ACCOUNTING QUESTIONS
ACCOUNTING QUESTIONS
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- Anheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year (in millions of dollars):
Net sales | $39,758 |
Cost of goods sold | $16,447 |
Selling, general and administration | 10,578 |
$27,025 | |
Income from operations | $12,733* |
*Before special items |
In addition, assume that Anheuser-Busch InBev sold 320 million barrels of beer during the year. Assume that Costs that vary in total dollar amount as the level of activity changes.variable costs were 70% of the cost of goods sold and 40% of selling, general, and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that Anheuser-Busch InBev expects pricing, variable costs per barrel, and Costs that tend to remain the same in amount, regardless of variations in the level of activity.fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $400 million.
When computing the cost per unit amounts for the break-even formula, round to two decimal places. If required, round your final answer to the nearest whole barrel.
- Compute the break-even number of barrels for the current year.
barrels - Compute the anticipated break-even number of barrels for the following year.
barrels
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2.The Junior League of Yadkinville, California, collected recipes from members and published a cookbook entitled Food for Everyone. The book will sell for $18 per copy. The chairwoman of the cookbook development committee estimated that the club needed to sell 2,000 books to break even on its $4,000 investment.
What is the Costs that vary in total dollar amount as the level of activity changes.variable cost per unit assumed in the Junior League’s analysis?
$ per unit
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3.Rollins and Cohen, CPAs, offer three types of services to clients: auditing, tax, and small business accounting. Based on experience and projected growth, the following billable hours have been estimated for the year ending December 31, 2016:
Billable Hours | |||
Audit Department: | |||
Staff | 22,400 | ||
Partners | 7,900 | ||
Tax Department: | |||
Staff | 13,200 | ||
Partners | 5,500 | ||
Small Business Accounting Department: | |||
Staff | 3,000 | ||
Partners | 600 |
The average billing rate for staff is $150 per hour, and the average billing rate for partners is $320 per hour.
Prepare a professional fees earned budget for Rollins and Cohen, CPAs, for the year ending December 31, 2016.
Rollins and Cohen, CPAs | |||
Professional Fees Earned Budget | |||
For the Year Ending December 31, 2016 | |||
Billable Hours | Hourly Rate | Total Revenue | |
Audit Department: | |||
Staff | $ | $ | |
Partners | |||
Total | $ | ||
Tax Department: | |||
Staff | $ | $ | |
Partners | |||
Total | $ | ||
Small Business Accounting Department: | |||
Staff | $ | $ | |
Partners | |||
Total | $ | ||
Total professional fees earned | $ |
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4.Anticipated sales for Safety Grip Company were 42,000 passenger car tires and 19,000 truck tires. Rubber and steel belts are used in producing passenger car and truck tires as follows:
Passenger Car | Truck | |
Rubber | 35 lbs. per unit | 78 lbs. per unit |
Steel belts | 5 lbs. per unit | 8 lbs. per unit |
The purchase prices of rubber and steel are $1.20 and $0.80 per pound, respectively. The desired ending inventories of rubber and steel belts are 40,000 and 10,000 pounds, respectively. The estimated beginning inventories for rubber and steel belts are 46,000 and 8,000 pounds, respectively.
- Prepare a direct materials purchases budget for Safety Grip Company for the year ended December 31, 2016. When required, enter unit prices to the nearest cent.
Safety Grip Company | |||
Direct Materials Purchases Budget | |||
For the Year Ending December 31, 2016 | |||
Rubber | Steel Belts | Total | |
Pounds required for production: | |||
Passenger tires | lbs. | lbs. | |
Truck tires | |||
o Less desired inventory, December 1, 2016 o Less desired inventory, December 31, 2016 o Plus desired inventory, December 1, 2016 o Plus desired inventory, December 31, 2016 o Plus estimated inventory, December 1, 2016 o Plus estimated inventory, December 31, 2016 |
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Total | lbs. | lbs. | |
o Less desired inventory, January 1, 2016 o Less desired inventory, January 31, 2016 o Less estimated inventory, January 1, 2016 o Less estimated inventory, January 31, 2016 o Plus estimated inventory, January 1, 2016 o Plus estimated inventory, January 31, 2016 |
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Total units purchased | lbs. | lbs. | |
Unit price | x $ | x $ | |
Total direct materials to be purchased | $ | $ | $ |
- Ambassador Suites Inc. operates a downtown hotel property that has 300 rooms. On average, 80% of Ambassador Suites’s rooms are occupied on weekdays, and 40% are occupied during the weekend. The manager has asked you to develop a direct labor budget for the housekeeping and restaurant staff for weekdays and weekends. You have determined that the housekeeping staff requires 30 minutes to clean each occupied room. The housekeeping staff is paid $14 per hour. The housekeeping labor cost is fully variable to the number of occupied rooms. The restaurant has six full-time staff (eight-hour day) on duty, regardless of occupancy. However, for every 60 occupied rooms, an additional person is brought in to work in the restaurant for the eight-hour day. The restaurant staff is paid $12 per hour.
