income                                                     $82


The net cash provided by (used by) investing activities for the year was
Question 23

Financial statements for Larkins Company appear below:



Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)

                                                         Year 2     Year 1
Current assets:
 Cash and marketable securities                            $180      $180
 Accounts receivable, net                                   210       180
 Inventory                                                  130       120
 Prepaid expenses                                            50        50
Total current assets                                        570       530
Noncurrent assets:
 Plant & equipment, net                                   1,540      1,480
Total assets                                             $2,110     $2,010

Current liabilities:
 Accounts payable                                            $100    $130
 Accrued liabilities                                           60      60
 Notes payable, short term                                     90     120
Total current liabilities                                     250     310
Noncurrent liabilities:
 Bonds payable                                                480     500
Total liabilities                                             730     810
Stockholders' equity:
 Preferred stock, $20 par, 10%                                120      120
 Common stock, $10 par                                        180      180
 Additional paid-in capital--common stock                     240      240
 Retained earnings                                            840      660
Total stockholders' equity                                  1,380    1,200
Total liabilities & stockholders' equity                   $2,110   $2,010

Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)

Sales (all on account)                                   $2,760
Cost of goods sold                                        1,930
Gross margin                                                    830
Selling and administrative expense                              330
Net operating income                                            500
Interest expense                                                 50
Net income before taxes                                         450
Income taxes (30%)                                              135
Net income                                                     $315

Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. The market price of a share of common stock on December 31, Year 2 was
$150.

Larkins Company's dividend payout ratio for Year 2 was closest to:




Question 24


Financial statements for Larkins Company appear below:

Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)

                                                              Year 2        Year 1
Current assets:
 Cash and marketable securities                                 $180         $180
 Accounts receivable, net                                        210          180
 Inventory                                                       130          120
 Prepaid expenses                                                 50           50
Total current assets                                             570          530
Noncurrent assets:
 Plant & equipment, net                                        1,540         1,480
Total assets                                                  $2,110        $2,010

Current liabilities:
 Accounts payable                                                    $100    $130
 Accrued liabilities                                                   60      60
 Notes payable, short term                                             90     120
Total current liabilities                                             250     310
Noncurrent liabilities:
 Bonds payable                                                     480          500
Total liabilities                                                  730          810
Stockholders' equity:
 Preferred stock, $20 par, 10%                                    120            120
 Common stock, $10 par                                            180            180
 Additional paid-in capital--common stock                         240            240
 Retained earnings                                                840            660
Total stockholders' equity                                      1,380          1,200
Total liabilities & stockholders' equity                       $2,110         $2,010

Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)

Sales (all on account)                                      $2,760
Cost of goods sold                                           1,930
Gross margin                                                   830
Selling and administrative expense                             330
Net operating income                                           500
Interest expense                                                50
Net income before taxes                                        450
Income taxes (30%)                                             135
Net income                                                    $315

Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. The market price of a share of common stock on December 31, Year 2 was
$150.

Larkins Company's book value per share at the end of Year 2 was closest to:

Question 25

Financial statements for Larkins Company appear below:

Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)

                                                               Year 2          Year 1
Current assets:
 Cash and marketable securities                                 $180            $180
 Accounts receivable, net                                        210             180
 Inventory                                                       130             120
 Prepaid expenses                                                 50              50
Total current assets                                                 570             530
Noncurrent assets:
 Plant & equipment, net                                             1,540          1,480
Total assets                                                       $2,110         $2,010


Current liabilities:
 Accounts payable                                                      $100         $130
 Accrued liabilities                                                     60           60
 Notes payable, short term                                               90          120
Total current liabilities                                               250          310
Noncurrent liabilities:
 Bonds payable                                                          480          500
Total liabilities                                                       730          810
Stockholders' equity:
 Preferred stock, $20 par, 10%                                          120          120
 Common stock, $10 par                                                  180          180
 Additional paid-in capital--common stock                               240          240
 Retained earnings                                                      840          660
Total stockholders' equity                                            1,380        1,200
Total liabilities & stockholders' equity                             $2,110       $2,010


Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)


Sales (all on account)                                            $2,760
Cost of goods sold                                                 1,930
Gross margin                                                         830
Selling and administrative expense                                   330
Net operating income                                                 500
Interest expense                                                      50
Net income before taxes                                              450
Income taxes (30%)                                                   135
Net income                                                          $315


Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. The market price of a share of common stock on December 31, Year 2 was
$150.



