Accounting for Managers 1st Canadian Edition by Paul Collier, Sandy Kizan & Schumann SOLUTIONS

Accounting for Managers, 1st Canadian Edition 1e Paul Collier Sandy Kizan Eckhard Schumann (Answer Key For Self-Test Questions, All Chapters, 100% Original Verified, A+ Grade) Chapter 1 Answer Key for Self-Test Questions

S1.1 d S1.2 c S1.3 e S1.4 b S1.5 e S1.6 c S1.7 c S1.8 c S1.9 b

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Chapter 2 Answer Key for Self-Test Questions

S2.1 a S2.2 b S2.3 b S2.4 d S2.5 d S2.6 a

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Chapter 3 Answer Key for Self-Test Questions

S3.1 c S3.2 d S3.3 d S3.4 c S3.5 a

• cash = $15,000 + $25,000 = $40,000 • profit = $50,000 – $35,000 = $15,000

S3.6 b

• profit = $150,000 – $80,000 – $30,000 – $12,000 – $8,000 = $20,000 • cash = $100,000 – $90,000 + $150,000 – $30,000 – $12,000 – $8,000 = $100,000.

• equity = $100,000

S3.7 c

assets = liabilities + equity $600,000 = $500,000 + equity Thus, equity = $100,000

S3.8 c S3.9 d S3.10 b

• profit = $100,000 – $35,000 – $15,000 – $4,000 – $8,000 = $38,000 • cash = $100,000 – $35,000 – $15,000 – $4,000 – $8,000 + $25,000 – $30,000 = $33,000 • shareholders’ equity = share capital + retained earnings (which equals profit in first year of business) = $25,000 + $38,000 = $63,000

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S3.11 b

Recall that shareholders’ equity = share capital + retained earnings Using the basic accounting equation: assets = liabilities + shareholders’ equity assets = liabilities + (share capital + retained earnings) $240,000 = $125,000 + (share capital + ($80,000 – $35,000)) share capital = $70,000 Thus, total capital (equity) = $70,000 + $45,000 = $115,000

S3.12 c

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Chapter 4 Answer Key for Self-Test Questions

S4.1 b S4.2 d S4.3 d S4.4 d S4.5 b S4.6 d S4.7 d

assets = liabilities + shareholders’ equity working capital + fixed assets = liabilities + shareholders’ equity $150,000 + $750,000 = $300,000 + shareholders’ equity shareholders’ equity = $600,000

S4.8 b

Advertising cost = $240,000 ÷ 12 months = $20,000 per month ($120,000 paid January 1 + $120,000 paid July 1) At March 31, advertising expense = $20,000 × 3 months = $60,000; prepayment is $120,000 paid January 1 – $60,000 expensed = $60,000 prepayment

S4.9 b

Annual depreciation expense = $180,000 ÷ 4 years = $45,000 Value of computer system on December 31 statement of financial position = $180,000 cost – ($45,000 × 1 year) = $135,000

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S4.10 a

Change in cash = $185,000 operating income + $65,000 depreciation expense – $40,000 income taxation – $100,000 new capital investment – $65,000 repayment of borrowings = $45,000

S4.11 d

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Chapter 5 Answer Key for Self-Test Questions

S5.1 d

• dividend payout ratio = dividends paid / profit after taxes = (1,000,000 × $0.25) / $350,000 = $71.4% • earnings per share (EPS) = profit after taxes / number of shares = $350,000 / 1,000,000 = $0.35 • price/earnings (P/E) ratio = market value per share / earnings per share = $5.00 / $0.35 = 14.3

S5.2 b S5.3 c S5.4 a S5.5 d S5.6 b S5.7 d

• dividend yield = dividends per share / market value per share = (($1,750,000 × 60%) ÷ 2,000,000) / $2.50 = 21%

S5.8 d S5.9 a S5.10 c S5.11 d S5.12 d

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Chapter 6 Answer Key for Self-Test Questions

S6.1 e S6.2 a S6.3 e S6.4 a S6.5 a S6.6 c S6.7 a S6.8 c S6.9 a S6.10 b S6.11 c S6.12 b

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Chapter 7 Answer Key for Self-Test Questions

S7.1 c

• opening inventory $25,000 + purchases – closing inventory $30,000 = cost of goods sold $35,000

