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1. 31) A transfer pricing method should lead to which of the following results? 31) ______ A) managers.31)
A transfer pricing method should lead to which of the following results?
31)
______ A)
managers always acting in their own best interest B)
managers acting in their own best interest and their decisions being in the long-term best interest of the company C)
managers acting in their own best interest and their decisions being in the short-term best interest of the company D)
managers competing with each other E)
managers acting in their own best interest and their decisions being in the long-term best interest of the manager's subunit
32)
Subunits X and Y determined the price for interdepartmental services during the last monthly meeting, using the selling prices charged to outside parties. This is an example of
32)
______ A)
market-based transfer prices. B)
multinational transfer pricing. C)
negotiated transfer prices. D)
subunit transfer prices. E)
cost-based transfer prices.
33)
Negotiated prices are typically used when which of the following circumstances exists?
33)
______ A)
market prices fall and rise in an unusual manner B)
market prices are high C)
market prices are low D)
both subunits freely agree on the initial price discussed E)
market prices are not available
34)
Blackoil Corp. has two divisions, Refining and Production. The company's primary product is Clean Oil. Each division's costs are provided below:
Refining:
Variable costs per litre of oil$30
Fixed costs per litre of oil$24
Production:
Variable costs per litre of oil$ 6
Fixed costs per litre of oil$ 4
The Production Division is able to sell the oil to other areas for $24 per litre. The Refining Division has been operating at a capacity of 80,000 barrels a day, purchasing 50,000 barrels of oil, on average, from the Production Division and 30,000 barrels, on average, from other suppliers at $40 per barrel.
What is the transfer price per litre assuming the method used to place a value on each barrel of oil is 175% of variable costs?
34)
______ A)
$24.50 B)
$17.50 C)
$12.50 D)
$10.50 E)
$12.00
Use the information below to answer the following question(s).
Blackoil Corp. has two divisions, Refining and Production. The company's primary product is Clean Oil. Each division's costs are provided below:
Refining:Variable costs per litre of oil$30
Fixed costs per litre of oil$24
Production:
Variable costs per litre of oil$ 6
Fixed costs per litre of oil$ 4
The Production Division is able to sell the oil to other areas for $24 per litre. The Refining Division has been operating at a capacity of 80,000 barrels a day, using oil from the Production Division and oil purchased from other suppliers. The Refining Division usually purchases 50,000 barrels of oil, on average, from the Production Division and 30,000 barrels, on average, from other suppliers at $40 per barrel.
35)
What is the transfer price per litre from the Production Division to the Refining Division assuming the method used to place a value on each barrel of oil is 120% of full costs?
35)
______ A)
$12.50 B)
$9.50 C)
$7.20 D)
$12.00 E)
$16.80
36)
What is the transfer price per litre from production to refining if the market price method of pricing is used?
36)
______ A)
$36
B)
$38
C)
$40
D)
$32
E)
$24
37)
What is the Production Division's operating income per 200 litres of oil reported under the 175% of variable costs method?
37)
______ A)
$1,500 B)
$1,200 C)
$880 D)
$(100) E)
$100
38)
What is the Refining Division's operating income if 150 barrels of oil are sold at$110 each and 200 litres are transferred in?
38)
______ A)
$7,500 B)
$16,500 C)
$8,500 D)
$15,600 E)
$8,400
39)
Division A sells soybean paste internally to Division B, which, in turn, produces soybean burgers that sell for $5 per kilogram. Division A incurs costs of $0.75 per kilogram, while Division B incurs additional costs of $2.50 per kilogram.
What is Division A's operating income per kilogram assuming the transfer price of the soybean paste is set at $1.25 per kilogram?
39)
______ A)
$1.525 B)
$0.500 C)
$0.875 D)
$1.625 E)
$1.250
40)
Division A sells soybean paste internally to Division B, which, in turn, produces soybean burgers that sell for $5 per kilogram. Division A incurs costs of $0.75 per kilogram, while Division B incurs additional costs of $2.50 per kilogram.
What is Division B's operating income per kilogram assuming the transfer price of the soybean paste is set at $1.25 per kilogram?
40)
______ A)
$1.250 B)
$0.875 C)
$0.500 D)
$1.625 E)
$1.525
2. Which of the following statements is true of absorption costing? A) It considers variable selling...
Which of the following statements is true of absorption costing?