- Determine the estimated housekeeping, restaurant, and total direct labor cost for an average weekday and average weekend day. Enter percentages as whole numbers.
Ambassador Suites Inc. | ||
Direct Labor Cost Budget | ||
For a Weekday or a Weekend Day | ||
Weekday | Weekend Day | |
Room occupancy | ||
Room capacity | ||
Occupied percent | x% | x% |
Rooms occupied | ||
Housekeeping | ||
Number of minutes to clean a room | x | x |
Total minutes | ||
Total hours | ||
Labor rate per hour | x $ | x $ |
Housekeeping daily labor budget | $ | $ |
Restaurant staff | ||
Base restaurant staff | ||
Incremental 60 room blocks | + | + |
Total staff | ||
Hours per day | x | x |
Total hours | ||
Labor rate per hour | x $ | x $ |
Restaurant staff daily labor budget | $ | $ |
Total daily labor budget | $ | $ |
6.Levi Strauss & Co. manufactures slacks and jeans under a variety of brand names, such as Dockers® and 501 Jeans®. Slacks and jeans are assembled by a variety of different sewing operations. Assume that the One of the major elements of the income statement budget that indicates the quantity of estimated sales and the expected unit selling price.sales budget for Dockers and 501 Jeans shows estimated sales of 23,600 and 53,100 pairs, respectively, for May 2016. The finished goods inventory is assumed as follows:
Dockers | 501 Jeans | |||
May 1 estimated inventory | 670 | 1,660 | ||
May 31 desired inventory | 420 | 1,860 |
Assume the following direct labor data per 10 pairs of Dockers and 501 Jeans for four different sewing operations:
Direct Labor per 10 Pairs | ||||
Dockers | 501 Jeans | |||
Inseam | 18 | minutes | 9 | minutes |
Outerseam | 20 | 14 | ||
Pockets | 6 | 9 | ||
Zipper | 12 | 6 | ||
Total | 56 | minutes | 38 | minutes |
- Prepare a production budget for May.
Levi Strauss and Co. | ||
Production Budget | ||
May 2016 (assumed data) | ||
Dockers | 501 Jeans | |
Expected units to be sold | ||
o Less May 1 desired inventory o Less May 31 desired inventory o Plus May 1 desired inventory o Plus May 31 desired inventory o Plus May 1 estimated inventory o Plus May 31 estimated inventory |
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Total units | ||
o Less May 1 desired inventory o Less May 31 desired inventory o Less May 1 estimated inventory o Less May 31 estimated inventory o Plus May 1 estimated inventory o Plus May 31 estimated inventory |
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Total units to be produced |
- Prepare the May direct labor cost budget for the four sewing operations, assuming a $13 wage per hour for the inseam and outerseam sewing operations and a $15 wage per hour for the pocket and zipper sewing operations.
Levi Strauss and Co. | |||||
Direct Labor Cost Budget | |||||
May 2016 (assumed data) | |||||
Inseam | Outerseam | Pockets | Zipper | Total | |
Dockers | |||||
501 Jeans | |||||
Total minutes | |||||
Total direct labor hours | |||||
Direct labor rate | x $ | x $ | x $ | x $ | |
Total direct labor cost | $ | $ | $ | $ | $ |
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7.Horizon Financial Inc. was organized on February 28, 2016. Projected selling and administrative expenses for each of the first three months of operations are as follows:
March | $52,400 |
April | 64,200 |
May | 68,900 |
Depreciation, insurance, and property taxes represent $9,000 of the estimated monthly expenses. The annual insurance premium was paid on February 28, and property taxes for the year will be paid in June. Seventy percent of the remainder of the expenses are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month.
Prepare a schedule indicating cash payments for selling and administrative expenses for March, April, and May. Enter all amounts as positive numbers.