S7.2 b S7.3 d S7.4 b

• cost of goods sold = opening inventory $150,000 + purchases $650,000 – closing inventory $200,000 = $600,000 • gross profit = sales $1,100,000 – cost of goods sold $600,000 = $500,000 • operating profit = gross profit $500,000 – G&A expense $275,000 = $225,000

S7.5 b S7.6 d S7.7 b

inventory LCNRV = lower of cost ($1,500) and NRV ($1,350, which is selling price less costs to complete less selling costs) = $1,350

S7.8 a

• cost of goods available for sale = (6,000 × $2) + (3,000 × $2.20) + (2,000 × $2.30) = $23,200 • weighted average cost = $23,200 / 11,000 units = $2.10909 per unit • units in ending inventory = (6,000 + 3,000 + 2,000) – 8,000 = 3,000 units

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• cost of goods sold = 8,000 units × $2.10909 = $16,873 • ending inventory = 3,000 units × $2.10909 = $6,327 S7.9 a

• units in ending inventory = (6,000 + 3,000 + 2,000) – 8,000 = 3,000 units • FIFO cost of goods sold = (6,000 × $2) + (2,000 × $2.20) = $16,400 • FIFO ending inventory = (1,000 × $2.20) + (2,000 × $2.30) = $6,800

S7.10 b Equivalent Units Units complete and transferred out EWIP Total EU Costs BWIP Costs added Total costs Divided by EU Rate per EU Assignment of Costs Units completed and trans out Ending WIP Total

Total

DM

Conversion

65,000 15,000

65,000 15,000 80,000

65,000 4,500 69,500

$87,000 $277,150 $364,150

$62,000 $192,000 $254,000 80,000 $3.175

$25,000 $85,150 $110,150 69,500 $1.585

$309,400 $54,757 $364,157

$206,375* $47,625*

$103,025* $7,132*

*$3.175 x 65,000 = $206,375; $1.585 x 65,000 = $103,025; $3.175 x 15,000 = $47,625; $1.585 x 4,500 = $7,132 S7.11 d

• total expected profit = $4,000,000 – ($850,000 + $2,650,000) = $500,000 • percentage completed this year = construction costs incurred this year ÷ total expected construction costs = $850,000 / ($850,000 + $2,650,000) = 24.2857% • profit recognized in current year = total expected profit × percentage completed this year = $500,000 × 24.2857% = $121,428

S7.12 a

EOQ = square root ((2DO) / C) = square root ((2 × 12,000 × $50) / $0.02) = 7,746

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S7.13 c

EOQ = square root ((2DO) / C) = square root ((2 × (36×250) × $4,000) / $6,000) = 110

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Chapter 8 Answer Key for Self-Test Questions

S8.1 a

• variable costs (November) = ($10,000 ÷ 5,000 units) = $2/unit • variable costs (December) = 10,000 units × $2/unit = $20,000 • fixed costs (December) = fixed costs (November) = $30,000 • mixed costs (December) = total costs $75,000 – variable costs $20,000 – fixed costs $30,000 = $25,000

S8.2 a

• variable cost per unit = change in total costs / change in activity = ($345,000 – $185,000) / (15,000 – 7,000) = $20 per unit

S8.3 c

direct materials (40 × $2.50) + direct labour [(7 × $12) + (4 × $7)] + variable production overhead [(7 + 4) × $5] = direct materials $100 + direct labour $112 + variable production overhead $55 = $267 variable cost per unit produced

S8.4 c

total production cost for one unit = variable production cost per unit + fixed production cost per unit = variable $267 (from S8.3) + fixed $80 [= $1,000,000 / 12,500 units] = $347 total production cost per unit

S8.5 c

• average cost at 10,000 document activity level = [(10,000 × $7) + $100,000] / 10,000 = $17 per document

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• average cost at 20,000 document activity level = [(20,000 × $7) + $100,000] / 20,000 = $12 per document • change in average cost between the activity levels is $5 ($17 – $12) S8.6 a

• revenue = regular sales (240,000 × $5) + special order sales [60,000 × ($5×(1–40%))] = regular $1,200,000 + $180,000 = $1,380,000 • operating profit = $1,380,000 – $750,000 – $450,000 = $180,000

S8.7 b

Solve the equation (SP = selling price per unit): • (20,000 × (SP – $8 variable cost)) – $100,000 fixed costs = $40,000 profit • 20,000 SP – $160,000 – $100,000 = $40,000 • SP = $15 per unit

