![Image](https://www.worldsupporter.org/sites/default/files/styles/medium/public/bundle/wereldbol_summaries_joho_single_boek_1_150x190px_0.png?itok=PgQm9J5z)
Select the correct statement:
Describe the budgeting process. More specifically, which outputs are prepared during this process, and in which order are they prepared?
The management accountant of Cost-Eau inc. has estimated the following sales volumes for next year:
Sales | August | September | October | November |
Volumes | 2,500.00 | 2,350.00 | 2,050.00 | 2,750.00 |
The company typically sells each unit for a price of C53,500.00. Moreover, 80.00% of the revenues earned any given month are collected during the following month. The other 20.00% are collected in the month of the sale itself. What is the total amount of cash receipts in November?
One of the components used by SafeGuardian to make security vaults is bought from a supplier for a stable price of C1,450.50 per unit. Credit terms allow the company to pay 75.00% of its purchases the month following the purchase (the rest is paid in the month of the purchase).
Andrei, the management accountant, also estimated that the company will start the next period with C1,348,965.00 worth of this component in the inventory and consume 8,742 units during the period. In addition, the ending inventory should contain exactly 1,488 units. How many units of the component should the company purchase?
Sean Eliasoph is the management accountant of CoffeeDrop. He is currently working on the Selling, General, and Administrative (SG&A) budget for next year. Sales volumes are expected to be 5,930 bags of coffee in February 2020 and 6,430 bags in March 2020. The unit price should be C14.00 and advertising expenses should amount to C260.00 each month.
In addition to the unit production costs, each unit sold costs an additional C0.30 paid to a service provider for delivery, and an additional C0.70 of commission for the sales people. The other monthly administrative cost are the following:
Personnel expenses (i.e. wages and commissions) are typically paid the month in which they are incurred. For all the other expenses, 40.00% are paid in the month in which they are incurred, and the rest is paid one month later. What is the amount recorded in accounts payable at the end of February for SG&A expenses?
Quentin Eliasoph works as management accountant for the company All4Music which produces and sells music instruments. He communicated the following table showing the variances explaning an actual profit of C41,428.80, against C34,514.35 budgeted:
Variances | Amounts | Impact |
Volume variance | 2,654.95 | Favorable |
Selling price variance | 1,960.00 | Favorable |
Material usage variance | 1,785.00 | Unfavorable |
Material price variance | 682.50 | Favorable |
Labor usage variance | 0.00 | Favorable |
Labor price variance | 3,402.00 | Favorable |
How should you interpret the variances displayed in this table?
Fwatch buys watches from foreign suppliers and sells them on the local market. Last year, the sales people of the company budgeted a volume of 2,600 watches sold for the month of May. They also expected to sell these watches for a unit price of C66.00. The actual volume was 2,420 and the actual selling price was C70.30
The purchasers of the company bought each watch for C50.00, instead of the C46.20 initially budgeted. Finally, Selling, General and Administrative expenses (all fixed costs) amounted to C40,680.00, below the C46,580.00 recorded in the budget What is the total volume variance? \
Demeter buys bouquets of flowers from foreign suppliers and sells them on the local market. Last year, the sales people of the company budgeted a volume of 6,200 bouquets sold for the month of May. They also expected to sell these bouquets for a unit price of C129.00. The actual volume was 5,950 and the actual selling price was C127.00.
The purchasers of the company bought each bouquet for C45.50, instead of the C38.70 initially budgeted. Finally, Selling, General and Administrative expenses (all fixed costs) amounted to C481,660.00, below the C554,060.00 recorded in the budget.
What is the flexible budget variance?
