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aEx. 151 Cutting Edge Corp. produces sporting equipment. In 2012, the first year of operations, Cutting Edge produced 25,000 units and sold 22,000 units. In 2013, the production and sales results were exactly reversed. In each year, selling price was $100, variable manufacturing costs were $40 per unit, variable selling expenses.
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137.Which one of the following budgets would be prepared for a manufacturer but not for a merchandiser? a.Direct labor budget b.Cash budget c.Sales budget d.Budgeted income statement               138.The formula for determining budgeted merchandise purchases is budgeted a.production + desired ending inventory – beginning inventory. b.sales + beginning inventory – desired ending inventory. c.cost of goods sold +.
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Ex. 138 Seaver Corporation manufactures mountain bikes. It has fixed costs of $4,620,000. Seaver’s sales mix and contribution margin per unit is shown as follows: Sales MixContribution Margin Green20%$120 Brown50%$  60 Blue30%$  40 Instructions Compute the number of each type of bike that the company would need to sell in order to break even under this product.
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              47.It is important that budgets be accepted by a.division managers. b.department heads. c.supervisors. d.all of these.               48.Which of the following statements about budget acceptance in an organization is true? a.The most widely accepted budget by the organization is the one prepared by top management. b.The most widely accepted budget by the organization is the one.
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127.Correy Inc. reported the following information for 2012: OctoberNovemberDecember Budgeted sales$230,000$220,000$270,000 Budgeted purchases$120,000$128,000$144,000 All sales are on credit. Customer amounts on account are collected 50% in the month of sale and 50% in the following month. Cost of goods sold is 35% of sales. Correy purchases and pays for merchandise 60% in the month of.
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BRIEF Exercises BE  126 Archer Industries sells three different sets of sportswear. Sleek sells for $30 and has variable costs of $18; Smooth sells for $50 and has variable costs of $30; Potent sells for $80 and has variable costs of $45. The sales mix of the three sets is: Sleek, 50%;.
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              67.Which of the following is not an operating budget? a.Direct labor budget b.Sales budget c.Production budget d.Cash budget               68.Which of the following is not a financial budget? a.Capital expenditure budget b.Cash budget c.Manufacturing overhead budget d.Budgeted balance sheet               69.Which of the following is done to improve the reliability of the sales forecast? a.Employ financial planning models b.Lengthen the planning.
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              81.Cost structure a.refers to the relative proportion of fixed versus variable costs that a company incurs. b.generally has little impact on profitability. c.cannot be significantly changed by companies. d.refers to the relative proportion of operating versus nonoperating costs that a company incurs.               82.Outsourcing production will a.reduce fixed costs and increase variable costs. b.reduce variable costs.
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Ex. 146 An investment banker is analyzing two companies that specialize in the production and sale of gourmet cappuccino and chai mixes. Roasted Beans Co. uses a labor-intensive approach and Monat Industries uses a mechanized system. Variable costing income statements for the two companies are shown below:  Roasted Beans         Monat Industries Sales$1,000,000$1,000,000 Variable costs     650,000    .
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TRUE-FALSE STATEMENTS               1.Budgets are statements of management's plans stated in financial terms.               2.A benefit of budgeting is that it provides definite objectives for evaluating performance.               3.A budget can be a means of communicating a company's objectives to external parties.               4.A budget can be used as a basis for evaluating performance.              .
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Ex. 172 Garver Industries has budgeted the following unit sales:    2012   Units January10,000 February8,000 March9,000 April11,000 May15,000 The finished goods units on hand on December 31, 2011, was 2,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of $4 per pound. It is the company's policy to maintain a.
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              91.A company with a higher contribution margin ratio is a.more sensitive to changes in sales revenue. b.less sensitive to changes in sales revenue. c.either more or less sensitive to changes in sales revenue, depending on other factors. d.likely to have a lower breakeven point.               92.The degree of operating leverage a.does not provide a.
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              61.In a sales mix situation, at any level of units sold, net income will be higher if a.more higher contribution margin units are sold than lower contribution margin units. b.more lower contribution margin units are sold than higher contribution margin units. c.more fixed expenses are incurred. d.weighted-average unit contribution margin decreases.               62.Ramirez Corporation.
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              21.A manufacturing overhead budget is not needed if the company develops a predeter-mined overhead rate to apply overhead.               22.The manufacturing overhead budget generally has separate sections for variable, mixed, and fixed costs.               23.A production budget should be prepared before the sales budget.               24.The direct materials budget contains both quantity.
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117.The projection of financial position at the end of the budget period is found on the a.budgeted income statement. b.cash budget. c.budgeted balance sheet. d.sales budget.               118.What is the proper preparation sequencing of the following budgets? 1.Budgeted Balance Sheet 2.Sales Budget 3.Selling and Administrative Budget 4.Budgeted Income Statement a.1, 2, 3, 4 b.2, 3, 1, 4 c.2, 3, 4, 1 d.2, 4,.