S8.8 a

• sales (in units) for profit of $0 (break-even) = (fixed costs + target profit) / unit contribution margin • break-even sales in units = ($66,000 + $0) / ($30 – $10) = 6,600 units

S8.9 d

Solve the equation (SP = selling price per unit): • (10,000 × SP) – variable cost (10,000 × $35) – $450,000 fixed cost = $0 profit • 10,000 SP – $350,000 – $450,000 = $0 • SP = $80 per unit

S8.10 c

• sales (in units) for profit of $10,000 = (fixed costs + target profit) / unit contribution margin • sales in units = (($1,000 × 12) + $10,000) / ($75 – $30) = 489 units

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S8.11 a

• sales (in units) for profit of $5,000 = (fixed costs + target profit) / unit contribution margin • sales in units = ($7,000 + $5,000) / ($20 – $8 – $5) = 1,714 units

S8.12 b

revenue – required return = target cost • (18,000 × $18) – ($200,000 × 12%) = target cost • target cost = $180,000 – $24,000 = $156,000 • thus, target cost per unit = $156,000 / 18,000 = $8.67 • target mark-up per unit = $10 cost – $8.67 target cost = $1.33

S8.13 a

minimum acceptable selling price on a special order with excess capacity = variable costs = direct materials $5 + direct labour $2.50 + variable overhead $2 = $9.50

S8.14 d

prospective selling price = costs + mark-up = ($13,400 + $15,000 + $5,000 + $8,000) × 1.15 = $47,610

S8.15 b

minimum transfer price = incremental costs + opportunity costs = $2.50 + $0 (no opportunity costs since excess capacity) = $2.50

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Chapter 9 Answer Key for Self-Test Questions

S9.1 b

Calculate contribution margin per constrained resource (machine hours): • Product R = ($12 – $4) / 4 mh = $2 per mh • Product S = ($20 – $11) / 3 mh = $3 per mh ** highest ** • Product T = ($25 – $15) / 5 mh = $2 per mh • Product U = ($8 – $4) / 1.5 mh = $2.67 per mh

S9.2 a

Calculate contribution margin per constrained resource (hours): • Client A = ($5,000 – $2,000) / 15 hours = $200 per hour • Client B = ($7,500 – $3,500) / 25 hours = $160 per hour • Cilent C = ($10,000 – $6,000) / 30 hours = $133 per hour • Client D = ($3,000 – $1,000) / 5 hours = $400 per hour • Client E = ($3,500 – $1,000) / 10 hours= $250 per hour ranking highest to lowest: D, E, A, B, C

S9.3 d S9.4 b

cost of unused capacity = $250,000 – (85,000/100,000 × $250,000) = $37,500

S9.5 b

• relevant cost to make = (10,000 × $18) + $30,000 = $210,000 • relevant cost to buy = (10,000 × $22) = $220,000 • net cost of purchasing the component is $10,000 cost

S9.6 a

• relevant cost to make = (50,000 × ($12 + $15 + $15)) = $2,100,000

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• relevant cost to buy = (50,000 × $45) – $200,000 = $2,050,000 • net cost/benefit of purchasing the computer screens is $50,000 benefit S9.7 c

• relevant cost to retain old equipment = $0 • relevant cost to buy new equipment = – $500,000 + $45,000 + (500×($2,000–$500)) = $295,000 • net cost/benefit of purchasing the new equipment is $295,000 benefit

S9.8 d

• relevant cost to retain old truck = – (5 × $10,000) = – $50,000 • relevant cost to buy new truck = – $60,000 + $15,000 – (5 × $5,000) = – $70,000 • net cost/benefit of purchasing the new truck is $20,000 benefit

S9.9 d S9.10 b S9.11 c S9.12 a

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Chapter 10 Answer Key for Self-Test Questions

S10.1 c

• total employment compensation cost = salary $40,000 + CPP ($40,000×4.95%) + EI ($40,000×2.52%) = $42,988 • actual productive days at work = 230 work days × 75% = 172.5 days • daily cost rate to the company = $42,988 ÷ 172.5 days = $249

