Accounting Final Exam 2024-2025. Questions and Correct, Verified Answers. Graded A, Exams of Accounting

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Accounting Final Exam 2024-2025.

Questions and Correct, Verified Answers.

Graded A

A cash budget shows budgeted cash receipts and cash payments during the budget period. - ANSTrue or False : True A company budgets 640 hours of direct labor during July. The company applies variable overhead at the rate of $18 per direct labor hour. Budgeted fixed overhead equals $92,000 per month. Budgeted total factory overhead is: - ANS$18 x 640 = $11, ...... $11,520 + $92,000 = $103, A company budgets sales of $800,000 for June. The company pays a sales manager a monthly salary of $4,000 and a commission of 8% of that months sales. Total selling expenses for the month of June equal: - ANS $800,000 x 8% = $64, $64,000 + $4,000 = $68, A company paid $200,000 ten years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $200,000 original cost of the machine is an example of a(n): - ANSSunk Cost

A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to current and future decisions, is called a(n): - ANSSunk Cost A cost that requires a future outlay of cash and is relevant for decision making, is a(n): - ANSOut-of-pocket Cost A formal statement of a company's plans in dollars is a: - ANSBudget An additional cost from selecting a certain course of action is a(n): - ANSIncremental Cost An opportunity cost: - ANSIs the potential benefit lost by taking a specific action instead of alternative actions. Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit? - ANSTotal cost per unit times markup percentage per unit. Budgets that are revised by adding a new quarterly budget to replace the quarter that just elapsed are called: - ANSRolling budgets. Chang Industries has already spent $230,000 to produce tables. Those tables can be sold as is for $442,000. Alternatively, the tables can be processed further by finishing them with a stain for an additional cost of $150,000. The stained tables can be sold for $620,000. Chang should: - ANS$620,000 - $442,000 = $178, = $178000 - 150000 = $28,

Finish the tables for incremental income of $28,000. Frederick Company is thinking about having one of its products manufactured by an outside supplier. Currently, manufacturing the product would cost $12.40 per unit for direct materials and $9.40 per unit for direct labor. Factory overhead is normally $10.40 per unit, and incremental overhead to make this product is $7. per unit. If Frederick Company can buy 5,000 units from an outside supplier for $130,000, the company should: - ANS$12.40 x 5,000 = $62, $9.40 x 5,000 = $47, $7.60 x 5,000 = $38, = $147, Buy the product because the total incremental costs of manufacturing are greater than $130,000. Gard Company has $40,000 cash at the beginning of March and budgets $150, in cash receipts from sales and $200,500 in cash payments during March. The company's preliminary cash balance is: - ANS$40,000 + $150,000 - $200,500 = (- 10,500) Giannis Company sells a single product for $100 per unit. Budgeted sales units for January are 2,400 units. Total budgeted sales is: - ANS2,400 Units x $100 Per Unit =$240, Gordon Corporation produced 10,000 digital watches in the current year. Variable costs are $8 per watch. Overhead assigned is $2.25 per watch. A supplier offers the watches for $9.50 each. Gordon's production manager reports the incremental overhead is $1.25 per watch. Gordon should: - ANSTotal relevant costs of making watches =

$8 + $1.25 = $9.

Additional cost of buying watches = $9.50 - $9.25 = $0. Continue making the watches as an additional $0.25 per watch would be incurred if bought from the supplier. Graham Corporation has 1,000 cartons of oranges that were harvested at a cost of $29,000. The oranges can be sold as is for $34,160. The oranges can be processed further into orange juice at an additional cost of $12,825 and be sold at a price of $50,550. The incremental income (loss) from processing the oranges into orange juice would be: - ANSAdditional cost of processing = $12, Additional revenue from processing = Revenue from processed juice - Revenue from unprocessed oranges = $50,550 - $34, = $16, Hence, incremental income (loss) from processing the oranges into orange juice = $16,390 - $12, = $3, June Budgeted sales units: 360 July Budgeted sales units: 400

If each month's ending inventory of finished units should be 60% of the next month's sales, Garcia Company's desired ending inventory in units for June is: - ANS60% x 400 sales = 240 Monte Company's July sales budget shows sales of $1,200,000. The company budgets beginning merchandise inventory of $100,000 and ending merchandise inventory of $80,000 for July. Cost of goods sold is 60% of sales. The budgeted cost of merchandise purchases for July is: - ANS$1,200,000 x 60% = $720, ...... $80,000 + $720,000 - $100,000 = $700, Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10.20; direct labor, $14.20, and incremental overhead $3.20. An outside supplier has offered to sell the product to Paxton for $35.80. Compute the net incremental cost or savings of buying the component. - ANS$10.20 + $14.20 + $3.20 = $27. ($35.80 - $27.60) = $8. $8.20 cost per unit. Tanner Company currently pays $14 per unit to buy a part for a product it manufactures. Instead, Tanner could make the part for per unit costs of $6 for direct materials, $4 for direct labor, and $2 for incremental overhead. Tanner normally applies overhead costs using a predetermined rate of 200% of direct labor cost. Should Tanner make or buy the part? - ANS$14 - $12 = $ Make the part as the cost to make it is $2 less than the cost to buy it.

The decision to sell or process a product further is analyzed by identifying the incremental costs and revenues of further processing. - ANSTrue or False : True The master budgeting process begins with the: - ANSSales Budget The master budgeting process typically begins with the sales budget and ends with a cash budget and: - ANSBudgeted financial statements The practice of continually revising budgets as time passes is called: - ANSContinuous budgeting The process of planning future business actions and expressing them as formal plans is called: - ANSBudgeting The usual budget period for most companies is: - ANSAn annual period separated into quarterly and monthly budgets. To determine a product selling price based on the total cost method, management should include: - ANSTotal product and selling, general, and administrative costs plus a markup. Valdez Company is considering eliminating its kitchen division, which reported an operating loss of $54,000 for the past year as shown below.

Segment Income (Loss) Sales $,1070, Variable costs $797, Contribution margin $273, Fixed costs $327, Income (loss) $(54,000) If the kitchen division is dropped, all $797,000 of its variable costs are avoidable, and $196,200 of its fixed costs are avoidable. The impact on Valdez's income from eliminating this business segment would be: - ANS$273,000 - $196,200 = $76, $76,800 decrease What decision rule should be followed when deciding if a business segment should be eliminated? - ANSSegments with revenues that are less than avoidable expenses should be considered for elimination. Which of the following is a benefit derived from budgeting? - ANSBudgeting provides a basis for evaluating performance. Which of the following is not necessary for budgets to be effective? - ANSAll budgeted amounts must be spent to ensure that budgets aren't reduced for the next period.