Horizon Financial Inc. | |||
Schedule of Cash Payments for Selling and Administrative Expenses | |||
For the Three Months Ending May 31, 2016 | |||
March | April | May | |
March expenses: | |||
Paid in March | $ | ||
Paid in April | $ | ||
April expenses: | |||
Paid in April | |||
Paid in May | $ | ||
May expenses: | |||
Paid in May | |||
Total cash payments | $ | $ | $ |
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January | February | March | ||||
Salaries | $56,900 | $ 68,100 | $ 72,200 | |||
Utilities | 2,400 | 2,600 | 2,500 | |||
Other operating expenses | 32,300 | 41,500 | 44,700 | |||
Total | $91,600 | $112,200 | $119,400 |
7.EastGate Physical Therapy Inc. is planning its cash payments for operations for the first quarter (January–March), 2017. The Accrued Expenses Payable balance on January 1 is $15,000. The An accounting device used to plan and control resources of operational departments and divisions.budgeted expenses for the next three months are as follows:
Other operating expenses include $3,000 of monthly depreciation expense and $500 of monthly insurance expense that was prepaid for the year on May 1 of the previous year. Of the remaining expenses, 70% are paid in the month in which they are incurred, with the remainder paid in the following month. The Accrued Expenses Payable balance on January 1 relates to the expenses incurred in December.
Prepare a schedule of cash payments for operations for January, February, and March.
EastGate Physical Therapy Inc. | |||
Schedule of Cash Payments for Operations | |||
For the Three Months Ending March 31, 2017 | |||
January | February | March | |
Payments of prior month’s expense | $ | $ | $ |
Payments of current month’s expense | |||
Total payment | $ | $ | $ |
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8.Raphael Frame Company prepared the following sales budget for 2016:
Raphael Frame Company Sales Budget For the Year Ending December 31, 2016 |
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Product and Area | Unit Sales Volume |
Unit Selling Price |
Total Sales | ||||
8″ × 10″ Frame: | |||||||
East | 8,500 | $16 | $136,000 | ||||
Central | 6,200 | 16 | 99,200 | ||||
West | 12,600 | 16 | 201,600 | ||||
Total | 27,300 | $436,800 | |||||
12″ × 16″ Frame: | |||||||
East | 3,800 | $30 | $114,000 | ||||
Central | 3,000 | 30 | 90,000 | ||||
West | 5,400 | 30 | 162,000 | ||||
Total | 12,200 | $366,000 | |||||
Total revenue from sales | $802,800 | ||||||
At the end of December 2016, the following unit sales data were reported for the year:
Unit Sales | ||||
8″ × 10″ Frame | 12″ × 16″ Frame | |||
East | 8,755 | 3,686 | ||
Central | 6,510 | 3,090 | ||
West | 12,348 | 5,616 |
For the year ending December 31, 2017, unit sales are expected to follow the patterns established during the year ending December 31, 2016. The unit selling price for the 8″ × 10″ frame is expected to increase to $17 and the unit selling price for the 12″ × 16″ frame is expected to increase to $32, effective January 1, 2017.
Required:
- Compute the increase or decrease of actual unit sales for the year ended December 31, 2016, over An accounting device used to plan and control resources of operational departments and divisions.budget.
Unit Sales, Year Ended 2016 |
Increase (Decrease) Actual Over Budget |
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Budget | Actual Sales | Difference | Percent | ||
8″ × 10″ Frame: | |||||
East | % | ||||
Central | % | ||||
West | % | ||||
12″ × 16″ Frame: | |||||
East | % | ||||
Central | % | ||||
West | % |
- Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 2017, compute the unit sales volume to be used for preparing the sales budget for the year ending December 31, 2017. Round budgeted units to the nearest whole unit.
2016 Actual Units |
Percentage Increase (Decrease) |
2017 Budgeted Units (rounded) |
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8″ × 10″ Frame: | ||||
East | % | |||
Central | % | |||
West | % | |||
12″ × 16″ Frame: | ||||
East | % | |||
Central | % | |||
West | % |
- Prepare a sales budget for the year ending December 31, 2017.