S10.2 a

• total employment compensation cost = salary $50,000 + CPP ($50,000×4.95%) + EI ($50,000×2.52%) = $53,735 • actual productive days at work = (52 weeks × 5 days/week) – (4 weeks × 5 days/week) – 10 days = 230 work days × 25/40 = 143.75 days • daily cost rate to the company = $53,735 ÷ 143.75 days = $249 per day • hourly cost rate to the company = $373.81/day ÷ 8 hours/day = $46.72 per hour

S10.3 c

• variable cost per unit = change in total costs / change in activity = ($850,000 – $750,000) / (1,200,000 – 1,000,000) = $0.50 per unit

S10.4 b

• variable cost per unit = change in total costs / change in activity = ($850,000 – $750,000) / (1,200,000 – 1,000,000) = $0.50 per unit • fixed cost = total cost – variable cost = $850,000 – (1,200,000 × $0.50) = $250,000

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S10.5 a

• employee cost $2,500 ($100 × 5 employees × 5 days), but this is NOT relevant as it would be paid anyway • supervision time required = 10% × (5 employees × 5 days) = 2.5 days • supervision cost = 2.5 days × $300 overtime rate per day = $750

S10.6 b

cost of unused capacity = $100,000 – (23,000/25,000 × $100,000) = $8,000

S10.7 b

• relevant cost to make (avoidable costs) = materials $120 + variable overhead $30 = $150 {note that the company wants to retain its skilled labour force and thus would not be able to avoid their labour cost regardless of whether they were working or not} • relevant cost to buy = $140 • net cost/benefit of purchasing the component is $10 benefit

S10.8 d

the unavoidable cost for each delivery is the allocated administrative support cost of $5

S10.9 a

total cost to provide auditing services = partners $62,500 (250/800 × $200,000) + juniors $252,000 (2,800/5,000 × $450,000) = $314,500

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Chapter 11 Answer Key for Self-Test Questions

S11.1 a

prime costs = total direct costs = direct materials $700,000 + direct labour $220,000 = $920,000

S11.2 a

• product cost = manufacturing costs = direct materials $12 + indirect materials $6 + direct labour $24 + indirect labour $8 + other variable overhead costs $10 + fixed production overhead $12 = $72 • conversion costs = production costs, other than direct materials, used to make a product or provide a service = indirect materials $6 + direct labour $24 + indirect labour $8 + other variable overhead costs $10 + fixed production overhead $12 = $60

S11.3 a

overhead rate for Division 2 = $500,000 × 30% / 2,000 hours = $75 per hour

S11.4 d

• product cost = direct materials $300 + direct labour $150 + machining overhead $60 (10 × $120,000/20,000) + assembly overhead $56 (7 × $80,000/10,000) + finishing overhead $9 (3 hours × $30,000/10,000) = $575

S11.5 c

• cost per unit of GH1 = direct materials $150 + direct labour $75 + company-wide overhead $641.25 [27 × ($150,000+$200,000+$125,000)/20,000] = $866.25

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S11.6 c

• activity cost driver rate (activity 1) = $20,000 / 500 = $40 • activity cost driver rate (activity 2) = $37,000 / 1,000 = $37 • activity cost driver rate (activity 3) = $91,200 / 3,800 = $24 • total overhead cost allocated to Product A = Activity 1 overhead $4,000 (100×$40) + Activity 1 overhead $29,600 (800×$37) + Activity 1 overhead $19,200 (800×$24) = $52,800 • overhead cost per unit for Product A under activity-based costing = $52,800 / 8,000 units = $6.60

S11.7 a

• Product L = $120,000 × (80/240) / 20,000 units = $2 per unit • Product M = $120,000 × (160/240) / 20,000 units = $4 per unit

S11.8 a

the unavoidable cost for each delivery is the allocated administrative support cost of $5

S11.9 d

total cost to provide auditing services = partners $62,500 (250/800 × $200,000) + juniors $252,000 (2,800/5,000 × $450,000) = $314,500

S11.10

b • cost per batch under absorption costing = direct materials $20 + direct labour $10 + variable manufacturing overhead $5 + fixed manufacturing overhead $70 ($350,000 / (5,000,000 produced / 1,000 per batch)) = $105

S11.11

c • cost per batch under variable costing = direct materials $20 + direct labour $10 + variable manufacturing overhead $5 = $35

S11.12

a

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• cost per unit under absorption costing = direct materials $20 + direct labour $25 + variable manufacturing overhead $18 + fixed manufacturing overhead $35 ($665,000 / 19, 000 produced) = $98 • operating profit = sales $2,300,000 – cost of goods sold $1,803,200 (18,400 × $98) – S&A costs $124,000 = $372,800

