COMPREHENSIVE EXAMINATION A (Chapters - 4) Points Approximate Minutes Multiple Choice 20 20 A - II Cost of Goods Manufactured and Sold 20 15 A - III Job Order Cost Accounting 20 15 A - IV Process Cost Accounting 25 20 A-V Activity-Based Costing 15 15 100 85 Problem Topic A-I Checking Work 90 A-2 Test Bank for ISV Managerial Accounting, Fourth Edition Problem A - I — Multiple Choice (20 points) Circle the one best answer Cost of goods manufactured during a period is obtained by taking the total manufacturing costs incurred during the period and adding and subtracting the following inventories: a b c d Adding Beginning finished goods inventory Beginning work in process inventory Beginning raw materials inventory Beginning work in process inventory Subtracting Ending finished goods inventory Ending finished goods inventory Ending work in process inventory Ending work in process inventory Cost of goods sold is equal to a total manufacturing costs plus beginning work in process less ending work in process b cost of goods sold plus beginning work in process less ending work in process c total manufacturing costs plus ending work in process less beginning work in process d cost of goods manufactured plus beginning finished goods less ending finished goods Inventory accounts for a manufacturer consists of a direct materials, work in process, and finished goods b direct labor, work in process, and finished goods c manufacturing overhead, direct materials, and direct labor d work in process, direct labor, and manufacturing overhead In a process cost system, equivalent units of production are the a work done on physical units expressed in fully completed units b units that are transferred to the next processing department c units completed and transferred to finished goods d units that are incomplete at the end of a period Use the following information for questions and In the month of November, a department had 500 units in the beginning work in process inventory that were 60% complete These units had $16,000 of materials cost and $12,000 of conversion costs Materials are added at the beginning of the process and conversion costs are added uniformly throughout the process During November, 10,000 units were completed and transferred to the finished goods inventory and there were 2,000 units that were 25% complete in the ending work in process inventory on November 30 During November, manufacturing costs charged to the department were: Materials $368,000; Conversion costs $408,000 The cost assigned to the units transferred to finished goods during November was a $720,000 b $724,000 c $752,000 d $716,000 The cost assigned to the units in the ending work in process inventory on November 30 was a $144,000 b $84,000 c $64,000 d $116,000 Comprehensive Examination A An appropriate cost driver for ordering and receiving materials cost is the a direct labor hours b machine hours c number of parts d number of purchase orders Benefits of activity-based costing include all of the following except a more accurate product costing b fewer cost pools used to assign overhead costs to products c enhanced control over overhead costs d better management decisions An example of a value-added activity in a manufacturing operation is a machine repair b inventory control c engineering design d building maintenance 10 A-3 Assigning manufacturing costs to work in process results in credits to all of the following accounts except a Factory Labor b Manufacturing Overhead c Raw Materials Inventory d Work in Process Inventory A-4 Test Bank for ISV Managerial Accounting, Fourth Edition Problem A - II — Cost of Goods Manufactured and Sold (20 points) Selected account balances of Heedy Manufacturing Company appear below for 2008: Finished Goods Inventory Work In Process Inventory Raw Materials Inventory Sales Direct Labor Factory Supervisory Salaries Income Tax Expense Factory Insurance Raw Material Purchases Administrative Expenses Sales Returns and Allowances Factory Depreciation Indirect Labor Selling Expenses Beginning of Year $25,000 30,000 46,000 End of Year $ 32,000 35,000 26,000 360,000 45,000 18,000 25,000 12,000 75,000 17,000 15,000 22,000 11,000 