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# Percentage Increase in Cost of Goods Sold

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1. Assume the following cost of goods sold data for a company:

2014 \$1,680,000
2013 1,400,000
2012 1,200,000

If 2012 is the base year, what is the percentage increase in cost of goods sold from 2012 to 2014?

2. Krug Corporation has income before taxes of \$900,000 and an extraordinary gain of \$300,000. If the income tax rate is 25% on all items, the income statement should show income before irregular items and extraordinary items, respectively, of:

3. Maisley Company decided to analyze certain costs for June of the current year. Units started into production equaled 28,000 and ending work in process equaled 4,000. With no beginning work in process inventory, how much is the conversion cost per unit if ending work in process was 25% complete and total conversion costs equaled \$105,000

4. The Molding Department of Boswell Company has the following production data: beginning work process 40,000 units (60% complete), started into production 680,000 units, completed and transferred out 640,000 units, and ending work in process 80,000 units (40% complete). Assuming materials are entered at the beginning of the process, equivalent units for materials are:

5. At January 1, 2013, Deer Corp. has beginning inventory of 2,000 surfboards. Deer estimates it will sell 10,000 units during the first quarter of 2013 with a 12% increase in sales each quarter. Deer's policy is to maintain an ending inventory equal to 25% of the next quarter's sales. Each surfboard costs \$100 and is sold for \$150. How much is budgeted sales revenue for the third quarter of 2013?

6 Materials costs of \$500,000 and conversion costs of \$535,500 were charged to a processing department in the month of September. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. There were no units in beginning work in process, 100,000 units were started into production in September, and there were 8,000 units in ending work in process that were 40% complete at the end of September.

What was the total amount of manufacturing costs assigned to those units that were completed and transferred out of the process in September?

7. If equivalent units are 12,000 for conversion costs and units transferred out equals 8,000, what stage of completion should the ending work in process be for the 16,000 units remaining?

8. The last department in a production process shows the following information at the end of the period:
Units
Beginning Work in Process 25,000
Started into Production 200,000
Ending Work in Process 50,000

How many units have been transferred out to finished goods during the period?

9. At January 1, 2013, Deer Corp. has beginning inventory of 2,000 surfboards. Deer estimates it will sell 10,000 units during the first quarter of 2013 with a 12% increase in sales each quarter. Deer's policy is to maintain an ending inventory equal to 25% of the next quarter's sales. Each surfboard costs \$100 and is sold for \$150. How much is budgeted sales revenue for the third quarter of 2013?

10. A company determined that the budgeted cost of producing a product is \$30 per unit. On June 1, there were 80,000 units on hand, the sales department budgeted sales of 300,000 units in June, and the company desires to have 120,000 units on hand on June 30. The budgeted cost of goods manufactured for June would be

#### Solution Summary

The following problems helps with problems involving the cost of goods sold.

\$2.19

## Accounting: percentage increase, quick assets, AR turnover, days sales, cost

1. What type of analysis is indicated by the following?
Increase (Decrease*)
2007 2006 Amount Percent
Current assets \$ 380,000 \$ 500,000 \$120,000* 24%*
Fixed assets 1,680,000 1,500,000 180,000 12%

vertical analysis
horizontal analysis
liquidity analysis
common-size analysis

2. Assume the following sales data for a company:
2007 750,000
2006 600,000

What is the percentage increase in sales from 2006 to 2007?
25%
125%
20%
167%

3. Assume the following sales data for a company:
2007 \$1,134,000
2006 945,000

What is the percentage increase in sales from 2006 to 2007?
120%
20%
95%
25%

4. Based on the following data, what is the amount of quick assets?
Accounts payable \$ 30,000
Accounts receivable 65,000
Accrued liabilities 7,000
Cash 20,000
Intangible assets 40,000
Inventory 72,000
Long-term investments 100,000
Long-term liabilities 75,000
Marketable securities 36,000
Notes payable (short-term) 20,000
Property, plant, and equipment 625,000
Prepaid expenses 2,000

\$163,000
\$195,000
\$121,000
\$56,000

5. Based on the following data for the current year, what is the accounts receivable turnover?
Net sales on account during year \$400,000
Cost of merchandise sold during year 300,000
Accounts receivable, beginning of year 45,000
Accounts receivable, end of year 35,000
Inventory, beginning of year 90,000
Inventory, end of year 110,000