Larkins Company's return on common stockholders' equity for Year 2 was closest to:


Question 26




Part N19 is used by Malouf Corporation to make one of its products. A total of 7,000
units of this part are produced and used every year. The company's Accounting
Department reports the following costs of producing the part at this level of activity:
                                               Per Unit
Direct materials                                $2.20
Direct labor                                    $8.50
Variable manufacturing overhead                 $1.30
Supervisor’s salary                             $5.80
Depreciation of special equipment               $7.20
Allocated general overhead                      $4.60


An outside supplier has offered to make the part and sell it to the company for $24.50
each. If this offer is accepted, the supervisor's salary and all of the variable costs,
including the direct labor, can be avoided. The special equipment used to make the part
was purchased many years ago and has no salvage value or other use. The allocated
general overhead represents fixed costs of the entire company, none of which would be
avoided if the part were purchased instead of produced internally. In addition, the space
used to make part N19 could be used to make more of one of the company's other
products, generating an additional segment margin of $25,000 per year for that product.
What would be the impact on the company's overall net operating income of buying part
N19 from the o


Question 27

Financial statements for Larkins Company appear below:

Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)

                                                                  Year 2         Year 1
 Current assets:
  Cash and marketable securities                                   $180           $180
  Accounts receivable, net                                          210            180
  Inventory                                                         130            120
  Prepaid expenses                                                   50             50
 Total current assets                                               570            530
 Noncurrent assets:
  Plant & equipment, net                                           1,540          1,480
 Total assets                                                     $2,110         $2,010


 Current liabilities:
  Accounts payable                                                    $100        $130
  Accrued liabilities                                                   60          60
  Notes payable, short term                                             90         120
 Total current liabilities                                             250         310
 Noncurrent liabilities:
  Bonds payable                                                        480         500
 Total liabilities                                                     730         810
 Stockholders' equity:
  Preferred stock, $20 par, 10%                                        120         120
  Common stock, $10 par                                                180         180
  Additional paid-in capital--common stock                             240         240
     Retained earnings                                                 840         660
    Total stockholders' equity                                       1,380       1,200
    Total liabilities & stockholders' equity                        $2,110      $2,010


    Larkins Company
    Income Statement
    For the Year Ended December 31, Year 2
    (dollars in thousands)


    Sales (all on account)                                       $2,760
    Cost of goods sold                                            1,930
    Gross margin                                                    830
    Selling and administrative expense                              330
    Net operating income                                            500
    Interest expense                                                 50
    Net income before taxes                                         450
    Income taxes (30%)                                              135
    Net income                                                     $315


Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. The market price of a share of common stock on December 31, Year 2 was
$150.



.    Larkins Company's dividend yield ratio on December 31, Year 2 was closest to:

Question 28

The Adams Company, a merchandising firm, has budgeted its activity for November
according to the following information:

• Sales were at $450,000, all for cash.
• Merchandise inventory on October 31 was $200,000.
• The cash balance on November 1 was $18,000.
• Selling and administrative expenses are budgeted at $60,000 for November and are
paid for in cash.
• Budgeted depreciation for November is $25,000.
• The planned merchandise inventory on November 30 is $230,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.



