Accounting 9 Problems Exam 2015 Solution

1.
Data concerning Goulbourne Corporation's single product appear below:

Per Unit Percent of Sales
Selling price----------------------------------- $210 100%
Variable expenses----------------------------- 126 60%
--------------------------------
Contribution margin---------------------------- $84 40%

Fixed expenses are $444,000 per month. The company is currently selling 7,000 units per month.

Required:

Management is considering using a new component that would increase the unit variable cost by $2. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 200 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? Show your work!

(Points : 30)

Question 2. 2.

Butremovic Corporation's contribution format income statement for the most recent month follows:

Sales-------------------------$121,000
Variable expenses---------- 60,500
------------
Contribution margin-------- 60,500
Fixed expenses------------- 43,700
------------
Net operating income------ $16,800

Required:

a. Compute the degree of operating leverage to two decimal places.
b. Using the degree of operating leverage, estimate the percentage change in net operating income that should result from an 8% increase in sales.

(Points : 30)

Question 3. 3.Plotz Corporation's net cash provided by operating activities was $59,000; its net income was $67,000; its income taxes were $29,000; its capital expenditures were $44,000; and its cash dividends were $13,000.

Required:

Determine the company's free cash flow. (Points : 30)

Question 4. 4.

Kawalek Corporation's balance sheet appears below:

Comparative Balance Sheet
Ending Beginning
Balance Balance
Assets:
Cash and cash equivalents-------------------------- $ 35 $ 36
Accounts receivable--------------------------------- 62 53
Inventory------------------------------------------ 64 65

Property, plant, and equipment-------------------- 722 600
Less accumulated depreciation------------------- 303 287
---------------------------------
Total assets------------------------------------ $580 $467

Liabilities and stockholders' equity:
Accounts payable---------------------------------- $56 $47
Accrued Liabilities---------------------------------- 22 23
Income Taxes Payable ------------------------------ 46 42
Bonds payable---------------------------------------- 289 300
Common stock-------------------------------------- 53 50
Retained Earnings------------------------------------ 114 5
---------------------------
Total liabilities and stockholders' equity $580 $467

The net income for the year was $151. Cash dividends were $42. The company did not dispose of any property, plant, and equipment, issue any bonds payable, or repurchase any of its own common stock during the year.

Required:

Prepare a statement of cash flows in good form using the indirect method.

(Points : 30)

Question 5. 5.

In July, one of the processing departments at Wrightsel Corporation had beginning work in process inventory of $22,000 and ending work in process inventory of $16,000. During the month, $225,000 of costs were added to production and the cost of units transferred out from the department was $231,000.

Required:

Construct a cost reconciliation report for the department for the month of July.

(Points : 30)

Question 6. 6.Job 599 was recently completed. The following data have been recorded on its job cost sheet:

Direct Materials-------------- $40,610
Direct Labor Hours----------- 1,147 labor hours
Direct Labor Hours Wage--- $11.00 per labor hour
Number of units completed 3,100

The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $20 per direct labor-hour.

Required:

Compute the unit product cost that would appear on the job cost sheet for this job.

(Points : 30)

Question 7. 7.

The management of Paye Corporation expects sales in April to be $130,000. The company's contribution margin ratio is 65% and its fixed monthly expenses are $54,000.

Required:

Estimate the company's net operating income for April, assuming that the fixed monthly expenses do not change. Show your work!

(Points : 30)

Question 8. 8.

Torri Inc. produces and sells two products. During the most recent month, Product C34M's sales were $25,000 and its variable expenses were $5,750. Product Y03Z's sales were $40,000 and its variable expenses were $9,850. The company's fixed expenses were $48,310.

Required:

a. Determine the overall break-even point for the company. Show your work!
b. If the sales mix shifts toward Product C34M with no change in total sales, what will happen to the break-even point for the company? Explain.

(Points : 30)

Question 9. 9.

Mossor Corporation has two major business segments-Retail and Wholesale. In December, the Retail business segment had sales revenues of $510,000, variable expenses of $296,000, and traceable fixed expenses of $61,000. During the same month, the Wholesale business segment had sales revenues of $510,000, variable expenses of $240,000, and traceable fixed expenses of $82,000. Common fixed expenses totaled $191,000 and were allocated as follows: $113,000 to the Retail business segment and $78,000 to the Wholesale business segment.

Required:

Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.

(Points : 30)