practical exam
123. Tilson Company has projected sales and production in units for the second quarter of the
coming year as follows:
Cash-related production costs are budgeted at $7 per unit produced. Of these production costs,
40% are paid in the month in which they are incurred and the balance in the following month.
Selling and administrative expenses will amount to $110,000 per month. The accounts payable
balance on March 31 totals $193,000, which will be paid in April.
All units are sold on account for $16 each. Cash collections from sales are budgeted at 60% in the
month of sale, 30% in the month following the month of sale, and the remaining 10% in the
second month following the month of sale. Accounts receivable on April 1 totalled $520,000
($100,000 from February's sales and the remainder from March).
Required:
a) Prepare a schedule for each month showing budgeted cash disbursements for Tilson Company.
b) Prepare a schedule for each month showing budgeted cash receipts for Tilson Company.
Payments relating to the prior month (March) in April represent the balance of accounts payable at
March 31.
191. (Appendix 10B) Vernon Mills, Inc. is a large producer of men's and women's clothing. The
company uses standard costs for all of its products. The standard costs and actual costs per unit of
product for a recent period are given below for one of the company's product lines:
During this period, the company produced 4,800 units of this product. A comparison of standard
and actual costs for the period on a total cost basis is given below:
There was no inventory of materials on hand at the beginning of the period. During the period,
21,120 metres of materials were purchased, all of which were used in production.
Required:
a) (Appendix 10B) For direct materials, compute the price and quantity variances for the period
and prepare journal entries to record all activity relating to direct materials for the period.
b) (Appendix 10B) For direct labour, compute the rate and efficiency variances and prepare a
journal entry to record the incurrence of direct labour cost for the period.
c) For variable overhead, compute the spending and efficiency variances.
a) Materials Price Variance:
(b) Labour Rate Variance:
(c) Variable Overhead Spending Variance:
Standard Hours of Input, at the Standard Rate:
186. The Winter Products Division of American Sports Corporation produces and
markets two products for use in the snow: Sleds and Saucers. The following data were
gathered on activities last month:
Required:
a. Prepare a segmented income statement in the contribution format for last month,
showing both "Amount" and "Percent" columns for the division as a whole and for
each product.
b. Why might it be very difficult to calculate separate break-even sales for each
product?
c. Refer to the original data and, if necessary, the results of the segmented income
statement prepared in part (a) above. Calculate the total break-even sales (in both
units AND dollars) for last month, assuming that none of the fixed production costs
and fixed selling expenses is traceable. Allocate the total break-even sales between
the two products.
d. Again, refer to the original data and, if necessary, the results of the segmented
income statement prepared in part (a) above. Calculate the total break-even sales (in
both units AND dollars) for last month, assuming that the "allocated" amounts of the
division's administrative expenses are fixed and actually traceable. Allocate the total
break-even sales between the two products.
e. How reasonable are the total break-even sales numbers calculated in parts (c) and
(d) given the actual results for last month?
a.
b. All fixed expenses have to be traceable to the two products in order to calculate
separate break-even sales for each product. However, the total administrative
expenses of the division are not traceable to the two products. This is the main
difficulty. The expenses are rather common as indicated in the segmented income
statement.
c.
d. This is the standard case where break-even sales can be calculated separately for
each product because there are no common or joint costs.
e. The total break-even sales numbers are reasonable in both cases because they are
less the reported total actual sales volume. In other words, the company reported
positive profits when actual sales exceeded the break-even sales.
189. Financial data for Bingham Company for last year appear below:
The "Investment in Carr Company" on the statement of financial position represents
an investment in the stock of another company.
Required:
a) Compute the company's margin, turnover, and return on investment for last year.
b) The Board of Directors of Beaker Company have set a minimum required return of
15%. What was the company's residual income last year?
a) Operating assets do not include investments in other companies or in undeveloped
land.
7. Falstaff Company's quality cost report is to be based on the following data:
Required:
Prepare a quality cost report in good form with separate sections for prevention costs,
appraisal costs, internal failure costs, and external failure costs.