A) It considers variable selling and administrative costs as product costs.
B) It considers fixed selling and administrative costs as product costs.
C) It considers fixed manufacturing overhead cost as product costs.
D) It considers variable manufacturing overhead cost as period costs.
42) Which of the following is true of the traditional format of the income statement?
A) It is prepared under the variable costing method.
B) It shows contribution margin as a line item.
C) It is not allowed under GAAP.
D) It is prepared under the absorption method.
43) Unit product cost calculations using absorption costing do not include ________.
A) fixed manufacturing overhead
B) variable manufacturing overhead
C) variable selling and administrative costs
D) direct materials
44. Flexlux, Inc. reports the following information:
Units produced 520 units
Units sold 520 units
Sales price $110 per unit
Direct materials $40 per unit
Direct labor $25 per unit
Variable manufacturing overhead $30 per unit
Fixed manufacturing overhead $14,000 per year
Variable selling and administrative costs $15 per unit
Fixed selling and administrative costs $25,000 per year
What is the unit product cost using variable costing?
A) $110
B) $92
C) $95
D) $15
46) When there is no beginning Finished Goods Inventory and all the goods that are produced are sold, the operating income ________.
A) will be higher under absorption costing than variable costing
B) will be lower under absorption costing than variable costing
C) will be higher than the gross profit under variable costing
D) will be the same for both absorption costing and variable costing
47) When production is greater than sales, the operating income will be higher under absorption costing than variable costing. Assume zero beginning and ending inventories. Which of the following gives the correct reason for the above statement?
A) All costs incurred have been recorded as expenses.
B) A portion of the fixed manufacturing overhead is still in the ending Finished Goods Inventory account.
C) All selling and administrative expenses have been recorded as period costs.
D) Fixed manufacturing costs have not been considered when calculating the operating profits.
3. 11.10 A manufacturer of pens has hired an advertising agency to develop an advertising campaign for.
11.10 A manufacturer of pens has hired an advertising agency to develop an advertising campaign for the upcoming holiday season. To prepare for this project, the research director decides to initiate a study of the effect of advertising on product perception. An experiment is designed to compare five different advertisements. Advertisement A greatly undersells the pen’s characteristics. Advertisement B slightly undersells the pen’s characteristics. Advertisement C slightly oversells the pen’s characteristics. Advertisement D greatly oversells the pen’s characteristics. Advertisement E attempts to correctly state the pen’s characteristics. A sample of 30 adult respondents, taken from a larger focus group, is randomly assigned to the five advertisements (so that there are 6 respondents to each). After reading the advertisement and developing a sense of “product expectation,” all respondents unknowingly receive the same pen to evaluate. The respondents are permitted to test the pen and the plausibility of the advertising copy. The respondents are then asked to rate the pen from 1 to 7 (lowest to highest) on the product characteristic scales of appearance, durability, and writing performance. The combined scores of three ratings (appearance, durability, and writing performance) for the 30 respondents (stored in ) are as follows:A B C D E 15 16 8 5 12 18 17 7 6 19 17 21 10 13 18 19 16 15 11 12 19 19 14 9 17 20 17 14 10 14a. At the 0.05 level of significance, is there evidence of a difference in the mean rating of the pens following exposure to five advertisements? b. If appropriate, determine which advertisements differ in mean ratings. c. At the 0.05 level of significance, is there evidence of a difference in the variation in ratings among the five advertisements? d. Which advertisement(s) should you use, and which advertisement(s) should you avoid? Explain.
4. Compute the increase or decrease in pretax operating profit that would have been reported had GE...
Analyzing LIFO and FIFO When Inventory Quantities Decline Based on an Actual Note - In a recent annual report, General Electric reported the following in its inventory note:
December 31 (dollars in millions) Current Year Prior Year
Raw materials and work in progress $5,603 $5,515
Finished goods 2,863 2,546
Unbilled shipments 246 280
8,712 8,341
Less revaluation to LIFO 2,226 2,076
LIFO value of inventories $6,486 $6,265
It also reported a $23 million change in cost of goods sold due to “lower inventory levels.”
Required:
1. Compute the increase or decrease in the pretax operating profit (loss) that would have been reported for the current year had GE employed FIFO accounting for all inventory for both years.
