Question

1. Bookworm Publishers publishes books, and they have gathered the following data for the month of October:

	Data
Cash on 10/1	$7,900
Expected Cash Collections	$350,000
Direct Materials Cash Disbursements	$68,000
Direct Labor Cash Disbursements	$45,000
MOH Cash Disbursements	$41,500
Operating Expenses Cash Disbursements	$93,000
Capital Expenditures Cash Disbursements	$132,000

Bookworm Publishers requires an ending cash balance of at least $5,000 and can borrow from a line of credit in $1,000 increments. How much cash is available for October?

	A. $357,900
	B. $350,000
	C. $5,000
	D. $277,400

2.Dandy's Fun Park is evaluating the purchase of a new game to be located on its Midway. Dandy's has narrowed their choices down to two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about the two choices follows.

	Wacky Water Race	Whack-A-Mole
Investment	$28,000	$15,000
Useful life	8	8
Estimated annual net cash inflows for 8 years	$10,000	$5,000
Residual value	$4,000	$5,000
Depreciation method	straight-line	straight-line
Required rate of return	10%	12%

What is the net present value of the Whack-A-Mole game?

Present Value of $1

Periods	4%	6%	8%	10%	12%
1	0.962	0.943	0.926	0.909	0.893
2	0.925	0.890	0.857	0.826	0.797
3	0.889	0.840	0.794	0.751	0.712
4	0.855	0.792	0.735	0.683	0.636
5	0.822	0.747	0.681	0.621	0.567
6	0.790	0.705	0.630	0.564	0.507
7	0.760	0.665	0.583	0.513	0.452
8	0.731	0.627	0.540	0.467	0.404

Present Value of Annuity of $1

Periods	4%	6%	8%	10%	12%
1	0.962	0.943	0.926	0.909	0.893
2	1.886	1.833	1.783	1.736	1.690
3	2.775	2.673	2.577	2.487	2.402
4	3.630	3.465	3.312	3.170	3.037
5	4.452	4.212	3.993	3.791	3.605
6	5.242	4.917	4.623	4.355	4.111
7	6.002	5.582	5.206	4.868	4.564
8	6.733	6.210	5.747	5.335	4.968

	A. ($11,860)
	B. $25,350
	C. ($25,350)
	D. $11,860 3. Everyone Deserves to Smile mobile dentist office budgeted for 4,355 patient visits a year. Everyone Deserves to Smile actually saw 4,500 patients during the year, and they have provided the following data: Fixed Portion for Budget Variable Portion per Patient Visit for Budget Actual Results Revenue $71 $410,800 Personnel Expenses $70,000 $68,000 Medical Supplies $10 $38,400 Occupancy Expenses $9,000 $1.50 $19,000 Admin Expenses $18,000 $0.75 $19,850 Based on the given information, what is the flexible budget variance for revenue? A. $91,300 Favorable B. $91,300 Unfavorable C. $10,295 Favorable D. $10,295 Unfavorable 4. Stockholders' expectations of company profits are affected by which of the following? A. Historical company earnings B. Industry risk C. General economic conditions D. All of the above 5. Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $48,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $21,000,000 for the golfing season. About 410,000 golfers are expected each year. Variable costs are about $15 per golfer. The Mountaintop golf course is a price-taker and won't be able to charge more than its competitors who charge $102 per golfer. What profit will it earn in terms of dollars? A. $(21,000,000) B. $14,670,000 C. $(14,670,000) D. $26,970,000 6. The finance function at Morningstar Farms may be classified as a(n) A. profit center. B. revenue center. C. cost center. D. investment center. 7. Which of the following is/are relevant when deciding whether to drive or fly home for semester break? A. Wear and tear on your vehicle. B. Cost of the gasoline. C. Cost of plane ticket. D. All of these costs are relevant. 8. Lasso Corporation manufactures a variety of appliances which all use Part B89. Currently, Lasso manufactures Part B89 itself. It has been producing 10,000 units of Part B89 annually. The annual costs of producing Part B89 at the level of 10,000 units include the following: Direct materials $3.00 Direct labor $8.10 Variable manufacturing overhead $4.20 Fixed manufacturing overhead $3.20 Total cost $18.50 All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assume Lasso can purchase 10,000 units of the part from the Nadal Parts Company for $20.20 each, and the facilities currently used to make the part could be used to manufacture 10,000 units of another product that would have a $10 per unit contribution margin. If no additional fixed costs would be incurred, what should Lasso do? A. Make the new product and buy the part to earn an extra $8.30 per unit contribution to profit. B. Continue to make the part to earn an extra $6.80 per unit contribution to profit. C. Make the new product and buy the part to earn an extra $5.10 per unit contribution to profit. D. Continue to make the part to earn an extra $8.10 per unit contribution to profit. 9. A rolling budget is a budget that A. is executed by upper management. B. extends 5-10 years into the future. C. begins with zero for each expense and then adds amounts in. D. is continuously updated, so the next 12 months of operations are always budgeted. 10. Which of the following is not included in the operating budget? A. Budgeted income statement B. Direct labor budget C. Budgeted balance sheet D. Sales budget 11. Panther Tire Corporation manufactures automobile tires. Panther Tire Corporation reported the following budgeted (standard) and actual information last quarter data: Standard direct labor hours per tire 0.25 Standard rate per direct labor hour $17.00 Actual direct labor hours 3,100 Actual total direct labor cost $65,000 Actual number of tires produced 5,000 What is the direct labor efficiency variance for last quarter? A. $12,300 favorable B. $31,450 favorable C. $12,300 unfavorable D. $31,450 unfavorable 12. The ________ budget is a component in a financial budget. A. budgeted cash budget B. sales C. production D. budgeted balance sheet

Answer 1

1. A. $ 357,900.

Cash available = Beginning balance + Expected Cash Collecions = $ 7,900 + $ 350,000 = $ 357,900.

2. D. $ 11,860.

Net present value of Whack-A-Mole game = $ 5,000 x 4.968 + $ 5,000 x 0.404 - $ 15,000 = $11,860.

3. A. $ 91,300 Favorable.

Flexible budget variance = $ 410,800 - $ 71 x 4,500 = $ 91,300 Favorable.

4. D. All of the above.

5. B. $ 14,670,000.

Profit = Total Contribution Margin - Fixed Costs = 410,000 x $ ( 102 - 15) - $ 21,000,000 = $ 14,670,000.

6. D. Investment Center.

7. D. All of these costs are relevant.

9. D. Is continuously updated....

10. C. Budgeted balance sheet.

11. D. $ 31,450 Unfavorable.

Direct labor efficiency variance = ( Standard hours allowed for actual output - Actual hours used ) x Standard labor rate per hour = ( 5,000 x 0.25 - 3,100) x $ 17 = $ 31,450 Unfavorable.

12. Budgeted balance sheet.