Julia Solo works as management accountant for the company SolarBucks which produces and sells cups of coffee. She gathered the following information about budgeted and actual volumes, usages, and prices:
Assumtions | Budget | Actual |
Volume | 3,000.00 | 2,880.00 |
Price | 9.50 | 11.10 |
Coffe beans (gram per unit) | 52.00 | 50.50 |
Preperation (labor minute per unit) | 1.70 | 1.70 |
Coffe beans (euro per kilogram) | 44.50 | 44.00 |
Preperation (euro per hour) | 24.70 | 23.70 |
What is the material usage variance? (1 point)
Sean Clawson works as management accountant for the company Tropical Sunset which produces and sells cocktails. He gathered the following information about budgeted and actual volumes, usages, and prices
Assumtions | Budget | Actual |
Volume | 94,000.00 | 104,400.00 |
Price | 8.40 | 6.92 |
Fruits (gram per unit) | 180.00 | 234.00 |
Preperation (labor minute per unit) | 2.70 | 3.10 |
Fruits (euro per kilogram) | 10.50 | 8.00 |
Preperation (euro per hour) | 39.30 | 35.30 |
What is the labor price variance? (1 point)
When a production manager considers replacing an old equipment with a new one, what kind of cost is the book value of the old equipment, from a decision making perspective?
SafeGuardian has a contribution margin ratio of 43.00%. The Chief Marketing Officer has to decide whether the company should invest in an advertising campaign. This campaign would cost C2,062.71 and bring the total fixed cost of the company to C24,199.11. Now, this campaign would also boost revenues, which would reach C70,200.00 instead of the C64,350.00 initially planned. What would be the net economic impact of this advertising campaign?
A foreign customer recently approached George Eliasoph, the Chief Marketing Officer of SweetPic, a company producing and selling large bags of candies. This customer wants to buy 1,120 units of an improved version of ChocoPic, one of the main products of the company. ChocoPic is usually sold for C17.50 per unit and has a unit variable cost of C12.25.
The modifications requested by this potential customer would increase the unit variable cost by C1.72 and require some specific equipment, increasing the current fixed costs of C22,050.00 by an amount of C1,323.00. In addition, the customer is willing to pay a maximum price of C16.45 per bag.
Assuming that this special order would not impact normal sales and prices, what would be the net economic impact of accepting it?
All4Music produces and sells three different kinds of music instruments: violin for a unit price of C2,760.00, cello for C4,130.00, and double bass for C5,170.00. The unit variable costs of these products are respectively C1,705.16, C2,488.76, and C2,169.33. As for the consumption of resources per unit, they are given by the following table:
Resources | Violin | Cello | Double bass |
wood (in kilogram) | 11.00 | 20.50 | 27.00 |
lacquer (in centiliter) | 51.00 | 61.00 | 55.50 |
assembling (in labour hour) | 12.80 | 16.50 | 9.00 |
cutting (in machine hour) | 5.10 | 6.40 | 4.10 |
If the capacity of production is constrained by the the number of kilograms of wood, what should be the order of priority in production?
A machine purchased 3 years ago for C206,131.00 has a current book value using straight-line depreciation of C126,850.00. Its operating expenses are C900,900.00 per year.
The current market value of this old machine is estimated at C88,795.00. If it is kept 4 more years, its salvage value would be C21,142.00.
The machine which might replace this old machine would cost C221,991.00, has a useful life of 4 years, and requires C885,300.00 per year in operating expenses. It has an expected salvage value of C95,139.00 after 4 years.
What would be the total net economic impact over the next 4 years of replacing the machine? (2 points)
Problem Devyani Solo is the management accountant of VegLover, a company producing and selling smoothies. In 2018, she collected the following information:
Detailed income statement | Total amount | Per unit |
Revenues Direct material cuts Direct labor wages Selling expenses | 326,600.00 -35,500.00 -92,300.00 -35,500 | 4.60 -0.50 -1.30 -0.50 |
Contribution Margin Fixed costs of production (1) Division administrative expenses Headquarters management fee | 163,300.00 -62,054.00 -47,152.40 -14,901.60 | 2.30 -0.87 -0.66 -0.21 |
Operating income | 39,192.00 | 0.55 |
Fixed cost of production are essentially wages of production workers and rent of the productive equipment. All these contracts can be terminated.
These results were obtained for 71,000 smoothies, which is the normal and stable volume of activity. A supplier recently contacted the company with a proposition. Instead of making the smoothies, VegLover could buy them from this supplier for a unit purchasing price of C3.00. The company could then save on all the production costs and concentrate on selling the products.
