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38. 41. Which of the following statements about service departments and their costs is not true?...
41. Which of the following statements about service departments and their costs is not true?
A. Service departments rarely provide services to other service departments.
B. Some service departments may be able to precisely measure the services it provides to other departments.
C. Service department costs should be included in total product costs.
D. Allocation of service department costs should be made on an equitable basis.
42. The number of workers in the departments served would most likely be the basis for distributing the cost of which service department?
A. Human Resources
B. Tool Room
C. Building Maintenance
D. Machine Shop
43. Kilowatt hours would be an appropriate basis for distributing the cost of which of the following service departments to production departments?
A. Power
B. Machine Maintenance
C. Human Resources
D. Building Maintenance
44. The method of distributing service department costs to production departments which makes no attempt to determine the extent to which one service department renders its services to another department is the:
A. Direct distribution method.
B. Sequential distribution method.
C. Service department distribution method.
D. Reciprocal method.
45. The method of distributing service department costs to production departments which distributes service department costs regressively to other service departments, and then to production departments is the:
A. Direct distribution method.
B. Sequential distribution method.
C. Service department distribution method.
D. Reciprocal method.
46. The method of distributing service department costs to production departments that takes into consideration that service departments not only may provide service to but also may receive service from other service departments is the:
A. Direct distribution method.
B. Sequential distribution method.
C. Service department distribution method.
D. Reciprocal method.
47. The Lucas Manufacturing Company has two production departments (fabrication and assembly) and three service departments (general factory administration, factory maintenance, and factory cafeteria). A summary of costs and other data for each department, prior to allocation of service department costs for the year ended June 30, appears below:
The costs of the general factory administration department, factory maintenance department, and factory cafeteria are allocated on the basis of direct labor hours, square footage occupied, and number of employees, respectively.
Fabrication
Assembly
General
Factory
Admin.
Factory
Maint.
Factory
Cafeteria
Direct labor costs:
$1,950,000
$2,050,000
Direct material costs:
$3,130,000
$ 950,000
Factory overhead costs:
$1,650,000
$1,850,000
$80,000
$67,500
$58,000
Direct labor hours:
237,690
387,810
Number of employees:
160
128
20
42
25
Sq. footage occupied:
20,000
30,000
2,400
2,000
4,800
Assuming that Lucas elects to distribute service department costs to production departments using the direct distribution method, the amount of general factory administration department costs that would be allocated to the assembly department would be (round all final calculations to the nearest dollar):
A. $30,400.
B. $25,650.
C. $0.
D. $49,600.
48. The Lorenzo Printing Company has two production departments (printing and binding) and three service departments (power generation, factory maintenance, and human resources). A summary of costs and other data for each department, prior to allocation of service department costs for the year ended April 30, appears below.
The costs of the power generation department, factory maintenance department, and human resources are allocated on the basis of kilowatt hours, square footage occupied, and number of employees, respectively.
Printing
Binding
Power
Gen.
Factory
Maint.
Human
Res.
Direct labor costs:
$475,000
$438,000
Direct material costs:
$632,000
$527,000
Factory overhead costs:
$750,000
$832,000
$75,000
$50,000
$30,000
Direct labor hours:
262,000
254,000
Number of employees:
40
35
5
20
5
Sq. footage occupied:
36,000
24,000
5,000
3,000
1,000
Assuming that Lucas elects to distribute service department costs to production departments using the direct distribution method, the amount of human resources department costs that would be allocated to the printing department would be (round all final calculations to the nearest dollar):
A. $15,000.
B. $12,000.
C. $16,000.
D. $18,000.
49. The preferred sequence for distributing the cost of service departments to production departments when using the sequential distribution method is:
A. to distribute the cost of the service department with the largest total overhead cost first.
B. to always distribute the cost of the Human Resources Department first.
C. to distribute the costs of the service departments to the production department having the largest amount of overhead cost first.
D. to distribute the costs of the service department that services the greatest number of departments first.
50. The Jason Manufacturing Company has two production departments (millwright and assembly) and three service departments (general factory administration, factory maintenance, and factory development). A summary of costs and other data for each department, prior to allocation of service department costs for the year ended March 30, appears below.
