Accounting questions and problems

Question 25
Nike Inc. has a fiscal year end of May 31. On May 31, 2007, Nike Inc. reported $10,688.3 million in assets and $7,025.4 million in equity. During fiscal 2008, Nike's assets increased by $1,754.4 million while its equity increased by $799.9 million.
What were Nike's total liabilities at May 31, 2007 and May 31, 2008?

Question 26
Packard Company's budgeted sales were 1,000 units at $50 per unit. During 2008 it had actual sales of 900 units at $55 per unit. Budgeted variable costs were $30 per unit. Calculate What is Packard's net sales volume variance.

Question 27
The following forecasted sales pertain to Louis Corporation:
Month Sales
September $80,000
October 100,000
November 60,000
December 40,000

Collection pattern:
65 percent in month of sale
35 percent in month following sale
Accounts Receivable (August 31) $14,000
Finished Goods Inventory (August 31) 15,000
Louis Corporation has a selling price of $5 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales. Calculate the budgeted beginning balance in units for finished goods inventory on November 1?

Question 28
Explain how budgets provide a basis for performance evaluation.

Question 29
Identify Cooper and Kaplan's four categories of activities and provide a brief description of each category.

Question 30
Identify the three different cost estimation methods discussed in this course and provide a description of the strengths and weaknesses of each.

Question 31
Summertime Clothing Company is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 60 percent of sales. Fabric purchases and payments are to be made during the month preceding the month of sale. Wages (production-related) are estimated at 20 percent of sales and are paid during the month of sale. Other operating costs amounting to 25 percent of sales are to be paid in the month following the month of sales. Additionally, a monthly lease payment of $5,000 is paid to Net World for computer services. Sales revenue is forecasted as follows:
Month Sales
March $150,000
April $170,000
May $230,000
June $200,000
July $250,000
Calculate the amount of budgeted cash disbursements for the month of May?

Question 32
Briefly explain the terms (1) contribution margin and (2) contribution margin ratio and why they are useful (two to three sentences each).

Question 33
If net income is $25,000 and operating leverage is 3.00 at the end of the most recent period, a 15% increase in sale will increase net income by what percent and what dollar amount?

Question 34
Differentiate among structural, organizational, and activity cost drivers.

Question 35
Beginning inventory in February consisted of 5,000 units (60 percent converted) and ending inventory consisted of 10,000 units (30 percent converted). In addition, 25,000 units were started during the period. How many equivalent units for conversion costs were in process February using the weighted average method?

Question 36
Compute the missing amounts for Nike Inc. for 2007 and 2008, in the table below:
($ millions) 2008 2007
Total assets $10,688.3
Contributed capital $ 2,500.9 $ 1,963.1
Earned capital $ 5,324.7
Total Liabilities $ 4,617.1 $ 3,662.6
Liabilities and equity $10,688.3

Question 37
During the most recent fiscal period, Kajing LTD had a contribution margin of $50,000 and operating profit of $20,000 on sales of $80,000.
Calculate Kajing's (a) operating leverage and (b) the amount of its profit for next year assuming sales increase to $96,000.

Question 38
Define strategic cost management and briefly discuss the three themes that make up strategic cost management

Question 39
Briefly explain the limitation of basic cost-volume-profit analysis as it relates to an organization's sales mix.

Question 40
Identify and briefly discuss the three dimensions on which competition takes place.

Question 41
The management of Rose Enterprises is analyzing variable overhead variances for the fiscal period just ended. During the period, Rose's management used 2,500 hours of direct labor. It had budgeted to use 4,000 hours of direct labor. Hours of direct labor is the single overhead driver of variable overhead. Variable overhead consists of two items. Indirect labor was budgeted as $3.00 per hour of direct labor. Indirect materials was budgeted as $2.00 per hour of direct labor. Actual variable overhead was $15,000.

Calculate Rose's variable overhead spending variance.

Question 42
What is a sunk cost? Under what circumstances are sunk costs relevant to a decision? Construct an example of a sunk cost. Briefly discuss why you think financial reports for investors and managerial reports for managers may or may not differ in their treatment of sunk costs.

Question 43
The management of Rose Enterprises is analyzing variable overhead variances for the fiscal period just ended. During the period, Rose's management used 2,500 hours of direct labor. It had budgeted to use 4,000 hours of direct labor. Hours of direct labor is the single overhead driver of variable overhead. Variable overhead consists of two items. Indirect labor was budgeted as $3.00 per hour of direct labor. Indirect materials was budgeted as $2.00 per hour of direct labor. Actual variable overhead was $15,000. Calculate Rose's variable overhead efficiency variance.

Question 44
Briefly explain why changes in technology and prices make cost estimation difficult.

Question 45
Orlando Company manufactures a product through a process where all manufacturing costs are added uniformly. Information for October beginning work-in-process follows.

The following costs were incurred during October:

During October, 25,000 units were completed. Also, 2,500 units that were 50 percent complete remained in process at the end of the day on October 31.

Calculate the cost of goods completed and the cost assigned to ending inventory. (Round to the nearest dollar, if necessary.)

Question 46
Rutledge Corp. obtained the following information from the Raw Materials Inventory account and purchasing records for the first quarter of the current year:

Beginning Raw Materials = $5,000
Ending Raw Materials = $6,000
Jan. Purchases = $6,000
Feb. Purchases = $4,000
Mar. Purchases = $5,000

Calculate the amount of Raw Materials used for this quarter.

Question 47
Fuino Company manufactures and sells specialty items. The following representative direct labor-hours and production costs are provided for a four-month period:
Month Hrs. Direct Labor Production Costs
January 1,500 $15,000
February 2,000 17,500
March 2,500 20,000
April 2,000 15,000
Total 8,000 $67,500

a = fixed production costs per month
b = variable production costs per direct labor hour
n = number of months
X = direct labor-hours per month
Y = total monthly production costs
Σ = Summation
Using the symbols above, indicate the cost estimation equation based on number of direct labor hours per month, and calculate total monthly production costs for May using the high-low method, during which hours of direct labor are expected to be 2,300 hours.

Question 48
Louisiana Mower Manufacturing Company has three divisions. Engine components are transferred from Components to Assembly. Assembled engines are transferred from Assembly to the Mower Division. Costs for each division are given below. Mowers are sold on in a competitive outside market for $250.
Division Name Components Assembly Mower
Total variable costs $50 per package of components $10 per engine plus transfer price paid to Components $100 per mower plus transfer price paid to Assembly
Total division fixed costs $55,000 $55,000 $110,000

All transfers are made at 100% of absorption cost. This period, Components sends Assembly 10,000 package of engine components. Determine the transfer price Assembly pays Components for engine components.

Question 49
Casey Productions needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 10 percent of total sales each month. Historically, credit sales on account have been collected as follows: 60 percent in the month of sale, 30 percent in the month after the sale, and the remaining 10 percent two months after the sale. Sales for the quarter are projected as follows: April, $60,000; May, $50,000; and June, $70,000. Accounts receivable on March 31 were $30,000.

Calculate the amount of Casey's expected cash collections for June.

Question 50
Odoom Merchandising Firm is developing its budgets for Year 2. The Year 1 income statement is as follows:
Sales (100,000 units) $500,000
Less Cost of goods sold 300,000
Gross profit $200,000
Operating expenses (includes $20,000 of depreciation) 120,000
Net income $80,000

Selling prices will increase by 10 percent, and sales volume in units will decrease by 5 percent. The cost of good sold as a percent of sales will increase to 62 percent. Other than depreciation, all operating costs are variable.

Required: Prepare a budgeted functional income statement for Year 2.