What would be the net economic impact of buying smoothies instead of making them?
May-Lin Kahlan, the Chief Operating Officer (COO) of UrCall Inc., a medium-sized company producing cell phones, considers re-engineering the production process to make it more efficient. She has found a supplier able to make some of the components of one product at the same level of quality and for the same total cost. At the current volume of activity, the higher cost per unit paid by the company would thus be compensated by equal savings on fixed costs. Under which circumstances should May-Lin outsource the production of the component? (1 point)
Benedict Pfeffer is the manager in charge of the production of Padawan for Yoda Corp., a company selling light sabers. He is considering outsourcing the production of a component. Which of the following pieces of information is irrelevant for this decision? (1 point)
May-Lin Pfeffer is the Chief Executive Officer of CoffeeDrop, a company which produces and sells bags of coffee. The division in charge of producing and selling the product Arabica is currently suffering a loss displayed in the 2018 financial income statement (for a total volume of 9,200 units):
Detailed Income Statement | Total amount |
Revenues Direct material costs (variable) Direct labor wages (variable) Rent of the productive equipment (fixed) (1) | 248,400.400 -24,840.00 -69.920.00 -88,961.90 |
Gross Margin Selling expense (variable) Division administrative expense (fixed) (2) Headquarters management (fixed) (3) | 64,678.10 -29,440.00 -38,126.50 -5,141.35 |
Operating income | -8,029.75 |
What would be the net economic impact of dropping the division producing and selling the product Arabica?
Which of the following issues is likely to result from a violation of the accountability principle?
Following the principles of responsibility accounting, what kind of responsibility center would typically be evaluated based on operating income?
Account | BU of Oliver Clawson | BU of George Adams |
Revenues | 550,200.00 | 532,593.60 |
Costs of Goods Sold | -275,100.00 | -266,482.00 |
Gross Margin | 275,100.00 | 266,111.60 |
Shipping costs Sales commissions Advertising Rent of BU offices HQ management fees Administrative wages | -10,920.00 -27,720.00 -16,250.00 -48,750.00 -32,500.00 -81,250.00 | -9,609.60 -24,693.60 -13,000.00 -39,000.00 -26,000.00 -97,500.00 |
Operating incomes | 57,710.00 | 56,608.40 |
Interest expense | -18,312.00 | -7,008.00 |
Earnings before taxes | 39,398.00 | 49,600.40 |
Taxes | -7,879.60 | -9,920.08 |
Net Income | 31,518.40 | 39,680.32 |
Select the correct statement:
Andrei Gavin manages an investment center. He has total authority in operation management and can make investment decisions. However, He does not make financing decision, and his division has currently more cash than it requires for operations to run smoothly. The balance sheet of his division at the end of the previous year, 2018, is displayed in the following table:
Balance sheet: assets | Amounts (in euros) |
Cash Accounts receivable Inventory Operating fixed assets Non-operating assets | 226,584.00 201,756.00 58,050.00 219,200.00 51,730.00 |
Total assets | 757,020.00 |
What asset base would you recommend using to evaluate the operating performance of Andrei’s division?
Leia Solo manages an investment center. Accordingly, she has total authority over operation management and can make investment decisions. In addition, her division has just the amount of cash necessary for operations to run smoothly. The income statement of last year, 2018, is the following:
Finanical Income Statement | Amount (in euros) |
Revenues Cost of Goods Sold | 891,000.00 -445,500.00 |
Gross margin SC&A expenses | 445,500.00 -270,700.00 |
Operating Income Interest expense | 174,800.00 -40,236.00 |
Earnings before taxes Taxes | 134,564.004 -26,913.00 |
Net Income | 170,651.00 |
The balance sheet of her division at the end of the same year is displayed in the following table:
Knowing that the desired rate of return of the company is 15.00%, what is the residual income of Leia’s division? (1 point)
Select the incorrect statement:
Sales people explain the merits of the product to customer to convince them to buy. However, they do not negotiate prices, they do not negotiate credit terms, and they are not allowed to engage expenses. How would you evaluate the financial performance of these sales people?