35,000 Instructions Using the above information for Heedy Manufacturing Company, answer the following questions Support your answers with clearly identified computations What was the amount of direct materials used in production? What were the total manufacturing costs incurred? What was the cost of goods manufactured? What was the cost of goods sold? What was the amount of net income? Comprehensive Examination A A-5 Problem A - III — Job Order Cost Accounting (20 points) Battle Manufacturing uses a job order cost accounting system On October 1, the company has a balance in Work in Process Inventory of $5,500 and two jobs in process: Job No 429, $3,000 and Job No 430, $2,500 During October, a summary of source documents reveals the following: For Job No 429 Job No 430 Job No 431 Job No 432 General Use Materials Requisition Slips $ 3,500 2,600 3,400 3,000 1,000 $13,500 Labor Time Tickets $ 4,400 3,400 4,200 4,000 1,500 $17,500 Battle Manufacturing applies manufacturing overhead to jobs at an overhead rate of 70% of direct labor cost Job No 429 is completed during the month Instructions (a) Prepare summary journal entries to record the requisition slips, time tickets, the assignment of manufacturing overhead to jobs, and the completion of Job No 429 Show computations (b) Answer the following questions What is the balance in Work in Process Inventory at October 31? If Battle Manufacturing incurred $8,000 of manufacturing overhead in addition to indirect materials and indirect labor, was overhead over- or underapplied in October and by how much? A-6 Test Bank for ISV Managerial Accounting, Fourth Edition Problem A - IV — Process Cost Accounting (25 points) The Mixing Department of Cherry Manufacturing Company has the following production and manufacturing cost data for January Production: Beginning inventory 8,000 units that are 100% complete as to materials and 40% complete as to conversion costs; units started into production 27,000; ending inventory of 12,000 units 20% complete as to conversion costs Manufacturing Costs: Beginning work in process inventory of $40,000, comprised of $30,000 of materials and $10,000 of conversion costs Materials added during the month, $110,000; labor and overhead applied during the month, $62,000 and $55,000, respectively Instructions (a) Compute the equivalent units of production for materials and conversion costs for the month of January (b) Compute the unit costs for materials and conversion costs (c) Determine the costs to be assigned to the units transferred out and ending work in process Problem A - V — Activity-Based Costing (15 points) Tuttle Manufacturing Company manufactures two products: radiators and gas tanks During June, 200 radiators and 400 gas tanks were produced and overhead costs of $66,000 were incurred The following information related to overhead costs was available: Activity Materials handling Machine setups Quality inspections Cost Driver Number of requisitions Number of setups Number of inspections Total Cost $28,000 18,000 20,000 The cost driver volume for each product was as follows: Cost Driver Number of requisitions Number of setups Number of inspections Radiators 300 140 200 Gas Tanks 500 220 300 Total 800 360 500 Instructions (a) Compute the overhead rate for each activity (b) Assign the manufacturing overhead costs for June to the two products using activity-based costing Comprehensive Examination A A-7 Solutions — Comprehensive Examination A Problem A - I — Solution d d a a a 10 b d b c d Problem A - II — Solution Direct materials Raw materials inventory, Jan Raw material purchases Raw materials available for use Raw materials inventory, Dec 31 Direct materials used Direct materials used Direct labor Manufacturing overhead Factory supervisory salaries Factory insurance Factory depreciation Indirect labor Total manufacturing costs Work in process inventory, Jan Direct materials used Direct labor Manufacturing overhead Total work in process Work in process inventory, Dec 31 Cost of goods manufactured $ 46,000 75,000 121,000 26,000 $ 95,000 $ 95,000 45,000 $18,000 12,000 22,000 11,000 63,000 $203,000 $ 30,000 $95,000 45,000 63,000 Finished goods inventory, Jan