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Chapter 12 Answer Key for Self-Test Questions

S12.1 c

($25,000) initial investment + $22,460

years 1-3 net cash inflow ($10,000 × 2.246

{PVA(n=3,i=16%)}) = ($2,540) S12.2 a

net present value

• discount factor = initial investment / annual cash flow = $25,000 / $10,000 = 2.5 • looking up in the present value of an annuity tables, {PVA(n=3,i=9%)} = 2.531 and {PVA(n=3,i=10%)} = 2.487, thus the IRR is between 9% and 10% • more specifically IRR = low rate + [(L – A) / (L – H)] = 9% + [(2.531–2.5) / (2.531–2.487)] = 9% + 0.705% = 9.7%

S12.3 c

S12.4 b

($2,000) initial investment +$

893

year 1 net cash inflow ($1,000 × 0.893 {PV(n=1,i=12%)})

+$

638

year 2 net cash inflow ($800 × 0.797 {PV(n=2,i=12%)})

+$

498

year 3 net cash inflow ($700 × 0.712 {PV(n=3,i=12%)})

=$

29

net present value

• Project A payback period = 2 years + 0.5 years ($50/$100) = 2.5 years • Project B payback period = 3 years

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• Project C payback period = 2 years S12.5 d

average ARR = (total profits / number of years) / (initial investment / 2) average ARR = (($40+$100+$210+$260+$160–$350 depreciation) / 5 years) / ($350 / 2) average ARR = $84 / $175 = 48%

S12.6 d

S12.7 a

($850,000) initial investment + $121,550

year 1 net cash inflow ($130,000 × 0.935 {PV(n=1,i=7%)})

+ $174,600

year 2 net cash inflow ($200,000 × 0.873 {PV(n=2,i=7%)})

+ $244,800

year 3 net cash inflow ($300,000 × 0.816 {PV(n=3,i=7%)})

+ $152,600

year 4 net cash inflow ($200,000 × 0.763 {PV(n=4,i=7%)})

+ $106,950

year 5 net cash inflow ($150,000 × 0.713 {PV(n=5,i=7%)})

= ($49,500)

net present value

cash value added (or profitability index) for each project is: • Project A — NPV / initial investment = $450,000 / $350,000 = 1.29 • Project B — NPV / initial investment = $400,000 / $350,000 = 1.14 • Project C — NPV / initial investment = $375,000 / $350,000 = 1.07

S12.8 d

($250,000) initial investment of new machine now + $ 60,000

salvage value of old machine now

+ $190,200

years 1-4 net cash inflow ($60,000 × 3.170

{PVA(n=4,i=10%)}) =$ S12.9 b

P

200

net present value, thus “yes” invest

initial investment now

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+ $108,150

years 1-5 net cash inflow ($30,000 × 3.605

{PVA(n=5,i=12%)}) =$ 0

net present value, thus “yes” invest

The maximum that the company should spend on the sewing machine is the amount that makes NPV = $0, that is $108,150.

S12.10

a Trial and error approach at discount rate of 8%: ($90,000) initial investment of now + $ 7,350

salvage value at end of 4 years ($10,000×0.735

{PV(n=4,i=8%)}) + $82,800

years 1-4 net cash inflow ($25,000 × 3.312 {PVA(n=4,i=8%)})

=$

net present value, thus IRR must be greater than 8%

150

Trial and error approach at discount rate of 9%: ($90,000) initial investment of now + $ 7,080

salvage value at end of 4 years ($10,000×0.708

{PV(n=4,i=9%)}) + $81,000

years 1-4 net cash inflow ($25,000 × 3.240 {PVA(n=4,i=9%)})

= ($ 1,920) net present value, thus IRR must be less than 9%

IRR must be between 8% and 9% S12.11

c

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• discount factor = initial investment / annual cash flow = $320,900 / $50,000 = 6.42 • looking up in the present value of an annuity tables, {PVA(n=10,i=8%)} = 6.710 and {PVA(n=10,i=9%)} = 6.418, thus the IRR is approximately 9% S12.12

c Net present value of Machine A: ($200,000) initial investment + $205,550

annual net cash inflows ($50,000 × 4.111

{PVA(n=6,i=12%)}) =$

5,550

net present value

Net present value of Machine B: ($250,000) initial investment + $234,325

annual net cash inflows ($65,000 × 3.605

{PVA(n=5,i=12%)}) = ($ 15,675)

net present value, thus do not invest since NPV < 0

Net present value of Machine C: ($310,000) initial investment + $288,400

annual net cash inflows ($80,000 × 3.605

{PVA(n=5,i=12%)}) = ($ 21,600)