The costs of the general factory administration department, factory maintenance department, and factory development department are allocated on the basis of direct labor hours, square footage occupied, and number of employees, respectively.
Millwright
Assembly
General
Factory
Admin.
Factory
Maint.
Factory
Devel.
Direct labor costs:
$1,950,000
$2,050,000
Direct material costs:
$3,130,000
$ 950,000
Factory overhead costs:
$1,975,000
$2,510,000
$95,000
$87,000
$65,000
Direct labor hours:
235,980
376,180
Number of employees:
210
255
51
84
30
Sq. footage occupied:
10,000
40,000
2,500
2,300
5,200
Assuming that Jason elects to use the sequential method to distribute service department costs (starting with factory development), what would be the amount of factory development that would be allocated to the factory maintenance department?
A. $ 9,100.
B. $ 4,350.
C. $29,640.
D. $0.
39. Which of the following best describes a value chain in the balanced scorecard framework?
Which of the following best describes a value chain in the balanced scorecard framework?
- The cause-and-effect linkages.
- The baseline level of performance.
- The sequence of business processes in which usefulness is added to products or services.
- The chain of financial and nonfinancial measures.
40. A factory engaged in manufacturing plastic buckets is working to 40% capacity and produces 10, 000
A factory engaged in manufacturing plastic buckets is working to 40% capacity and produces 10, 000
buckets per annum. The present cost break up for one bucket is as under,
Material Rs.10
Labour Rs.3
Overheads Rs.5 [60% fixed]
The selling price is Rs.20 per bucket.
If it is decided to work the factory at 50% capacity, the selling price falls by 3%. At 90% capacity, the
selling price falls by 5% accompanied by a similar fall in the price of material.
You are required to calculate the profit at 50% and 90% capacities and also show break even points for the same capacity production.
41. Scenario Glorious Florists is a floral supply company with offices and boutiques in Ontario and...
Scenario
Glorious Florists is a floral supply company with offices and boutiques in Ontario and Québec. The organization started operations in 1978 and currently has an approximate annual payroll of $12,000,000 in each jurisdiction.
The organization is considering terminating the employment of five employees in each jurisdiction. To assist with forecasting the budget for the balance of the year, Nancy Wilson, the Director of Finance has asked you, as the Payroll Supervisor, to provide her with the details on all legislated payments on termination of employment required for each jurisdiction. In addition to the required payments on termination, include any employer costs related to the employees’ statutory deductions.
42. Prepare the adjusting entries for the month of May. Use J4 as the page number for your journal.
Deanna Nardelli started her own consulting firm, Nardelli Consulting, on May 1, 2014. The trial balance at May 31 is as follows.
NARDELLI CONSULTING Trial Balance May 31, 2014 | |||
Account Number | Debit | Credit | |
101 | Cash | $ 4,500 | |
112 | Accounts Receivable | 6,000 | |
126 | Supplies | 1,900 | |
130 | Prepaid Insurance | 3,600 | |
149 | Equipment | 11,400 | |
201 | Accounts Payable | $ 4,500 | |
209 | Unearned Service Revenue | 2,000 | |
301 | Owner's Capital | 17,700 | |
400 | Service Revenue | 7,500 | |
726 | Salaries and Wages Expense | 3,400 | |
729 | Rent Expense | 900 | |
$31,700 | $31,700 | ||
In addition to those accounts listed on the trial balance, the chart of accounts for Nardelli Consulting also contains the following accounts and account numbers: No. 150 Accumulated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 631 Supplies Expense, No. 717 Depreciation Expense, No. 722 Insurance Expense, and No. 732 Utilities Expense.
Other data:
1. $900 of supplies have been used during the month.
2. Utilities expense incurred but not paid on May 31, 2014, $250.
3. The insurance policy is for 2 years.
4. $400 of the balance in the unearned service revenue account remains unearned at the end of the month.
5. May 31 is a Wednesday, and employees are paid on Fridays. Nardelli Consulting has two employees, who are paid $900 each for a 5-day work week.
6. The office furniture has a 5-year life with no salvage value. It is being depreciated at $190 per month for 60 months.