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BRIEF EXERCISES BE 159 Wynn, Inc. manufactures beanies. The budgeted units to be produced and sold are below: Expected ProductionExpected Sales August3,5002,900 September2,8003,900 It takes 24 yards of yarn to produce a beanie. The company's policy is to maintain yarn at the end of each month equal to 5% of next month's production needs and to.
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Ex. 173 Benet Company has budgeted the following unit sales:         2012                   2012           Quarter  UnitsQuarter  Units  170,000160,000 240,000 350,000 480,000 The finished goods inventory on hand on December 31, 2011 was 14,000 units. It is the company's policy to maintain a finished goods inventory at the end of each quarter equal to 20% of the next quarter's anticipated sales. Instructions Prepare a.
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              97.Comma Manufacturing budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels are planned for the fiscal year of July 1, 2011 to June 30, 2012: June 30, 2012June 30, 2011 Raw Materials3,000 kilos2,000 kilos Three kilos of raw materials are needed to produce each unit.
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              87.Which one of the following is not needed in preparing a production budget? a.Budgeted unit sales b.Budgeted raw materials c.Beginning finished goods units d.Ending finished goods units               88.A company budgeted unit sales of 136,000 units for January, 2012 and 160,000 units for February, 2012. The company has a policy of having an inventory.
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41.Hinge Manufacturing’s cost of goods sold is $420,000 variable and $240,000 fixed. The company’s selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company’s sales is $1,680,000, what is its net income? a.$360,000 b.$960,000 c.$1,020,000 d.$1,080,000               42.Woolford’s CVP income statement included sales of 3,000 units, a selling price of $50, variable.
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Ex. 141 Hewitt Co. has 4,000 machine hours available to produce either Product 22 or Product 44. The cost accounting department developed the following unit information for each product: Product 22Product 44 Sales price$20$40 Direct materials68 Direct labor32 Variable manufacturing overhead45 Fixed manufacturing overhead35 Machine time required15 minutes60 minutes Instructions Management wants to know which product to produce in order.
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SHORT-ANSWER ESSAY QUESTIONS S-A E  166 A CVP income statement is frequently prepared for internal use by management. Describe the features of the CVP income statement that make it more useful for management decision-making than the traditional income statement that is prepared for external users. S-A E  167 Nancy Sound, president of Crosley Corp.,.
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              57.The budget committee would not normally include the a.research director. b.treasurer. c.sales manager. d.external auditor.               58.The budget committee in a company is often headed by the a.president. b.controller. c.treasurer. d.budget director.               59.Long-range planning a.generally presents more detailed information than an annual budget. b.generally encompasses a longer period of time than an annual budget. c.is usually more accurate than an annual.
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aEx. 137 Qwik Service has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change-related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 30% of its sales and provides a 60% contribution.
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BE 164 Plack Company budgeted the following information for 2012: MayJuneJuly Budgeted purchases$104,000$110,000$102,000 Cost of goods sold is 40% of sales. Accounts payable is used only for inventory acquisitions. Plack purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month. Selling and administrative expenses are budgeted at $40,000.
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a101.Which cost is charged to the product under variable costing? a.Variable manufacturing overhead b.Fixed manufacturing overhead c.Variable administrative expenses d.Fixed administrative expenses               a102.Variable costing a.is used for external reporting purposes. b.is required under GAAP. c.treats fixed manufacturing overhead as a period cost. d.is also known as full costing. Use the following information for questions 103–107. Sprinkle Co. sells its product.
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aEx. 148 Nimble Corp. manufactures and sells a variety of camping products. Recently the company opened a new plant to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operations are shown below: Manufacturing Costs Fixed Overhead$120,000 Variable overhead$3 per unit Direct labor$12 per unit Direct material$30 per unit Beginning inventory0.
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Exercises Ex. 136 Kindle, Inc. manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 15% of sales. The income statement for the year ending December 31, 2012, is as follow. KINDLE, INC. Income Statement Year Ending December 31, 2012 Sales$130,000 Cost of goods sold Variable$58,500, Fixed    14,350,    72,850 Gross margin57,150 Selling.
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              77.The production budget shows expected unit sales are 50,000. The required production units are 52,000. What are the beginning and desired ending finished goods units, respectively? Beginning UnitsEnding Units a.5,0003,000 b.3,0005,000 c.2,0005,000 d.5,0002,000               78.The production budget shows that expected unit sales are 48,000. The total required units are 54,000. What are the required production.
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147.The primary benefits of budgeting include all of the following except it a.requires only top management to plan ahead and formalize their future goals. b.provides definite objectives for evaluating performance. c.creates an early warning system for potential problems. d.motivates personnel throughout the organization. 148.The responsibility for expressing management's budgeting goals in financial terms is performed.
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Ex. 170 Pitt Corp. makes and sells a single product, widgets. Three pounds of sand are needed to make one widget. Budgeted production of widgets for the next few months follows: September25,000 units October31,000 units The company wants to maintain monthly ending inventories of sand equal to 20% of the following month's production needs..