10.0
11.4
8.9
4.0

6. Based on the following data for the current year, what is the number of days' sales in inventory?
Net sales on account during year \$1,204,500
Cost of merchandise sold during year 657,000
Accounts receivable, beginning of year 75,000
Accounts receivable, end of year 85,000
Inventory, beginning of year 81,600
Inventory, end of year 98,600

50.5
45.3
24.7
29.9

7. The balance sheets at the end of each of the first two years of operations indicate the following:
2006 2005
Total current assets \$600,000 \$560,000
Total investments 60,000 40,000
Total property, plant, and equipment 900,000 700,000
Total current liabilities 150,000 80,000
Total long-term liabilities 350,000 250,000
Preferred 9% stock, \$100 par 100,000 100,000
Common stock, \$10 par 600,000 600,000
Paid-in capital in excess of par-common stock 60,000 60,000
Retained earnings 325,000 210,000

If net income is \$115,000 and interest expense is \$30,000 for 2006, and the market price is \$30, what is the price-earnings ratio on common stock for 2006. (round to one decimal point)?
17.0
12.1
12.4
15.9

8. The purpose of an audit is to _______.
determine whether or not a company is a good investment
render an opinion on the fairness of the statements
determine whether or not a company complies with income tax regulations
determine whether or not a company is a good credit risk

9. What term is used to describe the process of developing the organization's objectives and goals?
Supervising
Planning
Improving
Decision making

10. The cost of materials entering directly into the manufacturing process is classified as _______.
direct labor cost
burden cost
direct materials cost

11. Which of the following is an example of direct labor cost for an airplane manufacturer?
Cost of oil lubricants for factory machinery
Cost of wages of assembly worker
Salary of plant supervisor
Cost of jet engines

12. Which of the following is an example of a factory overhead cost?
Repair and maintenance cost on the administrative building
Factory heating and lighting cost
President's salary

13. Which of the following is not a prime cost?
Supervisor's wages
Direct labor wages
Machine operator wages
Assembly line wages

14. One of the following will not be found on the balance sheet of a manufacturing company: _______.
cost of goods sold
materials
work in process
finished goods

15. What is the purpose of the Statement of Cost of Goods Manufactured?
to determine the ending materials inventory
to determine the ending work in process inventory
to determine the amounts transferred to finished goods
all of the answers are true

16. Selected accounts with some debits and credits omitted are presented as follows:
Work in Process
Aug. 1 Balance 275,000 Aug. 31 Goods finished 1,230,000
31 Direct materials X
31 Direct labor 350,000

Aug. 1-31 Costs incurred 90,000 Aug. 1 Balance 15,000
31 Applied
(30% of direct
labor cost) X

If the balance of Work in Process at August 31 is \$200,000, what was the amount debited to Work in Process for direct materials in August?
\$700,000
\$805,000
\$300,000
\$605,000

17. Selected accounts with some debits and credits omitted are presented as follows:
Work in Process
Apr. 1 Balance 7,000 Apr. 30 Goods finished X
30 Direct materials 78,400
30 Direct labor 195,000

Finished Goods
Apr. 1 Balance 42,000
30 Goods finished 387,000

What was the balance of Work in Process as of April 30?
\$8,100
\$35,000
\$29,900
\$22,900

18. Putnam Manufacturers Inc. has estimated total factory overhead costs of \$84,000 and 12,000 direct labor hours for the current fiscal year. If job number 117 incurred 1,500 direct labor hours, the work in process account will be debited and factory overhead will be credited for _______.
\$10,500
\$0; WIP is credited
\$84,000
\$1,500

19. The proper journal entry to record the purchase of \$25,000 of raw materials on account would be: _______.

Jan 2 Raw Material Inventory 25,000
Accounts Receivable 25,000

Jan 2 Raw Material Inventory 25,000
Accounts Payable 25,000

Jan 2 Inventory 25,000
Accounts Receivable 25,000

Jan 2 Inventory 25,000
Cash 25,000

20. The following budget data are available for Newest Company:
Estimated direct labor hours 9,000
Estimated direct dollars \$60,000

If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is _____.
\$2.57
\$.39
\$6.67
\$17.11

