Managerial Accounting - Practice 2

Student: ___________________________________________________________________________

1. Lehne Company, which has only one product, has provided the following data concerning its most recent month of operations:

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. Required: a. What is the unit product cost for the month under variable costing? b. What is the unit product cost for the month under absorption costing? c. Prepare an income statement for the month using the contribution format and the variable costing method. d. Prepare an income statement for the month using the absorption costing method. e. Reconcile the variable costing and absorption costing net operating incomes for the month.

2. The Dean Company produces and sells a single product. The following data refer to the year just completed:

Assume that direct labor is a variable cost. Required: a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches. b. Prepare an income statement for the year using absorption costing. c. Prepare an income statement for the year using variable costing. d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.

3. Spencer Company's most recent monthly contribution format income statement is given below:

The company sells its only product for $10 per unit. There were no beginning or ending inventories. Required: a. What are total sales in dollars at the break-even point? b. What are total variable expenses at the break-even point? c. What is the company's contribution margin ratio? d. If unit sales were increased by 10% and fixed expenses were reduced by $2,000, what would be the company's expected net operating income? (Prepare a new income statement.)

4. Shelhorse Corporation produces and sells a single product. Data concerning that product appear below:

Fixed expenses are $275,000 per month. The company is currently selling 4,000 units per month. Required: The marketing manager believes that a $13,000 increase in the monthly advertising budget would result in a 150 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change? Show your work!

5. The Kamienski Cleaning Brigade Company provides housecleaning services to its clients. The company uses an activity-based costing system for its overhead costs. The company has provided the following data from its activity-based costing system.

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client, the Whiddon family, requested 15 jobs during the year that required a total of 60 hours of housecleaning. For this service, the client was charged $1,170. Required: a. Using the activity-based costing system, compute the customer margin for the Whiddon family. Round off all calculations to the nearest whole cent. b. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Whiddon family. Round off all calculations to the nearest whole cent.

6. Danton Company manufactures two products, Product F and Product G. The company expects to produce and sell 600 units of Product F and 3,000 units of Product G during the current year. The company uses activity-based costing to compute unit product costs for external reports. Data relating to the company's three activity cost pools are given below for the current year:

Required: Using the activity-based costing approach, determine the overhead cost per unit for each product.

7. Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow: - Sales are budgeted at $330,000 for November, $300,000 for December, and $320,000 for January. - Collections are expected to be 85% in the month of sale, 14% in the month following the sale, and 1% uncollectible. - The cost of goods sold is 60% of sales. - The company purchases 80% of its merchandise in the month prior to the month of sale and 20% in the month of sale. Payment for merchandise is made in the month following the purchase. - Other monthly expenses to be paid in cash are $21,200. - Monthly depreciation is $21,000. - Ignore taxes.

Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December. c. Prepare Cash Budgets for November and December. d. Prepare Budgeted Income Statements for November and December. e. Prepare a Budgeted Balance Sheet for the end of December.

8. Capes Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow: - Sales are budgeted at $390,000 for November, $360,000 for December, and $340,000 for January. - Collections are expected to be 85% in the month of sale, 10% in the month following the sale, and 5% uncollectible. - The cost of goods sold is 80% of sales. - The company purchases 40% of its merchandise in the month prior to the month of sale and 60% in the month of sale. Payment for merchandise is made in the month following the purchase. - The November beginning balance in the accounts receivable account is $77,000. - The November beginning balance in the accounts payable account is $320,000. Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December.