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net present value, thus do not invest since NPV < 0

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Chapter 13 Answer Key for Self-Test Questions

S13.1 b

• ROI = operating profit / total assets = $25,000 / $400,000 = 6.25% • Residual income = operating profit before tax – capital charge = $25,000 – ($400,000 × 5%) = $5,000

S13.2 b

• controllable profit to the division = sales $2,100,000 – variable cost of sales $1,300,000 – controllable divisional overhead $360,000 = $440,000

S13.3 c

• ROI = operating profit / total assets = $400,000 / $2,000,000 = 20% • Residual income = operating profit before tax – capital charge = $400,000 – ($2,000,000 × 16%) = $80,000

S13.4 b

• ROI (Edmonton) = operating profit / total assets = $2,250,000 / $8,200,000 = 27% • ROI (Toronto) = operating profit / total assets = $2,600,000 / $8,700,000 = 30%

S13.5 a

ROI = operating profit / total assets 0.12 = $75,000 / total assets Thus, total assets = $625,000

S13.6 d

• Residual income = operating profit before tax – capital charge = $345,000 – ($1,200,000 × 12%) = $201,000

S13.7 d

ROI = operating profit / total assets

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0.25 = $1,500,000 / total assets Thus, total assets = $6,000,000 S13.8 a

• total assets = $6,000,000 (see calculations in S13.7) • Residual income = operating profit before tax – capital charge = $1,500,000 – ($6,000,000 × 15%) = $600,000

S13.9 a

• WACC = [d × (MVd / (MVd + MVe))] + [e × (MVe / (MVd + MVe))] = [15% × ($2m/($2m+$3m))] + [10% × ($3m/($2m+$3m))] = 6% + 6% = 12% • EVA = after-tax operating profit – [(total assets – current liabilities) × WACC] = $550,000 – [($800,000 – $200,000) × 12%] = $478,000

S13.10

c WACC = [d × (MVd / (MVd + MVe))] + [e × (MVe / (MVd + MVe))] 0.104 = [d × ($400k/($400k+$600k))] + [0.12 × ($600k/($400k+$600k))] 0.104 = [d × 0.4] + 0.072 d = 0.08 = 8%

S13.11

b • current sales in dollars = variable costs / variable expense ratio = $3,000,000 / (1 – 0.60) = $7,500,000

ROI = operating profit / total assets 0.2 = [old operating profit $2,000,000 + new additional operating profit ($7,500,000×0.4 × 60% – $1,000,000)] / ($10,000,000 + new additional assets) 0.2 = [$2,000,000 + $800,000] / ($10,000,000 + new additional assets)

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0.2 = $2,800,000 / ($10,000,000 + new additional assets) new additional assets = $4,000,000 S13.12

b

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Chapter 14 Answer Key for Self-Test Questions

S14.1 d

• budgeted monthly sales = 120,000 units / 12 months = 10,000 units per month • required ending inventory = 1.5 × 10,000 units = 15,000 units • units to be produced in first month = units sold 10,000 + ending inventory 15,000 – beginning inventory 12,000 = 13,000 units produced

S14.2 a

• cartons to be produced = cartons sold 350,000 + ending inventory 60,000 – beginning inventory 40,000 = 370,000 cartons • grams of direct materials required for production of 370,000 cartons = 370,000 cartons × 5 grams/carton = 1,850,000 grams • grams of direct materials to be purchased = 1,850,000 grams – direct materials already in beginning inventory 250,000 grams (50,000 cartons × 5 grams) = 1,600,000 grams

S14.3 a

• units to be produced = units sold 5,000 + ending inventory 3,500 – beginning inventory 1,500 = 7,000 units • standard cost per unit = direct materials $12 + direct labour $8 + manufacturing overhead $5 = $25 per unit • production budget cost = 7,000 units × $25 standard cost = $175,000