21. A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be \$360,000 and direct labor hours would be 45,000. Actual manufacturing overhead costs incurred were \$377,200, and actual direct labor hours were 46,000. What is the predetermined overhead rate per direct labor hour?
\$8.00
\$8.20
\$8.38
\$7.83

22. A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be \$360,000 and direct labor hours would be 45,000. Actual manufacturing overhead costs incurred were \$377,200, and actual direct labor hours were 46,000. The entry to apply the factory overhead costs for the year would include a _______.
debit to factory overhead for \$360,000
credit to factory overhead for \$368,000
debit to factory overhead for \$377,200
credit to factory overhead for \$360,000

23. Given the following costs and activities for Downing Company electrical costs, use the high-low method to calculate Downing's variable electrical costs per machine hour.
Costs Machine Hours
April \$11,700 15,000
May \$13,200 17,500
June \$11,400 14,500
(Points: 4)
2.08
6.00
.60
1.20

24. A firm operated at 80% of capacity for the past year, during which fixed costs were \$210,000, variable costs were 65% of sales, and sales were \$1,000,000. Operating profit was _______.
\$140,000
\$150,000
\$310,000
\$200,000

25. If fixed costs are \$39,600, the unit selling price is \$42, and the variable costs are \$24, what is the break-even sales (unit) if the variable costs are decreased by \$2?
1,650
990
1,980
1,350

26. The Collins Corporation just started business in January of 2007. They had no beginning inventories. During 2007 they manufactured 12,000 units of product, and sold 10,000 units. The selling price of each unit was \$20. Variable manufacturing costs were \$4 per unit, and variable selling and administrative costs were \$2 per unit. Fixed manufacturing costs were \$24,000 and fixed selling and administrative costs were \$6,000.
What would be the Collins Corporations Net income for 2007 using absorption costing?

\$114,000
\$110,000
\$4,000
\$106,000

27. McCabe Manufacturing Co.'s static budget at 8,000 units of production includes \$40,000 for direct labor and \$4,000 for electric power. Total fixed costs are \$23,000. At 9,000 units of production, a flexible budget would show _______.
variable costs of \$49,500 and \$25,875 of fixed costs
variable costs of \$44,000 and \$23,000 of fixed costs
variable costs of \$49,500 and \$23,000 of fixed costs
variable and fixed costs totaling \$75,375

28. For January, sales revenue is \$600,000; sales commissions are 5% of sales; the sales manager's salary is \$96,000; advertising expenses are \$80,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are \$2,100 plus 1/2 of 1% of sales. Total selling expenses for the month of January are _______.
\$157,100
\$223,100
\$183,750
\$182,100

29. Below is budgeted production and sales information for Fleming Company for the month of December:
Product XXX Product ZZZ
Estimated beginning inventory 30,000 units 18,000 units
Desired ending inventory 32,000 units 15,000 units
Region I, anticipated sales 320,000 units 260,000 units
Region II, anticipated sales 190,000 units 130,000 units

The unit selling price for product XXX is \$5 and for product ZZZ is \$14.

Budgeted sales for the month are _______.
\$2,040,000
\$4,680,000
\$6,692,000
\$8,010,000

30. Production and sales estimates for March for the Finneaty Co. are as follows:
Estimated inventory (units), March 1 17,500
Desired inventory (unit), March 31 19,300

Expected sales volume (units):
Area M 6,000
Area L 7,000
Area O 9,000
Unit sales price \$15

The number of units expected to be manufactured in March is ________.
22,000
1,800
23,800
20,200

31. Production estimates for July are as follows:
Estimated inventory (units), July 1 8,500
Desired inventory (units), July 31 10,500
Expected sales volume (units), July 76,000

For each unit produced, the direct materials requirements are as follows:
Direct material A (\$5 per lb.) 3 lbs.
Direct material B (\$18 per lb.) 1/2 lb.