In the following equations, Q is the sales volume, P is the price, COGS refers to the cost of goods sold, and SELLEXP to the Selling expenses. AR refers to Accounts Receivable, and DRR is the desired rate of return on operating assets. The indice A means “actual value” and the indice B means “budgeted value”.
Which of the following is a purpose for transfer pricing?
SafeGuardian is composed of two business units (BU) organized as profit centers. The first BU produces and sells security vaults for a unit price of C8,500.00. Its unit variable cost of production is C3,740.00 and an additional C2,805.00 of fixed cost is allocated to each unit produced to compute the unit cost of production of C6,545.00. Shipping vaults to external customers costs an additional C374.00 per unit shipped. The monthly maximum capacity of production is 14 vaults, and the monthly demand in typically 11 vaults.
The second BU would like to diversify its product portfolio and would need every month 3 custom made vaults. An external supplier could deliver them of a unit price of C5,535.20. However, the first BU could produce them for a unit variable cost of C4,114.00. Each unit would consume the same amount of capacity as a normal vault. The selling price of this new product on the market would be C8,500.00 and shipping the product to external customers would also cost C374.00. However, there would be no shipping cost for the internal transfers since the divisions are located near each other.
What is the range of acceptable transfer prices?
A
B
C
D
C
A
C
C
D
D
B
C
C
B
B
D
D
C
A
D
D
B
D
A
C
A
B
D
B
A
JoHo can really use your help! Check out the various student jobs here that match your studies, improve your competencies, strengthen your CV and contribute to a more tolerant world
Which of the following measures of activity would be the most probable cost driver for Data Processing?
Select the incorrect statement:
CoffeeDrop produces and sells bags of coffee. Its management accountant has determined that if the company produces 700 bags in a month, the average operating cost per unit (including both fixed and variable operating expenses) is C4.93 per bag. If the company produces 1,000 bags in a month, the average operating cost per unit is C4.35 per bag instead. What is the variable cost per bag?
Olivia Grey is the management accountant of Paddle, a company producing tablets. She gathered the following information about the total overhead cost over the past four periods:
Month | Machine-hours | Total overhad costs |
March February April May | 828.00 736.00 920.00 1,013.00 | 340,780.80 319,749.60 361,812.00 383,071.80 |
In addition, Olivia also decomposed the total overhead costs incurred in May between its different subcomponents:
Costs in May | Amount |
Utilities (variable) Rent of the equimpent (fixed) Indirect labor (mixed) | 81,050.13 52,998.62 249,023.05 |
Total overhead cost | 383,071.80 |
What is the amount of fixed indirect labor costs? Hint: use the high-low method
To estimate the parameters of a cost equation with only one cost driver and using the linear regression, what are the minimum requirements in terms of available information?
Yoda Corp. produces and sells light sabers. The company works in “Just-in-Time” (it does not keep inventory) and so far it has sold 440 sabers. You received from Quentin Skywalker, the accountant, the following financial income statement for the current year, 2019, at this volume of activity:
Select the correct statement:
Describe the budgeting process. More specifically, which outputs are prepared during this process, and in which order are they prepared?
The management accountant of Cost-Eau inc. has estimated the following sales volumes for next year:
Sales | August | September | October | November |
Volumes | 2,500.00 | 2,350.00 | 2,050.00 | 2,750.00 |
The company typically sells each unit for a price of C53,500.00. Moreover, 80.00% of the revenues earned any given month are collected during the following month. The other 20.00% are collected in the month of the sale itself. What is the total amount of cash receipts in November?
One of the components used by SafeGuardian to make security vaults is bought from a supplier for a stable price of C1,450.50 per unit. Credit terms allow the company to pay 75.00% of its purchases the month following the purchase (the rest is paid in the month of the purchase).
Andrei, the management accountant, also estimated that the company will start the next period with C1,348,965.00 worth of this component in the inventory and consume 8,742 units during the period. In addition, the ending inventory should contain exactly 1,488 units. How many units of the component should the company purchase?
