Question 1
Billings Rail Company's sales for the next five months are asfollows:
February $175,000
March $160,000
April $145,000
May $135,000
June $130,000
Collection history for the company indicates that 50% of sales arecollected in the month of the sale, 38% is collected in thefollowing month, and 12% of sales are uncollectible.
How much are total budgeted cash receipts for April?
A. $123,800
B. $154,300
C. $72,500
D. $133,300
2 points
Question 2
Budgeted sales (in units) for Falter Company are as follows:
September 50,000 units
October 60,000 units
November 55,000 units
December 80,000 units
The company wishes to have 20% of the next month's sales on hand atthe end of each month. How much is budgeted production forNovember?
A. 60,000 units
B. 61,000 units
C. 50,000 units
D. 71,000 units
2 points
Question 3
Tech Star Company must maintain a minimum cash balance of$25,000. At the beginning of June the company's cash balance was$17,000. Budgeted cash receipts for June are $150,000 and budgetedcash disbursements are $201,000. Budgeted net income for Julytotals $11,000. During July, how much will Tech Star Company needto borrow?
A. $34,000
B. $59,000
C. $43,000
D. $9,000
2 points
Question 4
A flexible budget takes into account the fact that whenproduction levels change
A. total fixed costs remain the same.
B. variable costs per unit changes.
C. fixed costs per unit remain the same.
D. None of the above is true.
2 points
Question 5
Good Stuff Restaurant expects to make the following inventorypurchases:
Month Purchases
October $80,000
November 100,000
December 160,000
During September, the restaurant purchased $72,000 of inventory.The restaurant typically pays for 25% of the inventory purchaseswithin the month of the purchase and 75% in the following month.Estimate the cash disbursements that will be made in November forpurchases related to inventory.
A. $95,000
B. $100,000
C. $115,000
D. $85,000
2 points
Question 6
The produce division of Boot Ship Nutrition had invested capitalof $800,000 last year. If the minimum required rate of return is15% and last year's residual income was $60,000, how much wasNOPAT?
A. $60,000
B. $120,000
C. $400,000
D. $180,000
2 points
Question 7
Fred's Fenders' cost of capital is 15%, and its required rate ofreturn is 12%. The company has noninterest-bearing currentliabilities of $50,000 and total assets of $350,000. Fred's NOPATis $100,000. How much is Fred's residual income?
A. $55,000
B. $45,000
C. $52,000
D. $64,000
2 points
Question 8
Dingo is one of the divisions of Alpha Corporation. Dingo'sinvested capital is $500,000. Last year, Dingo recorded NOPAT of$80,000 on sales of $360,000. Which one of the following correctlycalculates return on investment using the two components of returnon investment?
A. $80,000 ÷ $360,000
B. 1.39 Ã 11.5
C. 22.22% Ã 0.72
D. $80,000 ÷ ($500,000 - $80,000)
2 points
Question 9
Residual income is NOPAT with an adjustment for
A. standard cost variances.
B. profit required for the level of investment in the investmentcenter.
C. taxes and depreciation.
D. accounting distortions.
2 points
Question 10
The income that is used in the calculation of return oninvestment is usually
A. EBIT (earnings before interest and taxes).
B. net income as defined by GAAP.
C. net income plus depreciation expense.
D. NOPAT (net operating profit after taxes).
Question 1
Billings Rail Company's sales for the next five months are asfollows:
| February | $175,000 |
| March | $160,000 |
| April | $145,000 |
| May | $135,000 |
| June | $130,000 |
Collection history for the company indicates that 50% of sales arecollected in the month of the sale, 38% is collected in thefollowing month, and 12% of sales are uncollectible.
How much are total budgeted cash receipts for April?
| A. | $123,800 | |
| B. | $154,300 | |
| C. | $72,500 | |
| D. | $133,300 |
2 points
Question 2
Budgeted sales (in units) for Falter Company are as follows:
| September | 50,000 units |
| October | 60,000 units |
| November | 55,000 units |
| December | 80,000 units |
The company wishes to have 20% of the next month's sales on hand atthe end of each month. How much is budgeted production forNovember?
| A. | 60,000 units | |
| B. | 61,000 units | |
| C. | 50,000 units | |
| D. | 71,000 units |
2 points
Question 3
Tech Star Company must maintain a minimum cash balance of$25,000. At the beginning of June the company's cash balance was$17,000. Budgeted cash receipts for June are $150,000 and budgetedcash disbursements are $201,000. Budgeted net income for Julytotals $11,000. During July, how much will Tech Star Company needto borrow?
| A. | $34,000 | |
| B. | $59,000 | |
| C. | $43,000 | |
| D. | $9,000 |
2 points
Question 4
A flexible budget takes into account the fact that whenproduction levels change
| A. | total fixed costs remain the same. | |
| B. | variable costs per unit changes. | |
| C. | fixed costs per unit remain the same. | |
| D. | None of the above is true. |
2 points
Question 5
Good Stuff Restaurant expects to make the following inventorypurchases:
| Month | Purchases |
| October | $80,000 |
| November | 100,000 |
| December | 160,000 |
During September, the restaurant purchased $72,000 of inventory.The restaurant typically pays for 25% of the inventory purchaseswithin the month of the purchase and 75% in the following month.Estimate the cash disbursements that will be made in November forpurchases related to inventory.