The number of pounds of materials A and B required for July production is ________.
216,000 lbs. of A; 36,000 lbs. of B
216,000 lbs. of A; 72,000 lbs. of B
234,000 lbs. of A; 39,000 lbs. of B
225,000 lbs. of A; 37,500 lbs. of B

32. Production and sales estimates for June are as follows:
Estimated inventory (units), June 1 16,000
Desired inventory (units), June 30 18,000
Expected sales volume (units):
Area X 4,000
Area Y 6,000
Area Z 5,500
Unit sales price \$20

The number of units expected to be manufactured in June is _______.
15,500
17,500
16,500
13,500

33. Consider the following budget information: materials to be used totals \$69,750; direct labor totals \$198,400; factory overhead totals \$394,800; work in process inventory January 1, 2008, was expected to be \$189,100; and work in progress inventory on December 31, 2008, is expected to be 197,600. What is the budgeted cost of goods manufactured?
\$662,950
\$671,450
\$654,450
\$1,049,650

34. O'Neill Co. has \$296,000 in accounts receivable on January 1. Budgeted sales for January are \$860,000. O'Neill expects to sell 20% of its merchandise for cash. Of the remaining 80% of sales on account, 75% are expected to be collected in the month of sale and the remainder the following month. The January cash collections from sales are ________.
\$812,000
\$688,000
\$468,000
\$984,000

35. The standard costs and actual costs for direct materials for the manufacture of 2,500 actual units of product are as follows:
Standard Costs
Direct materials 2,500 kilograms @ \$8

Actual Costs
Direct materials 2,600 kilograms @ \$8.75

The amount of the direct materials quantity variance is _______.
\$875 favorable
\$800 unfavorable
\$800 favorable
\$875 unfavorable

36. The following data is given for the Walker Company:
Budgeted production 26,000 units
Actual production 27,500 units
Materials:
Standard price per ounce \$6.50
Standard ounces per completed unit 8
Actual ounces purchased and used in production 228,000
Actual price paid for materials \$1,504,800
Labor:
Standard hourly labor rate \$22 per hour
Standard hours allowed per completed unit 6.6
Actual labor hours worked 183,000
Actual total labor costs \$4,020,000
Actual and budgeted fixed overhead \$1,029,600
Standard variable overhead rate \$24.50 per standard labor hour
Overhead is applied on standard labor hours.
The direct material price variance is _______.
22,800U
22,800F
52,000U
52,000F

37. The following data relate to direct labor costs for the current period:
Standard costs 9,000 hours at \$5.50
Actual costs 8,750 hours at \$5.75

What is the direct labor rate variance?
\$2,250.00 unfavorable
\$2,187.50 unfavorable
\$1,438.00 favorable
\$1,375.00 favorable

38. The standard factory overhead rate is \$10 per direct labor hour (\$8 for variable factory overhead and \$2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:
Standard: 25,000 hours at \$10 \$250,000

What is the amount of the factory overhead volume variance?

\$12,500 favorable
\$10,000 unfavorable
\$12,500 unfavorable
\$10,000 favorable

39. The standard factory overhead rate is \$7.50 per machine hour (\$6.20 for variable factory overhead and \$1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine hours. The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows:
Standard hours allowed for units produced: 60,000 hours at \$7.50 450,000

What is the amount of the factory overhead volume variance?
\$12,000 unfavorable
\$12,000 favorable
\$14,000 unfavorable
\$26,000 unfavorable

40. At the end of the fiscal year, variances from standard costs are usually transferred to the ______.
direct labor account
cost of goods sold account
direct materials account

41. A manager is responsible for costs only in a(n) ________.
profit center
investment center
volume center
cost center

42. In a profit center, the department manager has responsibility for and the authority to make decisions that affect _______.
not only costs and revenues, but also assets invested in the center

the assets invested in the center, but not costs and revenues
both costs and revenues for the department or division
costs and assets invested in the center, but not revenues

43. The following data are taken from the management accounting reports of Dancer Co.:
Div. A Div. B Div. C
Income from operations \$1,800,000 \$1,350,000 \$1,350,000
Total service
department charges 1,700,000 1,050,000 1,100,000

If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that _______.
Division A's manager is given the bonus
Division B's manager is given the bonus
Division C's manager is given the bonus
The managers of Divisions B and C divide the bonus

44. The following financial information was summarized from the accounting records of Block Corporation for the current year ended December 31:
Software
Division Hardware
Division Corporate
Total
Cost of goods sold \$47,200 \$30,720
Direct operating expenses 27,200 20,040
Net sales 95,000 64,000
Interest expense \$ 2,040
Income tax 4,700