2. Compute the increase or decrease in pretax operating profit that would have been reported had GE employed LIFO but not reduced inventory quantities during the current year.
5. Tim Madsen is the purchasing agent for Computer Center, a large discount computer store. He has r...
Tim Madsen is the purchasing agent for Computer Center, a large discount computer store. He has recently added the hottest new computer, the Power model, to the store's stock of goods. Sales of this model now are running at about 13 per week. Tim purchases these computers directly from the manufacturer at a unit cost of $3,000, where each shipment takes half a week to arrive. Tim routinely uses the basic EOQ model to determine the store's inventory policy for each of its more important products. For this purpose, he estimates that the annual cost of holding items in inventory is 20 percent of their purchase cost. He also estimates that the administrative cost associated with placing each order is $75. T (a) Tim currently is using the policy of ordering 5 Power model computers at a time, where each order is timed to have the shipment arrive just about when the inventory of these computers is being depleted. Use the Solver version of the Excel template for the basic EOQ model to determine the various annual costs being incurred with this policy.
6. The following selected accounts and their current balances appear in the ledger of Clairemont Co....
The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2018:
Cash $ 240,000
Accounts receivable 966,000
Inventory 1,690,000
Estimated returns inventory 22,500
Office supplies 13,500
Prepaid insurance 8,000
Office equipment 830,000
Accumulated depreciation-office equipment 550,000
Store equipment 3,600,000
Accumulated depreciation-store equipment 1,820,000
Accounts payable 326,000
Customer refunds payable 40,000
Salaries payable 41,500
Note payable (final payment due 2024) 300,000
Common stock 500,000
Retained earnings 2,949,100
Dividends 100,000
Sales 11,343,000
Cost of goods sold 7,850,000
Sales salaries expense 916,000
Advertising expense 550,000
Depreciation expense-store equipment 140,000
Miscellaneous selling expense 38,000
Office salaries expense 650,000
Rent expense 94,000
Depreciation expense-office equipment 50,000
Insurance expense 48,000
Office supplies expense 28,100
Miscellaneous administrative expense 14,500
Interest expense 21,000
Prepare balance sheet, assuming that the current portion of the note payable is $50,000. Be sure to complete the statement heading. Refer to the problem data and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Negative amount should be indicated by the minus sign. A colon (:) will automatically appear if it is required. (I HAVE ALREADY DONE THIS. PLEASE CORRECT THE WRONG ANSWER IN THE RED CELL BELOW)
Prepare closing entries as of May 31, 2018. Refer to the Chart of Accounts for exact wording of account titles. Recall that closing entries involve all temporary accounts. No permanent accounts from the balance sheet are closed. Contra accounts, like Accumulated Depreciation-Office Equipment are treated like the account to which it is related (Office Equipment), with an opposite debit/credit effect in the closing process.Close the Revenue account to Income Summary. Next close all expense accounts and contra revenue accounts to Income Summary. Close Income Summary to the Retained Earnings account. Finally, close the Dividends account to the Retained Earnings account. There are 20 lines in the journal, with line one being the description "closing entries" with no debit or credit amounts. I have included the income statement and retained earnings statement below for reference, in addition to the chart of accounts.
CHART OF ACCOUNTS
Clairemont Co.