7. Invoices representing $1,700 of services performed during the month have not been recorded as of May 31.
Instructions
(a) Prepare the adjusting entries for the month of May. Use J4 as the page number for your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances and place a check mark in the posting reference column.
(c) Prepare an adjusted trial balance at May 31, 2014.
43. ABC systems only apply to manufacturing companies. Do you agree?
ABC systems only apply to manufacturing companies. Do you agree? Explain.
44. David Ding Baseball Bat Company currently has $3 million in debt outstanding, bearing an interest...
David Ding Baseball Bat Company currently has $3 million in debt outstanding, bearing an interest rate of 12 percent. It wishes to finance a $4 million expansion program and is considering three alternatives: additional debt at 14 percent interest (option 1), preferred stock with a 12 percent dividend (option 2), and the sale of common stock at $16 per share (option 3). The company currently has 800,000 shares of common stock outstanding and
is in a 40 percent tax bracket.
a. If earnings before interest and taxes are currently $1.5 million, what would be earnings per share for the three alternatives, assuming no immediate increase in operating profit?
b. Develop a break-even, or indifference, chart for these alternatives. What are the approximate indifference points? To check one of these points, mathematically determine the indifference point between the debt plan and the common stock plan. What are the horizontal axis intercepts?
c. Compute the degree of financial leverage (DFL) for each alternative at the expected EBIT level of $1.5 million.
d. Which alternative do you prefer? How much would EBIT need to increase before the next alternative would be “better” (in terms of EPS)?
45. Which of the following factors is least likely to be considered in preparing a sales budget? Fore...
Which of the following factors is least likely to be considered in preparing a sales budget? Forecasted economic and market conditions. The capital expenditures budget. Proposed selling expenses, such as advertising. Prediction of unit sales. Business capacity.
46. answer and show your solution Problem 1-5 (IAA) On December 31, 2020, Cordillera Company reported th
Note payable - 9% 3,000,000 Note payable - 8% 6,000,000 Note payable - 10% 4.000,000 Note payable - 11% 5,000,000 The 9% note payable is noncancelable and matures on July 31, 2021. Sufficient cash is expected to be available to retire the note at maturity. The 8% note payable matures on May 31, 2026 but the creditor has the option of calling the note or demanding payment on June 30, 2021. However, the call option is not expected to be exercised given the prevailing market condition. The 10% note payable is due on March 31, 2022. A debt covenant requires Cordillera Company to maintain current assets at least equal to 150% of current liabilities. On December 31, 2020, Cordillera Company is in violation of this covenant. However, Cordillera Company obtained a waiver from the creditor until June 2021 having convinced the creditor that Cordillera's normal 2 to 1 ratio of current assets to current liabilities will be reestablished during the first half of 2021. The 11% note payable matures on June 30, 2021. On January 31. 2021 before the issuance of the 2020 financial statements. the note payabe was refinanced on a long-term basis. Required: Explain the appropriate classification of the notes payable as current or noncurrent in the statement of financial position on December 31, 2020. 17
47. Applying for a new job as a database administrator Scenario A: You’re applying for a new job as a...
Applying for a new job as a database administrator
Scenario A:
You’re applying for a new job as a database administrator. You’re currently a software engineer, but due to layoffs, you’ve been performing most of your department’s database-related projects for almost a year now. You want your resume to be taken seriously for the database administrator position.
What Do You Do?
Use the title database manager on your resume — after all, you’ve been performing the duties of the person who last had that role.
Use your official title, software engineer, on your resume, even though it doesn’t accurately reflect the database skills you perform each day.
Come up with a new job title altogether that better describes what you do each day. It’s not your official title, but it delivers the message.
Scenario B:
You’re doing a yearlong occupational therapy internship at a local nonprofit preschool where some of the children have special needs. Most of these children’s families are eligible for financial assistance from the county.
You suspect some of the families are understating their household incomes so they can receive more aid. One particular case involves an unmarried man and woman with a 2-year-old daughter. The family only reports the mother’s income, thus boosting the daughter’s financial assistance package by almost 50 percent.
You know the daughter would not be able to receive any of the services she’s getting from your school without this money, and you know the child is benefiting physically and psychologically from the therapy she’s receiving.
What Do You Do?