Cost of goods manufactured Cost of goods available for sale Finished goods inventory, Dec 31 Cost of goods sold Sales $360,000 Less sales returns and allowances 15,000 Expenses Cost of goods sold 191,000 Selling expenses 35,000 Administrative expenses 17,000 Income tax expense 25,000 Net income 203,000 233,000 35,000 $198,000 $ 25,000 198,000 223,000 32,000 $191,000 $345,000 268,000 $ 77,000 A-8 Test Bank for ISV Managerial Accounting, Fourth Edition Problem A - III — Solution (a) Requisition slips Oct 31 Work In Process Inventory Manufacturing Overhead Raw Materials Inventory 12,500 1,000 Time tickets Work in Process Inventory Manufacturing Overhead Factory Labor 16,000 1,500 Assignment of overhead Work in Process Inventory ($16,000 × 70%) Manufacturing Overhead 11,200 Completion of Job 429 Finished Goods Inventory Work in Process Inventory ($3,000 + $3,500 + $4,400 + $3,080) (b) Work in Process Inventory balance: October balance Costs added in October Completed jobs October 31 balance Under- or overapplied overhead: Overhead incurred ($1,000 + 1,500 + $8,000) Overhead applied Overhead overapplied 13,500 17,500 11,200 13,980 13,980 $ 5,500 39,700 45,200 13,980 $31,220 $10,500 11,200 $ 700 Problem A - IV — Solution (a) Transferred out Work in process, January 31 Total *(8,000 + 27,000) – 12,000 (b) Physical Units 23,000* 12,000 35,000 Equivalent Units Materials Conversion Costs 23,000 23,000 12,000 2,400** 35,000 25,400 **(12,000 × 20) Materials: [($30,000 + $110,000) ÷ 35,000] Conversion Costs: [($10,000 + $62,000 + $55,000) ÷ 25,400] $4 $9 Comprehensive Examination A (c) Costs accounted for Transferred out (23,000 × $9) Work in process, 1/31 Materials (12,000 × $4) Conversion costs (2,400 × $5) A-9 $207,000 48,000 12,000 60,000 $267,000 Problem A - V — Solution (a) The overhead rates are: Activity Materials handling Machine setups Quality inspections Total Cost $28,000 18,000 20,000 Total Driver Volume 800 360 500 Overhead Rate $35 50 40 (b) The assignment of the overhead costs to products is as follows: Cost Requisitions ($35) Setups ($50) Inspections ($40) Total costs (a) Total units (b) Cost per unit (a) ÷ (b) Radiators Number Cost 300 $10,500 140 7,000 200 8,000 $25,500 Gas Tanks Number Cost 500 $17,500 220 11,000 300 12,000 $40,500 200 400 $127.50 $101.25 Total Cost $28,000 18,000 20,000 $66,000 COMPREHENSIVE EXAMINATION B (Chapters - 9) Points Approximate Minutes Multiple Choice 22 22 B - II Cost-Volume-Profit 24 16 B - III Transfer Pricing 12 12 B - IV Budgeting 18 15 B-V Contribution Margin 14 10 B - VI Incremental Analysis 10 10 100 85 Problem Topic B-I Checking Work 90 Comprehensive Examination B B-5 Problem B - III — Transfer Pricing (12 points) Taner Company, a division of Douglas Cars, produces automotive batteries Taner sells the batteries to its customers for $82 per unit The variable cost per unit is $38, and fixed costs per unit are $16 Top management of Douglas Cars would like Taner to transfer 30,000 batteries to another division within the company at a price of $54 Taner has sufficient excess capacity to provide the 30,000 batteries to the other division Instructions (a) Compute the minimum transfer price that Taner should accept (b) Assume Taner is operating at full capacity Compute the minimum transfer price that Taner should accept Problem B - IV — Budgeting (18 points) Grace Company has budgeted the following unit sales for the first quarter of 2009: January February March Units 36,000 54,000 45,000 It takes two pounds of direct materials, which cost $6 per pound, to manufacture one unit of product It is the company’s policy to have a finished goods inventory on hand at the end of each month equal to 20% of next month’s sales and to maintain a direct materials inventory at the end of the month equal to 30% of the next month’s production needs The inventory levels at December 31, 2008, were in accordance with company policy Instructions Answer the following independent questions and show computations to support your answers Calculate the number of units that should be scheduled for production in the month of February What was the number of units in ending finished goods inventory at