1. Since overhead costs are indirect costs, _______. (Points : 1)

1. Since overhead costs are indirect costs, _______. (Points : 1)

2. An actual cost system differs from a normal cost system in that an actual cost system ______. (Points : 1)

3. One reason annual overhead application rates are used is ______. (Points : 1)

4. When a manufacturing company has a highly automated manufacturing plant producing many different products, which of the following is the more appropriate basis of applying manufacturing overhead costs to work in process? (Points : 1)

5. In the formula y = a + bX, y represents _______. (Points : 1)

6. If the level of activity increases, _______. (Points : 1)

7. An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a _______. (Points : 1)

8. Reno Corporation uses a predetermined overhead application rate of $.30 per direct labor hour. During the year it incurred $345,000 dollars of actual overhead, but it planned to incur $360,000 of overhead. The company applied $363,000 of overhead during the year. How many direct labor hours did the company plan to incur? (Points : 1)

9. Gary Corporation has developed the following flexible budget formula for monthly overhead:
For output of less than 200,000 units: $36,600 + $.80(units)
For output of 200,000 units or more: $43,000 + $.80(units)

How much overhead should Gary expect if the firm plans to produce 200,000 units? (Points : 1)

10. Aztec Company is relocating its facilities. The company estimates that it will take three trucks to move office contents. If the per truck rental charge is $1,000 plus 25 cents per mile, what is the expected cost to move 800 miles? (Points : 1)

11. Aquatic Motor Company is exploring different prediction models that can be used to forecast indirect labor costs. One independent variable under consideration is machine hours. Following are matching observations on indirect labor costs and machine hours for the past six months:
Month Machine hours Indirect labor costs
1 300 $20,000
2 400 $24,000
3 240 $17,000
4 370 $22,000
5 200 $13,000
6 225 $14,000

In a high-low model, which months' observations would be used to compute the model's parameters? (Points : 1)

12. If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in _______. (Points : 1)

13. Under absorption costing, fixed manufacturing overhead could be found in all of the following except the _______. (Points : 1)

14. The FASB requires which of the following to be used in preparation of external financial statements? (Points : 1)

15. An ending inventory valuation on an absorption costing balance sheet would _______. (Points : 1)

16. Profit under absorption costing may differ from profit determined under variable costing. How is this difference calculated? (Points : 1)

17. The costing system that classifies costs by functional group only is _______. (Points : 1)

18. The costing system that classifies costs by both functional group and behavior is _______. (Points : 1)

19. Another name for variable costing is _______. (Points : 1)

20. If a firm uses variable costing, fixed manufacturing overhead will be included _______. (Points : 1)

Click here for the solution: 1. Since overhead costs are indirect costs, _______. (Points : 1)

Beck Company uses the indirect method of preparing the Statement of Cash Flows

Beck Company uses the indirect method of preparing the Statement of Cash Flows and reports the following comparative balance sheet information. As customary, the most recent data is in the first column.

Balance Sheets
12-31-2007 12-31-2006
Cash $60,000 $80,000
Inventory 150,000 128,000
Equipment 240,000 205,000
Accumulated depreciation (39,000) (15,000)
$411,000 $398,000

Accounts payable $93,000 $133,000
Bonds payable (due in 7 years) 81,000 70,000
Common stock 129,000 120,000
Retained earnings 108,000 75,000
$411,000 $398,000

Additional information:
Net income for 2007 was $40,000.
No equipment was disposed of during 2007.

Required:
Prepare a Cash Flow Statement using the indirect method.

Click here for the solution: Beck Company uses the indirect method of preparing the Statement of Cash Flows

Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?

13. Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?


Click here for the solution: Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?

Jael Equipment uses a flexible budget for its indirect manufacturing costs

Jael Equipment uses a flexible budget for its indirect manufacturing costs. For 20x4, the company anticipated that it would produce 18,000 units with 3,500 machine-hours and 7,200 employee days. The costs and cost drivers were to be as follows:

Fixed Variable Cost driver
Product handling $30,000 $0.40 per unit
Inspection 8,000 8.00 per 100 unit batch
Utilities 400 4.00 per 100 unit batch
Maintenance 1,000 0.20 per machine-hour
Supplies 5.00 per employee day

During the year, the company processed 20,000 units, worked 7,500 employee days, and had 4,000 machine-hours. The actual costs for 20x4 were:

Actual costs
Product handling $36,000
Inspection 9,000
Utilities 1,600
Maintenance 1,200
Supplies 37,500

Required:
a. Prepare the static budget using the overhead items above and then compute the static-budget variances.
b. Prepare the flexible budget using the overhead items above and then compute the flexible-budget variances.

Click here for the solution: Jael Equipment uses a flexible budget for its indirect manufacturing costs

George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company

ACC 421 Week 5

Problem 23-7 (P23-7) (SCF-Direct and Indirect Methods from Comparative Financial Statements) George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative statement of financial position and income statement for Winston as of May 31, 2008, are shown on the next page. The company is preparing its statement of cash flows.

AND SO ON

The following is additional information concerning Winston’s transactions during the year ended
May 31, 2008.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable account.
3. Plant assets costing $98,000 were purchased by paying $48,000 in cash and issuing 5,000 shares of stock.
4. The “other expenses” are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Winston issued 4,000 shares of common stock at par value.
7. There were no penalties assessed for the retirement of bonds.
8. Cash dividends of $105,000 were declared and paid at the end of the fiscal year.

Instructions
(a) Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities.
(b) Prepare a statement of cash flows for Winston Company for the year ended May 31, 2008, using the direct method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.)
(c) Using the indirect method, calculate only the net cash flow from operating activities for Winston Company for the year ended May 31, 2008.


Click here for the solution: George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company