Nothing. The child’s welfare outweighs the county’s need to know what’s really happening with the family’s finances. Besides, it’s the county’s responsibility to verify the household incomes of participants in the financial assistance program.
Talk to your supervisor about the situation, even though you’re pretty sure she must already know about it herself.
Contact the county department that oversees the program in your county and report the matter as suspected fraud.
Scenario C:
You’re in graduate school at a major research university, pursuing your PhD in chemistry. You’ve completed a series of experiments for your doctoral dissertation. Some of the data you’ve gathered in these experiments supports the hypothesis you’ve been trying to prove, while some does just the opposite.
Your doctoral program requires you to publish one academic paper based on your research in a professional scientific journal. If you were to write and publish a paper focusing solely on the good data you’ve gathered in your experiments, you’d be on your way to securing your PhD, and you’d likely get additional funding.
On the other hand, if you write and publish a paper highlighting all your data, you’d be taking a considerable risk. The organization paying for your research might be disappointed and terminate your funding.
What Do You Do?
Write and publish a paper highlighting all your data, but focus mostly on the good data despite the risk of losing your research funding.
Write and publish a paper highlighting only the good data.
Tell the funding organization about the experiments and offer to repeat them in an attempt to get better data to support the hypothesis.
Scenario D:
You are the entire information technology department for a small firm with 20 employees. The president of the company believes some of the employees are spending far too much time on the Internet doing tasks not related to work. The president asks you to start monitoring employees’ Internet usage without their knowledge, something you could easily do from a technological standpoint.
What Do You Do?
Start monitoring employees’ email and Web usage, as the president has asked.
Suggest that an acceptable Internet-use policy be developed.
Talk to employees and tell them what the president has in mind so they’ll change their habits.
Scenario E:
You’re the development assistant for a small nonprofit health education organization, and part of your job requires you to oversee the printing of various documents. Typically, you write the documents, collaborate with a graphic designer to lay them out, and then work with an outside printer to get the documents printed in large quantities.
Your latest brochure, ?GHB: A Growing Public Health Concern is about to come back from the printer. When they arrive, you spot an error in a small headline on the third page. It’s supposed to read GHB: An Emerging Public Health Crisis, but instead it says GHB: An Emerging Pubic Health Crisis.
What a difference a letter makes!
What Do You Do?
Call the mistake to your supervisor’s attention, even though it’s relatively minor in the grand scheme of things and probably won’t have any impact on the overall message the brochure is trying to communicate.
In the interest of saving your organization money and time, you let the mistake go unnoticed and work extra hard to distribute all copies of the brochure as quickly as possible so you can get the document reprinted.
Go to your organization’s graphic artist, who probably should have caught the mistake during production, and ask what went wrong and why. Then, be prepared to tell your supervisor about the graphic artist’s mistake if the supervisor should ask about it.
Applying for a new job as a database administrator
Accounting Basics
48. Give an example of three financial intermediaries, and explain how they act as a bridge between
- Give an example of three financial intermediaries, and explain how they act as a bridge between small investors and large capital markets or corporations. (LO 1-5)
- Firms raise capital from investors by issuing shares in the primary markets. Does this imply that corporate financial managers can ignore trading of previously issued shares in the secondary market? (LO 1-4)
49. Accountants employed by a particular business firm or not-for-profit organization, perhaps as...
Accountants employed by a particular business firm or not-for-profit organization, perhaps as chief accountant, controller, or financial vice-president , are said to be engaged
50. Faith Evans Corporation is a regional company which is an
Faith Evans Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ (National Association of Securities Dealers Quotes). Faith Evans Corp. has issued 10,000 units. Each unit consists of a $500 par, 12% subordinated debenture and 10 shares of $5 par common stock. The investment banker has retained 400 units as the underwriting fee. The other 9,600 units were sold to outside investors for cash at $880 per unit. Prior to this sale the 2-week asking price of common stock was $40 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.
Instructions
(a) Prepare the journal entry to record Evans’ transaction, under the following conditions.
(1) Employing the incremental method.
(2) Employing the proportional method, assuming the recent price quote on the common stock reflects fair value.
(b) Briefly explain which method is, in your opinion, the better method.