Sean Eliasoph is the management accountant of CoffeeDrop. He is currently working on the Selling, General, and Administrative (SG&A) budget for next year. Sales volumes are expected to be 5,930 bags of coffee in February 2020 and 6,430 bags in March 2020. The unit price should be C14.00 and advertising expenses should amount to C260.00 each month.
In addition to the unit production costs, each unit sold costs an additional C0.30 paid to a service provider for delivery, and an additional C0.70 of commission for the sales people. The other monthly administrative cost are the following:
Airline company 'Fly Hamster Fly' transports both passengers and cargo. Below you find the cost categories and costs for the year 2012
1. depreciation costs | € 6.000.000 |
2. personnel costs | € 12.000.000 |
3. operating costs | See the information below and Question A |
The depreciation and personnel costs are fixed costs. The operating costs consist of fixed costs and variable costs. They concern various costs like costs involved in taking care of the flights, daily airplane maintenance costs, fly over and landing rights, and fuel usage. Fly Hamster Fly has given the following overview (years 2003-2011) of the operating costs. These costs are partly related to the company's turnover (revenues).
year | turnover level | total of operating costs |
2003 | € 18.000.000 | € 10.800.000 |
2004 | € 15.000.000 | € 7.300.000 |
2005 | € 20.000.000 | € 11.000.000 |
2006 | € 25.000.000 | € 12.400.000 |
2007 | € 22.500.000 | € 10.600.000 |
2008 | € 17.000.000 | € 9.300.000 |
2009 | € 35.000.000 | € 14.500.000 |
2010 | € 30.000.000 | € 14.900.000 |
2011 | € 27.500.000 | € 12.900.000 |
At a turnover of € 40.000.000, the maximum loadfactor (100%) of the planes is reached.
The above costs and turnover levels concern the transfer of both passengers and cargo. The total fixed operating costs and variable operating costs can be estimated using the high-low method
Calculate the 'variable operating costs' and 'fixed operating costs', using the high-low method. The variable operating costs have to be expressed as a percentage of the turnover.
State an advantage of using the high-low method. State a disadvantage of using the high-low method.
It is important for Fly Hamster Fly to know at.....read more
The Trouser Factory started its operations on January 1, 2012. The company is still small but has high expectations regarding its sales growth. Currently there is one tailor’s workshop. None of the tailors has a permanent employment contract, all work on a “stand-by basis”, in other words their working hours are flexible. The Trouser Factory manufactures design jeans that are sold to upscale shops. After a few weeks of operations the Trouser Factory assesses that the demand for designer jeans is high in the segment of young people (age 10 – 20 years) and not in the segment of young adults (age 20 – 30 years) and middle aged people (age 30 – 40 years) as originally expected.
The recently hired controller of the Trouser Factory has the task to prepare a budget for the first quarter of the calendar year 2012. The general manager has passed the following information on to the controller:
Budget information for the period January – March 2012
Budget first quarter 2012 | January | February | March |
Sales volume (number of jeans ) | 120 | 240 | 240 |
Sales price per unit (in €) | 95 | 95 | 95 |
Average quantity of jeans fabric per unit (in meter) | 1.20 | 1.20 | 1.20 |
Purchase price of jeans fabric (in € per meter) | 15 | 16 | 16 |
Total labor cost of tailors (in €) | 4,104 | 7,344 | 7,128 |
Labor cost tailors per hour (in €) | 18 | 18 | 18 |
Fixed overhead costs (in €) | 2,000 | 2,100 | 2,150 |
During the budget preparation process the controller made several assumptions. All sales will be made on account; thereof 30 percent will be collected in the month in which the product has been sold and the remainder will be collected in the month following the sale.
The Trouser Factory pays all.....read more
There are several ways to navigate the large amount of summaries, study notes en practice exams on JoHo WorldSupporter.
Do you want to share your summaries with JoHo WorldSupporter and its visitors?
Field of study
Add new contribution