    The budgeted net income for November is
Question 29
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has
developed standard costs for one bag of Fastgro as follows:

                                  Standard               Standard Cost
                                  Quantity                    per bag
Direct material                20 pounds                     $8.00
Direct labor                     0.1 hours                    $1.10
Variable overhead               0.1 hours                    $0.40

The company had no beginning inventories of any kind on January 1. Variable
overhead is applied to production on the basis of standard direct-labor hours. During
January, the company recorded the following activity:

• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds


The materials price variance for January is

Question 30

The Charade Company is preparing its Manufacturing Overhead budget for the fourth quarter of
the year. The budgeted variable factory overhead is $5.00 per direct-labor hour; the budgeted
fixed factory overhead is $75,000 per month, of which $15,000 is factory depreciation. If the
budgeted direct-labor time for December is 8,000 hours, then total budgeted factory overhead
per direct-labor hour (rounded) is


Question


Moorhouse Clinic uses client visits as its measure of activity. During December, the
clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client
visits. The clinic has provided the following data concerning the formulas used in its
budgeting and its actual results for December:

Data used in budgeting:
                                    Fixed element               Variable element
                                    per month                     per client-visit

Revenue                             ____-____                          $25.10
Personnel expenses                  $27,100                             $7.10
Medical supplies                        1,500                              4.50
Occupancy expenses                      6,000                              1.00
Administrative expenses                3,000                               0.10
Total expenses                        $37,600                            $12.70

Actual results
for December:
Revenue                              $96,299
Personnel expenses                  $51,009
Medical supplies                    $17,425
Occupancy expenses                   $9,240
Administrative expenses              $3,239



The spending variance for medical supplies in December would be closest to


Question

  A company's average operating assets are $220,000, and its net operating income is $44,000.
The company invested in a new project, increasing average assets to $250,000 and increasing
its net operating income to $49,550. What is the project's residual income if the required rate of
return is 20%?


 Question
The Clemson Company reported the following results last year for the manufacture and
sale of one of its products known as a Tam.

Sales (6,500 Tams at $130 each)                  $845,000
Variable cost of sales                            390,000
Variable distribution costs                         65,000
Fixed advertising expense                         275,000
Salary of product line manager                      25,000
Fixed manufacturing overhead                      145,000
Net operating loss                               $(55,000)


Clemson Company is trying to determine whether to discontinue the manufacture and
sale of Tams. The operating results reported above for last year are expected to
continue in the foreseeable future if the product isn't dropped. The fixed manufacturing
overhead represents the costs of production facilities and equipment that the Tam
product shares with other products produced by Clemson. If the Tam product were
dropped, there would be no change in the fixed manufacturing costs of the company.
Assume that discontinuing the manufacture and sale of Tams will have no effect on the
sale of other product lines. If the company discontinues the Tam product line, the
change in annual operating income (or loss) should be a
(Ignore income taxes in this problem.) The following data pertain to an investment:
Cost of the investment                     $18,955
Life of the project                         5 years
Annual cost savings                         $5,000
Estimated salvage value                     $1,000
Discount rate                                  10%


The net present value of the proposed investment is

Question
Kava Inc. manufactures industrial components. One of its products, which is used in the
construction of industrial air conditioners, is known as K65. Data concerning this product
are given below:
                                                         Per Unit
Selling price                                              $180
Direct materials                                             $29
Direct labor                                                  $5
Variable manufacturing overhead                               $4
Fixed manufacturing overhead                                 $21
Variable selling expense                                      $2
Fixed selling and administrative expense                     $17


The above per unit data are based on annual production of 4,000 units of the
component. Direct labor can be considered to be a variable cost. (Source: CMA,
adapted)

The company has received a special, one-time-only order for 500 units of component
K65. There would be no variable selling expense on this special order, and the total
fixed manufacturing overhead and fixed selling and administrative expenses of the
company wouldn't be affected by the order. Assuming that Kava has excess capacity
and can fill the order without cutting back on the production of any product, what is the
minimum price per unit on the special order below which the company shouldn't go?

								
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