December 31, 2008? What was the number of units in ending direct materials inventory at December 31, 2008? What was the number of units and the dollar amount of direct materials purchases budgeted for the month of January? B-6 Test Bank for Managerial Accounting, Fourth Edition Problem B - V — Contribution Margin (14 points) Sports Company makes two products, footballs and baseballs Additional information follows: Units Sales Variable costs Fixed costs Net income Footballs 4,000 $60,000 36,000 9,000 $15,000 Baseballs 2,500 $25,000 7,000 9,000 $ 9,000 Profit per unit $3.75 $3.60 If Sports has unlimited demand for both products, which product should the company emphasize? Problem B - VI — Incremental Analysis (10 points) Knox Manufacturing incurs unit costs of $15 ($9 variable and $6 fixed) in making a subassembly part for its finished product A supplier offers to make 10,000 of the assembly part at $11 per unit If the offer is accepted, all variable costs and $1 of fixed costs per unit will be saved Instructions (a) Prepare an analysis to show whether Knox Manufacturing should make or buy the assembly part (b) Would your answer be different if Knox Manufacturing could earn $25,000 of income with the facilities currently used to make the part? Comprehensive Examination B B-7 Solutions — Comprehensive Examination B Problem B - I — Solution c b c b d c 10 11 c d a a b Problem B - II — Solution Unit contribution margin = $10 ($200,000 ÷ 20,000) Break-even point in units = 12,000 units ($120,000 ÷ $10) Additional units to be sold = 2,000 units ($20,000 ÷ $10) Contribution margin Fixed expenses Expected net income $250,000 120,000 $130,000 ($200,000 × 1.25) OR Additional units: 20,000 × 25% = 5,000 Additional CM: 5,000 × $10 = $50,000 Additional net income: $80,000 + $50,000 = $130,000 Contribution margin ratio = 40% ($200,000 ÷ $500,000) Sales dollars necessary = $675,000 [($120,000 + $150,000) ÷ 4] Problem B - III — Solution (a) If Taner has excess capacity, then its opportunity cost is zero In this case, the minimum transfer price is: Minimum transfer price = $38 + $0 = $38 (b) The minimum transfer price is equal to Taner’s variable cost plus its opportunity cost In this case, the minimum transfer price is: Minimum transfer price = $38 + ($82 – $38) = $82 B-8 Test Bank for Managerial Accounting, Fourth Edition Problem B - IV — Solution Budgeted unit sales Desired ending inventory in units Total required units Less beginning inventory in units Required production units Production Budget February Units 54,000 9,000 (20% × 45,000) 63,000 10,800 (20% × 54,000) 52,200 7,200 units (36,000 × 20%) Budgeted unit sales Desired ending inventory in units Total required units Less beginning inventory in units Required production units Direct materials per unit Raw materials inventory, Dec 31 January Pounds needed for production Desired ending inventory (52,200 × = 104,400) × 30% Total materials required Less beginning inventory in units Direct materials purchases Total cost of direct materials purchases Production Budget January 36,000 10,800 (20% × 54,000) 46,800 7,200 (20% × 36,000) 39,600 × 79,200 × 30% = 23,760 pounds Direct Materials Budget 79,200 31,320 110,520 23,760 86,760 × $6 $520,560 Problem B - V — Solution Contribution margin per unit: Footballs = ($60,000 – $36,000) ÷ 4,000 = $6 Baseballs = ($25,000 – $7,000) ÷ 2,500 = $7.20 Sports Company should attempt to sell more baseballs due to the higher contribution margin per unit Comprehensive Examination B B-9 Problem B - VI — Solution (a) Variable costs Fixed costs Purchase price Total cost Make $ 90,000 60,000 $150,000 Buy $ -050,000 110,000 $160,000 Net Income Increase/(Decrease) $ 90,000 10,000 (110,000) $ (10,000) Knox Manufacturing should continue to make the assembly part because net income will be $10,000 less if the part is purchased (b) Yes, the answer now would be to buy the part The $25,000 is the opportunity cost In the above analysis, it should be added to the Make column In such case, net income of $15,000 ($175,000 – $160,000) would be realized by buying the part COMPREHENSIVE EXAMINATION C (Chapters 10 - 14) Points Approximate Minutes Multiple Choice 22 