The gross profit for the Software Division is _______.
\$47,800
\$20,600
\$13,240
\$33,280

45. Stevenson Corporation had \$275,000 in invested assets, sales of \$330,000, income from operations amounting to \$49,500 and a desired minimum rate of return of 7.5%. The rate of return on investment for Stevenson is _______.
8%
10%
18%
7.5%

46. Espinosa Corporation had \$220,000 in invested assets, sales of \$242,000, income from operations amounting to \$48,400, and a desired minimum rate of return of 3%. The rate of return on investment for Espinosa is _______.
4%
22%
3%
6.4%

47. In an investment center, the manager has the responsibility for and the authority to make decisions that affect _______.
the assets invested in the center, but not costs and revenues
costs and assets invested in the center, but not revenues
both costs and revenues for the department or division
not only costs and revenues, but also assets invested in the center

48. The profit margin for Division E is 28% and the investment turnover is 2.8. What is the rate of return on investment for Division E?
20%
28%
14%
78.4%

49. The condensed income statement for a business for the past year is presented as follows:
Product
F G H Total
Sales \$300,000 \$220,000 \$340,000 \$860,000
Less variable costs 180,000 190,000 220,000 590,000
Contribution margin \$120,000 \$ 30,000 \$120,000 \$270,000
Less fixed costs 50,000 50,000 40,000 140,000
Income (loss) from oper. \$ 70,000 \$ (20,000) \$ 80,000 \$130,000

Management is considering the discontinuance of the manufacture and sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Products F and H. What is the amount of change in net income for the current year that will result from the discontinuance of Product G?
\$20,000 increase
\$30,000 increase
\$20,000 decrease
\$30,000 decrease

50. A business is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for \$24 per unit. The unit cost for the business to make the part is \$36, including fixed costs, and \$28, not including fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?
\$60,000 cost decrease
\$180,000 cost increase
\$60,000 cost increase
\$180,000 cost decrease

51. Wilson Company is considering replacing equipment which originally cost \$500,000 and which has \$460,000 accumulated depreciation to date. A new machine will cost \$790,000. What is the sunk cost in this situation?
\$330,000
\$500,000
\$40,000
\$290,000

52. Dary Co. Produces a single product. Its normal selling price is \$28 per unit. The variable costs are \$18 per unit. Fixed costs are \$20,000 for a normal production run of 5,000 units per month. Dary received a request for a special order that would not interfere with normal sales. The order was for 1,500 units and a special price of \$17.50 per unit. Dary Co. has the capacity to handle the special order and, for this order, a variable selling cost of \$2 per unit would be eliminated.
If the order is accepted, what would be the impact on net income?

decrease of \$750
decrease of \$6,750
increase of \$2,250
increase of \$1,500

53. Java, Inc has bought a new server and is having to decide what to do with the old one. The cost of the old server was originally \$60,000 and has been depreciated \$45,000. The company has received two offers that it must consider. One offer was made to purchase the equipment outright for \$18,500 less a 5% sales commission. The other offer was to lease the equipment for \$7,000 for the next five years but the company will be required to provide maintenance and insurance totaling \$3,000 per year. What offer should Java, Inc. accept?
\$2,425 in favor of leasing
Reject both offers
\$11,500 in favor of selling
\$16,500 in favor of leasing

54. Security Fire Alarm is currently buying 50,000 motherboards from MotherBoard's Inc at a price of \$65 per board. It was suggested at the last manager's meeting that the company should consider making its own boards. The costs to make the part are as follows: Direct Materials \$32 per unit, Direct labor \$10 per unit, Variable Factory Overhead \$16.00, Fixed Costs for the plant would increase by \$75,000. As the financial advisor, what would you recommend?
Buy - \$75,000 more in profits
Make - \$275,000 increase in profits
Buy - \$275,000 more in profits
Make - \$350,000 increase in profits

55. Niva Co. manufactures three products: Bales; Tales; and Wales. The selling prices are: 55; 78; and 32, respectively. The variable costs for each product are: 20; 50; and 15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 7 hours to process, Tales take 4 hours, and Wales take 1 hour.
Which product has the highest contribution margin per machine hour?

Bales
Tales
Wales
Bales and Tales have the same

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