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S14.4 a

• units to be produced = units sold 55,000 + ending inventory 15,000 – beginning inventory 10,000 = 60,000 units • kg of direct materials required for production of 60,000 units = 60,000 units × 4 kg/unit = 240,000 kg • kg to be purchased = used in production 240,000 kg + ending inventory 60,000 kg – beginning inventory 50,000 kg = 250,000 kg

S14.5 b

• expected April profit = sales $192,500 (5,500 × $35) – direct materials $68,750 (5,500 × $12.50) – direct labour $33,000 (5,500 × $6) – variable overhead $24,750 (5,500 × $4.50) – fixed overhead $10,000 = $56,000

S14.6 c

• units to be produced in May = units sold in May 6,500 + ending inventory May 4,500 (= expected June sales) – beginning inventory 6,500 = 4,500 units

S14.7 a

• June cost of goods sold = 4,500 units × $23 (direct materials $12.50 × direct labour $6 + variable manufacturing overhead $4.50) = $103,500

S14.8 c

• A/R increase of $15,000 = cash flow decrease of $15,000 • A/P increase of $11,000 = cash flow increase of $11,000 • cash flow effect = $15,000 decrease + $11,000 increase = $4,000 decrease

S14.9 b

• cash received in March = $33,000 (30% of March sales of $110,000) + $72,000 (60% of February sales of $120,000) + $8,000 (8% of January sales of $100,000) = $113,000

S14.10

d • cash disbursements for March:

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$23,400 February purchases (30% of February sales $78,000) paid March $25,000 salaries $ 9,000 insurance $20,000 selling costs $77,400 total cash disbursements for March S14.11

b • cash receipts for April: $33,000 cash collected from April sales (30% × $110,000) $58,500 cash collected from March sales (65% × $90,000) $91,500 total cash receipts for April

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Chapter 15 Answer Key for Self-Test Questions

S15.1 a S15.2 b

• total expense variance = actual costs $297,000 ($164,000 + $133,000) – budgeted costs $300,000 ($170,000 – $130,000) = $3,000 F

S15.3 c S15.4 d S15.5 a S15.6 b

• sales price variance = actual quantity sold × (actual price – standard price) = 3,850 actual hours × (($23,600/3,850) – $6) = $500 F • sales quantity variance = budgeted selling price × (actual quantity sold – budgeted selling price) = $6/hour × (3,850 actual hours – 4,000 budgeted hours) = $900 U

S15.7 b

• flexible budget variance = actual costs – flexible budget = (1,800 × $3.20) – (1,800 × $3) = $5,760 – $5,400 = $360 U

S15.8 a

• materials price variance = actual inputs × (actual price per input – standard price per input) = 5,200 × ($3.05 – $3.10) = $260 F

S15.9 c

• direct materials efficiency variance = standard price per input × (actual inputs – standard inputs allowed for actual output) = $2 × (2,250 kg – 105,000/1,000×25kg) = $2 × (2,250 kg – 2,625 kg) = $750 F

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S15.10

c • direct labour rate variance = actual labour hours × (actual labour rate – standard labour rate) = $5,600/$14 × ($14 – $15) = 400 actual hours × ($14 – $15) = $400 F

S15.11

b • Using the variance formula, solve for actual cost of direct labour: direct labour rate variance = actual labour hours × (actual labour rate – standard labour rate) $26,250 U = 35,000 actual hours × (actual labour rate – $12.50) + $26,250 = 35,000 × actual labour rate – $437,500 actual labour rate = $13.25

S15.12

d • Using the variance formula, solve for actual quantity of direct materials: direct materials efficiency variance = standard price per input × (actual inputs – standard inputs allowed for actual output) $800 F = $4.00 × (actual quantity – 5,200 kg) – $800 = ($4 × actual quantity) – $20,800 actual quantity = 5,000 kg

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Chapter 16 Answer Key for Self-Test Questions

S16.1 c S16.2 a S16.3 b S16.4 a S16.5 a S16.6 a S16.7 b S16.8 a S16.9 a S16.10

a Schedule of customer profitability: Revenues Less: Cost of goods sold Deliveries expense Customer support Customer profitability

S16.11

a

S16.12

a

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Customer A Customer B Customer C $ 50,000 $45,000 $100,000 25,000 22,500 50,000 5,000 -8,000 8,000 600 600 1,200 $19,400 $13,900 $40,800

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