General Ledger
ASSETS
110 Cash
120 Accounts Receivable
125 Notes Receivable
130 Inventory
131 Estimated Returns Inventory
140 Office Supplies
141 Store Supplies
142 Prepaid Insurance
180 Land
192 Store Equipment
193 Accumulated Depreciation-Store Equipment
194 Office Equipment
195 Accumulated Depreciation-Office Equipment
LIABILITIES
210 Accounts Payable
216 Salaries Payable
217 Note Payable (current portion)
218 Note Payable (final payment due 2024)
219 Sales Tax Payable
EQUITY
310 Common Stock
311 Retained Earnings
312 Dividends
313 Income Summary
REVENUE
410 Sales
EXPENSES
510 Cost of Goods Sold
521 Delivery Expense
522 Advertising Expense
524 Depreciation Expense-Store Equipment
525 Depreciation Expense-Office Equipment
526 Sales Salaries Expense
527 Office Salaries Expense
531 Rent Expense
533 Insurance Expense
534 Store Supplies Expense
535 Office Supplies Expense
536 Credit Card Expense
540 Miscellaneous Selling Expense
541 Miscellaneous Administrative Expense
710 Interest Expense
Assets 2 Current assets: 3 Cash 4 Accounts receivable Inventory 6 Estimated returns inventory 7 Office supplies 8 Prepaid insurance 9 Total current assets 10 Property, plant, and equipment: 11 Office equipment Clairemont Co. Balance Sheet May 31, 2018 $830,000.00 Score: 222/233 $240,000.00 96600000 1,690,000.00 22,500.00 13,500.00 8,000.00 $2,940,000.00
7. Yummy Jams Company produces a line of jams. Yummy's estimated production of jars of
Yummy Jams Company produces a line of jams. Yummy's estimated production of jars of jam for the fourth quarter of the year is as follows: October 75,000 November 98,000 December 63,000 Each jar requires half a pound of berries. Yummy prefers to buy the freshest berries, so its policy is to have just 3 percent of the following month's production needs in ending inventory. On October 1, the company had 1,125 pounds of berries in inventory. Yummy's pays $0.60 per pound of berries. It buys all berries on account and typically pays 40 percent of a month's purchases in that month, and the remaining 60 percent the following month. How many pounds of berries will be purchased during the month of November? A) 49,945 B) 39,925 C) 41,950 D) 48,475 E) 23,375
8. Break-even sales and sales mix for a service company Zero Turbulence Airline provides air...
Break-even sales and sales mix for a service company
Zero Turbulence Airline provides air transportation services between Los Angeles, California, and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the fol- lowing operating statistics:
Fuel $7,000
Flight crew salaries 3,200
Airplane depreciation 3,480
Variable cost per passenger—business class 140
Variable cost per passenger—economy class 120
Round-trip ticket price—business class 800
Round-trip ticket price—economy class 300
It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight.
a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product mix is 10% business class and 90% economy class tickets.
b. How many business class and economy class seats would be sold at the break-even point?
9. Jay Cutler owns and manages a computer repair service, which
Jay Cutler owns and manages a computer repair service, which had the following trial balance on December 31, 2011 (the end of its fiscal year).
Summarized transactions for January 2012 were as follows.
1. Advertising costs, paid in cash, $1,000.
2. Additional supplies acquired on account $4,200.
3. Miscellaneous expenses, paid in cash, $2,000.
4. Cash collected from customers in payment of accounts receivable $14,000.
5. Cash paid to creditors for accounts payable due $15,000.
6. Supplies used during January $4,000.
7. Repair services performed during January: for cash $6,000; on account $9,000.
8. Wages for January, paid in cash, $3,500.
9. Jay’s drawings during January were $3,000.
Instructions
(a) Open T accounts for each of the accounts listed in the trial balance, and enter the opening balances for 2012.
(b) Prepare journal entries to record each of the January transactions. (Omit explanations.)
(c) Post the journal entries to the accounts in the ledger. (Add accounts as needed.)
(d) Prepare a trial balance as of January 31,2012.
10. When 10,000 units are produced, fixed costs are $14 per unit
When 10,000 units are produced, fixed costs are $14 per unit. Therefore, when 20,000 units are produced fixed costs
a. will increase to $28 per unit
b. will remain at $14 per unit
c. will decrease to $7 per unit
d. will total $280,000
11. Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain,
Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain, but lasts much longer than the other. Its discount rate is
11%. It plans to continue with one of the two models for the foreseeable future; which one should it choose? Based on the costs of each model shown below, which should it choose?
Model 0 1 2 3 4 5 p 7
Old Reliable - 200 - 4 - 4 - 4 - 4 - 4 p - 4
Short and Sweet - 100 - 2 - 2 - 2 - 2
12. Jackson Products produces a barbeque sauce using three departments: Cooking, Mixing, and Bottling...
Jackson Products produces a barbeque sauce using three departments: Cooking, Mixing, and Bottling. In the Cooking Department, all materials are added at the beginning of the process. Output is measured in ounces. The production data for July are as follows: Required: Prepare a physical flow schedule for July. Prepare an equivalent units schedule for July using the FIFO method. What if 60 percent of the materials were added at the beginning of the process and 40 percent were added at the end of the process (all ingredients used are treated as the same type or category of materials)? How many equivalent units of materials would there be?