Raphael Frame Company | |||
Sales Budget | |||
For the Year Ending December 31, 2017 | |||
Product and Area | Unit Sales Volume | Unit Selling Price | Total Sales |
8″ × 10″ Frame: | |||
East | $ | $ | |
Central | |||
West | |||
Total | $ | ||
12″ × 16″ Frame: | |||
East | $ | $ | |
Central | |||
West | |||
Total | $ | ||
Total revenue from sales | $ |
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9.The An accounting device used to plan and control resources of operational departments and divisions.budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July 2016 is summarized as follows:
- Estimated sales for July by sales territory:
Maine: | |
Backyard Chef | 310 units at $700 per unit |
Master Chef | 150 units at $1,200 per unit |
Vermont: | |
Backyard Chef | 240 units at $750 per unit |
Master Chef | 110 units at $1,300 per unit |
New Hampshire: | |
Backyard Chef | 360 units at $750 per unit |
Master Chef | 180 units at $1,400 per unit |
- Estimated inventories at July 1:
Direct materials: | |
Grates | 290 units |
Stainless steel | 1,500 lbs. |
Burner subassemblies | 170 units |
Shelves | 340 units |
Finished products: | |
Backyard Chef | 30 units |
Master Chef | 32 units |
- Desired inventories at July 31:
Direct materials: | |
Grates | 340 units |
Stainless steel | 1,800 lbs. |
Burner subassemblies | 155 units |
Shelves | 315 units |
Finished products: | |
Backyard Chef | 40 units |
Master Chef | 22 units |
- Direct materials used in production:
In manufacture of Backyard Chef: | |
Grates | 3 units per unit of product |
Stainless steel | 24 lbs. per unit of product |
Burner subassemblies | 2 units per unit of product |
Shelves | 4 units per unit of product |
In manufacture of Master Chef: | |
Grates | 6 units per unit of product |
Stainless steel | 42 lbs. per unit of product |
Burner subassemblies | 4 units per unit of product |
Shelves | 5 units per unit of product |
- Anticipated purchase price for direct materials:
Grates | $15 per unit |
Stainless steel | $6 per lb. |
Burner subassemblies | 110 per unit |
Shelves | $10 per unit |
- Direct labor requirements:
Backyard Chef: | |
Stamping Department | 0.50 hr. at $17 per hr. |
Forming Department | 0.60 hr. at $15 per hr. |
Assembly Department | 1.0 hr. at $14 per hr. |
Master Chef: | |
Stamping Department | 0.60 hr. at $17 per hr. |
Forming Department | 0.80 hr. at $15 per hr. |
Assembly Department | 1.50 hrs. at $14 per hr. |
Required:
- Prepare a One of the major elements of the income statement budget that indicates the quantity of estimated sales and the expected unit selling price.sales budget for July.
Gourmet Grill Company Sales Budget For the Month Ending July 31, 2016 |
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Product and Area | Unit Sales Volume |
Unit Selling Price |
Total Sales | |
Backyard Chef: | ||||
Maine | ||||
Vermont | ||||
New Hampshire | ||||
Total | ||||
Master Chef: | ||||
Maine | ||||
Vermont | ||||
New Hampshire | ||||
Total | ||||
Total revenue from sales |
- Prepare a A budget of estimated unit production.production budget for July.
Gourmet Grill Company Production Budget For the Month Ending July 31, 2016 |
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Units | ||
Backyard Chef | Master Chef | |
Expected units to be sold | ||
Plus desired inventory, July 31, 2016 | ||
Total | ||
Less estimated inventory, July 1, 2016 | ||
Total units to be produced |
- Prepare a A budget that uses the production budget as a starting point to budget materials purchases.direct materials purchases budget for July.
Gourmet Grill Company Direct Materials Purchases Budget For the Month Ending July 31, 2016 |
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Grates (units) |
Stainless Steel (lbs.) |
Burner Sub- assemblies (units) |
Shelves (units) |
Total | ||
Required units for production: | ||||||
Backyard Chef | ||||||
Master Chef | ||||||
Plus desired inventory, July 31, 2016 | ||||||
Total | ||||||
Less estimated inventory, July 1, 2016 | ||||||
Total units to be purchased | ||||||
Unit price | ||||||
Total direct materials to be purchased |
- Prepare a Budget that estimates direct labor hours and related costs needed to support budgeted production.direct labor cost budget for July.
Gourmet Grill Company Direct Labor Cost Budget For the Month Ending July 31, 2016 |
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Stamping Department |
Forming Department | Assembly Department | Total | |||||
Hours required for production: | ||||||||
Backyard Chef | ||||||||
Master Chef | ||||||||
Total | ||||||||
Hourly rate | ||||||||
Total direct labor cost |