11 C - II Variance Analysis 12 12 C - III Capital Budgeting 16 16 C - IV Flexible Overhead Budget 15 15 C-V Statement of Cash Flows 17 15 C - VI Ratios 18 16 100 85 Problem Topic C-I Checking Work 90 C-2 Test Bank for Managerial Accounting, Fourth Edition Problem C - I — Multiple Choice (22 points) Circle the one best answer Items from Tedder Company’s budget for March in which 2,100 units were produced and sold appear below: Direct materials Indirect materials—variable Supervisor salaries Depreciation on factory equipment Direct labor Property taxes on factory Total $12,000 2,000 10,000 8,000 7,000 3,000 $42,000 At 2,200 units, how much are budgeted variable manufacturing costs? a $22,000 b $43,000 c $21,000 d $19,905 A company developed the following per-unit standards for its product: pounds of direct materials at $6 per pound Last month, 2,000 pounds of direct materials were purchased for $11,400 The direct materials price variance for last month was a $11,400 favorable b $600 favorable c $300 favorable d $600 unfavorable The per-unit standards for direct materials are gallons at $4 per gallon Last month, 11,200 gallons of direct materials that actually cost $42,400 were used to produce 6,000 units of product The direct materials quantity variance for last month was a $3,200 favorable b $2,400 favorable c $3,200 unfavorable d $5,600 unfavorable The per-unit standards for direct labor are direct labor hours at $12 per hour If in producing 2,400 units, the actual direct labor cost was $51,200 for 4,000 direct labor hours worked, the total direct labor variance is a $1,920 unfavorable b $6,400 favorable c $4,000 unfavorable d $6,400 unfavorable The standard rate of pay is $5 per direct labor hour If the actual direct labor payroll was $19,600 for 4,000 direct labor hours worked, the direct labor price (rate) variance is a $800 unfavorable b $800 favorable c $1,000 unfavorable d $400 favorable Comprehensive Examination C C-3 The standard number of hours that should have been worked for output attained is 8,000 direct labor hours, and the actual number of hours worked was 8,400 If the direct labor price variance was $8,400 unfavorable, and the standard rate of pay was $18 per direct labor hour, what was the actual rate of pay for direct labor? a $17.00 per direct labor hour b $15.00 per direct labor hour c $19.00 per direct labor hour d $18.00 per direct labor hour Which one of the following does not affect cash? a Acquisition and retirement of bonds payable b Write-off of an uncollectible accounts receivable c Acquisition of treasury stock d Payment of cash dividend Erickson Company reported net income of $140,000 for 2008 The income statement also indicates that interest expense for 2008 was $50,000 Assuming an income tax rate of 30%, the number of times interest was earned for 2008 was a times b times c 3.8 times d 2.8 times During 2008, Thomas Company had an asset turnover ratio of times with sales totaling $1,000,000 If net income was $80,000, Thomas Company's return on assets in 2008 was a 8% b 32% c 40% d 80% 10 Equipment was purchased for $72,000 and it is estimated to have a $12,000 salvage value at the end of its estimated 8-year life The equipment is estimated to generate cash inflows of $10,000 each year and will be depreciated by using the straight-line method The payback period on this investment is a years b 7.2 years c 4.8 years d 4.5 years 11 Jensen Company purchased a new machine for $200,000 and will use the straight-line method of depreciation over years with no salvage value If the company's minimum annual rate of return is 10%, this investment must generate expected annual income of a $3,000 b $10,000 c $20,000 d $50,000 Test Bank for Managerial Accounting, Fourth Edition C-4 Problem C - II — Variance Analysis (12 points) Camping Out Company manufactures down sleeping bags Each sleeping bag requires pounds of down and takes hours of direct labor The standard cost of the down used by Camping Out is $8 per pound, and the standard labor cost is $10 per hour In November, Camping Out purchased 15,000 pounds of down for $120,750 During the year, the company manufactured 4,000 sleeping bags Payroll