Managerial Accounting - Practice 2 Key

1. Lehne Company, which has only one product, has provided the following data concerning its most recent month of operations:

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. Required: a. What is the unit product cost for the month under variable costing? b. What is the unit product cost for the month under absorption costing? c. Prepare an income statement for the month using the contribution format and the variable costing method. d. Prepare an income statement for the month using the absorption costing method. e. Reconcile the variable costing and absorption costing net operating incomes for the month.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement AICPA FN: Reporting Garrison - Chapter 07 #143 Learning Objective: 1 Learning Objective: 2 Learning Objective: 3 Level: Hard

2. The Dean Company produces and sells a single product. The following data refer to the year just completed:

Assume that direct labor is a variable cost. Required: a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches. b. Prepare an income statement for the year using absorption costing. c. Prepare an income statement for the year using variable costing. d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement AICPA FN: Reporting Garrison - Chapter 07 #145 Learning Objective: 1 Learning Objective: 2 Learning Objective: 3 Level: Medium

3. Spencer Company's most recent monthly contribution format income statement is given below:

The company sells its only product for $10 per unit. There were no beginning or ending inventories. Required: a. What are total sales in dollars at the break-even point? b. What are total variable expenses at the break-even point? c. What is the company's contribution margin ratio? d. If unit sales were increased by 10% and fixed expenses were reduced by $2,000, what would be the company's expected net operating income? (Prepare a new income statement.)

4. Shelhorse Corporation produces and sells a single product. Data concerning that product appear below:

Fixed expenses are $275,000 per month. The company is currently selling 4,000 units per month. Required: The marketing manager believes that a $13,000 increase in the monthly advertising budget would result in a 150 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change? Show your work!

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Garrison - Chapter 06 #178 Learning Objective: 4 Level: Easy

5. The Kamienski Cleaning Brigade Company provides housecleaning services to its clients. The company uses an activity-based costing system for its overhead costs. The company has provided the following data from its activity-based costing system.

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client, the Whiddon family, requested 15 jobs during the year that required a total of 60 hours of housecleaning. For this service, the client was charged $1,170. Required: a. Using the activity-based costing system, compute the customer margin for the Whiddon family. Round off all calculations to the nearest whole cent. b. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Whiddon family. Round off all calculations to the nearest whole cent.

6. Danton Company manufactures two products, Product F and Product G. The company expects to produce and sell 600 units of Product F and 3,000 units of Product G during the current year. The company uses activity-based costing to compute unit product costs for external reports. Data relating to the company's three activity cost pools are given below for the current year:

Required: Using the activity-based costing approach, determine the overhead cost per unit for each product.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Garrison - Chapter 08 #91 Learning Objective: 3 Learning Objective: 4 Level: Medium

7. Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow: - Sales are budgeted at $330,000 for November, $300,000 for December, and $320,000 for January. - Collections are expected to be 85% in the month of sale, 14% in the month following the sale, and 1% uncollectible. - The cost of goods sold is 60% of sales. - The company purchases 80% of its merchandise in the month prior to the month of sale and 20% in the month of sale. Payment for merchandise is made in the month following the purchase. - Other monthly expenses to be paid in cash are $21,200. - Monthly depreciation is $21,000. - Ignore taxes.

Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December. c. Prepare Cash Budgets for November and December. d. Prepare Budgeted Income Statements for November and December. e. Prepare a Budgeted Balance Sheet for the end of December.

8. Capes Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow: - Sales are budgeted at $390,000 for November, $360,000 for December, and $340,000 for January. - Collections are expected to be 85% in the month of sale, 10% in the month following the sale, and 5% uncollectible. - The cost of goods sold is 80% of sales. - The company purchases 40% of its merchandise in the month prior to the month of sale and 60% in the month of sale. Payment for merchandise is made in the month following the purchase. - The November beginning balance in the accounts receivable account is $77,000. - The November beginning balance in the accounts payable account is $320,000. Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December.

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement AICPA FN: Reporting Garrison - Chapter 09 #116 Learning Objective: 2 Learning Objective: 3 Level: Medium

Managerial Accounting - Practice 2 SummaryCategory AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement AICPA FN: Reporting Garrison - Chapter 06 Garrison - Chapter 07 Garrison - Chapter 08 Garrison - Chapter 09 Learning Objective: 1 Learning Objective: 10 Learning Objective: 2 Learning Objective: 3 Learning Objective: 4 Learning Objective: 5 Learning Objective: 8 Learning Objective: 9 Level: Easy Level: Hard Level: Medium # of Questions 8 8 4 8 2 2 2 2 2 1 4 7 4 2 1 1 1 2 5