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EXERCISES Ex. 169 Delta Manufacturing has budgeted the following unit sales: 2011  Units April25,000 May50,000 June75,000 July45,000 Of the units budgeted, 40% are sold by the Coastal Division at an average price of $15 per unit and the remainder are sold by the Central Division at an average price of $12 per unit. Instructions Prepare separate sales budgets for each.
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a111.The one primary difference between variable and absorption costing is that under a.variable costing, companies charge the fixed manufacturing overhead as an expense in the current period. b.absorption costing, companies charge the fixed manufacturing overhead as an expense in the current period. c.variable costing, companies charge the variable manufacturing overhead as an expense.
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              11.The longer the budget period, the more reliable the estimates of future outcomes.               12.The budget committee has the responsibility for coordinating the preparation of the budget.               13.The budget is developed within the framework of a sales forecast.               14.Budgeting and long-range planning are two terms that describe the same process.              .
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              71.A shift from low-margin sales to high-margin sales a.may increase net income, even though there is a decline in total units sold. b.will always increase net income. c.will always decrease net income. d.will always decrease units sold.               72.A shift from high-margin sales to low-margin sales a.may decrease net income, even though there is an.
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MULTIPLE CHOICE QUESTIONS               37.Why are budgets useful in the planning process? a.They provide management with information about the company's past performance. b.They help communicate goals and provide a basis for evaluation. c.They guarantee the company will be profitable if it meets its objectives. d.They enable the budget committee to earn their paycheck.               38.A budget a.is.
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COMPLETION STATEMENTS               154.The ______________ income statement classifies cost as variable or fixed and computes a contribution margin.               155._________________ tells a company how far sales can drop before it will be operating at a loss.               156.___________________ is the relative percentage in which a company sells its multiple products.               157.When more than.
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              11.The break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio.               12.When a company has limited resources, management must decide which products to make and sell in order to maximize net income.               13.When a company has limited resources to manufacture products, it should manufacture those.
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              a21.Variable costing is the approach used for external reporting under generally accepted accounting principles.               a22.The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead.               a23.Selling and administrative costs are period costs under both absorption and variable costing.               a24.Manufacturing cost per unit will be higher.
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              51.The required sales in units to achieve a target net income is a.(sales + target net income) divided by contribution margin per unit. b.(sales + target net income) divided by contribution margin ratio. c.(fixed cost + target net income) divided by contribution margin per unit. d.(fixed cost + target net income) divided by.
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              31.The budget itself and the administration of the budget are entirely accounting responsibilities.               32.Financial planning models and statistical and mathematical techniques may be used in forecasting sales.               33.The direct materials budget is derived from the direct materials units required for production plus desired ending direct materials units less beginning.
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Ex. 145 The following CVP income statements are available for Chantal Corp. and Mantle, Inc. Chantal Corp.Mantle, Inc. Sales revenue$700,000$700,000 Variable costs  350,000  210,000 Contribution margin350,000490,000 Fixed costs  150,000  290,000 Net income$200,000$200,000 Instructions (a)Compute the degree of operating leverage for each company. (b)Assume that sales revenue decreases by 20%. Prepare a CVP income statement for each company.       .
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aEx. 150 On-Road Wheels, Inc. manufactures a basic road bicycle. Production and sales data for the most recent year are as follows (no beginning inventory): Variable production costs$95 per bike Fixed production costs$500,000 Variable selling and administrative costs$22 per bike Fixed selling and administrative costs$520,000 Selling price$200 per bike Production20,000 bikes Sales16,000 bikes Instructions (a)Prepare a brief income statement using.
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Ex. 143 Oscar Corporation produces and sells three products. Unit data concerning each product is shown below.         Product            X      Y      Z    Selling price$200$300$250 Direct labor costs307545 Other variable costs11090121 Ex  143(cont.) The company has 2,000 hours of labor available to build inventory in anticipation of the company's peak season. Management is trying to decide.
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MULTIPLE CHOICE QUESTIONS               31.Cost-volume-profit analysis is the study of the effects of a.changes in costs and volume on a company’s profit. b.cost, volume, and profit on the cash budget. c.cost, volume, and profit on various ratios. d.changes in costs and volume on a company’s profitability ratios.               32.The CVP income statement classifies costs a.as variable or.
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Ex. 140 Blue Chance Co. sells computers and video game systems. The business is divided into two divisions along product lines. Variable costing income statements for the current year are presented below: ComputersVG Systems  Total   Sales$700,000$300,000$1,000,000 Variable costs  420,000  210,000     630,000 Contribution margin$280,000$  90,000370,000 Fixed costs     259,000 Net income$   111,000 Ex  140(cont.) Instructions (a)Determine the sales mix and contribution margin ratio.
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BE  130 Marina Manufacturing is considering buying new equipment for its factory. The new equipment will reduce variable labor costs but increase depreciation expense. Contribution margin is expected to increase from $250,000 to $325,000. Net income is expected to remain the same at $100,000. Instructions Compute the degree of operating leverage before and.
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