reported a total of 1,480 direct labor hours at a cost of $14,060 Instructions (a) Compute the materials price and quantity variances and indicate whether the variances are favorable or unfavorable (b) Compute the labor price and quantity variances and indicate whether the variances are favorable or unfavorable Problem C - III — Capital Budgeting (16 points) Easton Company is considering a capital investment of $500,000 in new equipment It is expected to have a useful life of 10 years with no salvage value Depreciation is computed by the straight-line method During the life of the investment, annual net income and cash inflows are expected to be $35,000 and $85,000, respectively Easton requires either a 10% cost of capital "hurdle" rate, or a payback period of years Instructions Compute the (a) cash payback period, (b) net present value, (c) internal rate of return (to the nearest percent), and (d) annual rate of return Show all computations State whether the project should be accepted or rejected for each of the four capital budgeting techniques Present Value of an Annuity of (n) Periods 10 5% 7.72173 6% 7.36009 8% 6.71008 9% 6.41766 10% 6.14457 11% 5.88923 12% 5.65022 15% 5.01877 Comprehensive Examination C C-5 Problem C - IV — Flexible Overhead Budget (15 points) Healey Company budgeted a level of activity of 20,000 machine hours to be worked each month in the Machining Department At this level of activity, manufacturing overhead costs were budgeted as follows: Variable manufacturing overhead Indirect materials Indirect labor Repairs Utilities Fixed manufacturing overhead Supervisory salaries Property taxes Depreciation Total manufacturing overhead $ 25,000 38,000 4,000 10,000 20,000 1,000 12,000 $110,000 Instructions The actual manufacturing costs incurred for the month of March, when 24,000 machine hours were worked, are listed below on a partially completed budget report Complete the budget report in a manner that would be most useful for evaluating the performance of the Machining Department manager for the month of March, 2008 HEALEY COMPANY Manufacturing Overhead Budget Report Machining Department For the Month Ended March 31, 2008 Variable manufacturing overhead Indirect materials Indirect labor Repairs Utilities Total variable Fixed manufacturing overhead Supervisory salaries Property taxes Depreciation Total fixed Total costs Budget at Actual at $ $ 30,800 44,500 7,000 11,000 93,300 $ 20,000 1,000 12,000 33,000 $126,300 Difference Favorable F Unfavorable U $ $ C-6 Test Bank for Managerial Accounting, Fourth Edition Problem C - V — Statement of Cash Flows (17 points) The comparative balance sheet for Mott Company appears below: MOTT COMPANY Comparative Balance Sheet Dec 31, 2008 Assets Cash $54,000 Accounts receivable 6,000 Inventory 11,000 Prepaid expenses 2,000 Building 20,000 Accumulated depreciation—building (3,000) Total assets $90,000 Dec 31, 2007 $12,000 8,000 7,000 3,000 20,000 (2,000) $48,000 Liabilities and Stockholders' Equity Accounts payable Long-term note payable Common stock Retained earnings Total liabilities and stockholders' equity $ 1,000 13,000 33,000 43,000 $90,000 $ 4,000 14,000 18,000 12,000 $48,000 The income statement for the year is as follows: MOTT COMPANY Income Statement For the Year Ended December 31, 2008 Sales (all on credit) Expenses and losses Cost of goods sold Operating expenses, exclusive of depreciation Depreciation expense Interest expense Loss on sale of land Income taxes Total expenses and loss Net income $280,000 $184,000 42,300 1,000 1,200 2,500 9,000 240,000 $ 40,000 Cash dividends of $9,000 were paid during the year Land costing $15,000 was acquired by the issuance of common stock The property was subsequently sold for $12,500 cash Instructions Prepare a statement of cash flows for the year ended December 31, 2008 using the indirect method Comprehensive Examination C C-7 Problem C - VI —Ratios (18 points) The financial information below was taken from the annual financial statements of Falls Company Current assets Current liabilities Total assets Sales Cost of goods sold Inventory Receivables (net) Net income Common stockholders’ equity Total liabilities 2008 $280,000 80,000 550,000 760,000 525,000 100,000 100,000 57,000 330,000 220,000 Instructions Calculate the following ratios for Falls Company for 2008 Current ratio Average collection period of receivables in days Return on assets Debt to total assets ratio Inventory turnover Return on common stockholders’ equity Asset turnover Profit margin 2007 $170,000 90,000 450,000 600,000 510,000 110,000 60,000 48,000 270,000 180,000 C-8 Test Bank for Managerial Accounting, Fourth Edition Solutions — Comprehensive Examination C Problem C - I — Solution a b a b d c 10 11 b b b b b Problem C - II — Solution Actual Quantity × Actual Price 15,000 × $8.05 = $120,750 Actual Quantity × Standard Price 15,000 × $8 = $120,000 Price Variance $750 U Standard Quantity × Standard Price 16,000 × $8 = $128,000 Quantity Variance $8,000 F Total Materials Variance $7,250 F b Actual Hours × Actual Rate 1,480 × $9.50 = $14,060 Actual Hours × Standard Rate 1,480 × $10 = $14,800 Price Variance $740 F Standard Hours × Standard Rate 1,200 × $10 = $12,000 Quantity Variance $2,800 U Total Labor Variance $2,060 U Problem C - III — Solution (a) Cash payback period — $500,000 ÷ $85,000 = 5.88 years Accept project (b) Net present value — ($85,000 × 6.14457) – $500,000 = $22,288 Accept project (c) Internal rate of return (to the nearest %) — $500,000 ÷ $85,000 = 5.88235, close to factor for 11% (5.88923) Accept project (d) Annual rate of return — $35,000 ÷ $250,000 = 14% Accept project Comprehensive Examination C C-9 Problem C - IV — Solution HEALEY COMPANY Manufacturing Overhead Budget Report Machining Department For the Month Ended March 31, 2008 Budget at 24,000 MH Variable manufacturing overhead Indirect materials ($1.25) Indirect labor ($1.90) Repairs ($.20) Utilities ($.50) Total variable Fixed manufacturing overhead Supervisory salaries Property taxes Depreciation Total fixed Total costs Actual at 24,000 MH Difference Favorable F Unfavorable U $ 30,000 45,600 4,800 12,000 92,400 $ 30,800 44,500 7,000 11,000 93,300 $ 800 1,100 2,200 1,000 900 U F U F U 20,000 1,000 12,000 33,000 $125,400 20,000 1,000 12,000 33,000 $126,300 -0$ 900 U Problem C - V — Solution MOTT COMPANY Statement of Cash Flows For the Year Ended December 31, 2008 (Indirect Method) Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Decrease in accounts receivable Increase in inventory Decrease in prepaid expenses Decrease in accounts payable Loss on sale of land Net cash provided by operating activities Cash flows from investing activities Proceeds from sale of land Cash flows from financing activities Payment of cash dividends Payment of long-term note Net cash used by financing activities Net increase in cash Cash at beginning of period Cash at end of period Noncash financing and investing activities Acquired land through issuance of common stock $40,000 $1,000 2,000 (4,000) 1,000 (3,000) 2,500 (500) 39,500 12,500 (9,000) (1,000) (10,000) 42,000 12,000 $54,000 $15,000 C - 10 Test Bank for Managerial Accounting, Fourth Edition Problem C - VI — Solution Current ratio: $280,000 ÷ $80,000 = 3.5:1 Average collection period of receivables in days: 365 ÷ 9.5 = 38.4 days $760,000 ——————————— = 9.5 (100,000 + $60,000) ÷ $57,000 ———————————— = 11.4% ($550,000 + $450,000) ÷ Return on assets: Debt to total assets ratio: $220,000 ÷ $550,000 = 40% $525,000 Inventory turnover: ———————————— = ($110,000 + $100,000) ÷ Return on common stockholders’ equity: $760,000 Asset turnover: ———————————— = 1.52 ($450,000 + $550,000) ÷ Profit margin: $57,000 ÷ $760,000 = 7.5% $57,000 ———————————— = 19% ($270,000 + $330,000) ÷ ... $ C-6 Test Bank for Managerial Accounting, Fourth Edition Problem C - V — Statement of Cash Flows (17 points) The comparative balance sheet for Mott Company appears below: MOTT COMPANY Comparative... October and by how much? A-6 Test Bank for ISV Managerial Accounting, Fourth Edition Problem A - IV — Process Cost Accounting (25 points) The Mixing Department of Cherry Manufacturing Company has...A-2 Test Bank for ISV Managerial Accounting, Fourth Edition Problem A - I — Multiple Choice (20 points) Circle the one best answer Cost of goods manufactured during a period is obtained by taking