| A. | $95,000 | |
| B. | $100,000 | |
| C. | $115,000 | |
| D. | $85,000 |
2 points
Question 6
The produce division of Boot Ship Nutrition had invested capitalof $800,000 last year. If the minimum required rate of return is15% and last year's residual income was $60,000, how much wasNOPAT?
| A. | $60,000 | |
| B. | $120,000 | |
| C. | $400,000 | |
| D. | $180,000 |
2 points
Question 7
Fred's Fenders' cost of capital is 15%, and its required rate ofreturn is 12%. The company has noninterest-bearing currentliabilities of $50,000 and total assets of $350,000. Fred's NOPATis $100,000. How much is Fred's residual income?
| A. | $55,000 | |
| B. | $45,000 | |
| C. | $52,000 | |
| D. | $64,000 |
2 points
Question 8
Dingo is one of the divisions of Alpha Corporation. Dingo'sinvested capital is $500,000. Last year, Dingo recorded NOPAT of$80,000 on sales of $360,000. Which one of the following correctlycalculates return on investment using the two components of returnon investment?
| A. | $80,000 ÷ $360,000 | |
| B. | 1.39 Ã 11.5 | |
| C. | 22.22% Ã 0.72 | |
| D. | $80,000 ÷ ($500,000 - $80,000) |
2 points
Question 9
Residual income is NOPAT with an adjustment for
| A. | standard cost variances. | |
| B. | profit required for the level of investment in the investmentcenter. | |
| C. | taxes and depreciation. | |
| D. | accounting distortions. |
2 points
Question 10
The income that is used in the calculation of return oninvestment is usually
| A. | EBIT (earnings before interest and taxes). | |
| B. | net income as defined by GAAP. | |
| C. | net income plus depreciation expense. | |
| D. | NOPAT (net operating profit after taxes). |
Related questions
Edwards Company has projected sales and production in units forthe second quarter of the coming year as follows: |
| April | May | June | |
| Sales | 32,000 | 22,000 | 27,000 |
| Production | 27,000 | 27,000 | 32,000 |
| Required: |
| a. | Cash-related production costs are budgeted at $5 per unitproduced. Of these production costs, 30% are paid in the month inwhich they are incurred and the balance in the following month.Selling and administrative expenses (all paid in cash) will amountto $50,000 per month. The accounts payable balance on March 31totals $98,000, all of which will be paid in April. Prepare aschedule for each month showing budgeted cash disbursements forEdwards Company. (Omit the "$" sign in yourresponse.) |
| April | May | June | |
| Production cost | $ | $ | $ |
| Cashdisbursement: | |||
| Production thismonth | |||
| Production priormonth | |||
| Selling andadministration | |||
| Totaldisbursement | $ | $ | $ |
| b. | Assume that all units are sold on account for $11 each. Cashcollections from sales are budgeted at 50% in the month of sale,40% in the month following the month of sale and the remaining 10%in the second month following the month of sale. Accountsreceivable on April 1 totaled $277,000 ($47,000 from February'ssales and the remainder from March sales.) Prepare a schedule foreach month showing budgeted cash receipts for Edwards Company.(Omit the "$" sign in your response.) |
| April | May | June | |
| Total sales | $ | $ | $ |
| Cash receipts: | |||
| February sales | |||
| March sales | |||
| April sales | |||
| May sales | |||
| June sales | |||
| Total receipts | $ | $ | $ |
| Edwards Companyhas projected sales and production in units for the second quarterof the year as follows: | |||||||
| April | May | June | |||||
| Sales | 30,000 | 20,000 | 25,000 | ||||
| Production | 25,000 | 25,000 | 30,000 | ||||
| Assume that all units will besold on account for $15 each. | |||||||
| Cash collections from salesare budgeted at | |||||||
| 70% in the month of sale | |||||||
| 20% in the month following the month of sale | |||||||
| the remaining 10% in the second month following themonth of sale | |||||||
| Accounts receivable on March31 totaled $255,000 | |||||||
| ($45,000 from February's salesand the remainder from March.) | |||||||
| Production (inventory) costsof $10 per unit are paid in the month after they are incurred. | |||||||
| Edwards produced 27,000 unitsin March. | |||||||
| Selling and administrativeexpenses (excluding depreciation) are budgeted to be 15% of eachmonth's sales. | |||||||
| Prepare a schedule forbudgeted cash receipts in April, May, and June for EdwardsCompany. | |||||||
| Calculate the accountsreceivable balance as of June 30. | |||||||
| Prepare a schedule of cashdisbursements in April, May, and June for Edwards Company. | |||||||
| Edwards Company wants topurchase equipment costing $50,000 some time in the secondquarter. | |||||||
| When should it make thepurchase, assuming that it must pay immediately upon purchase? | |||||||
| Units | Dollars | |
| April (actual) | 5,500 | $1,100,000 |
| May(actual) | 3,600 | 720,000 |
| June(budgeted) | 8,000 | 1,600,000 |
| July(budgeted) | 6,500 | 1,300,000 |
| August (budgeted) | 4,500 | 900,000 |
All sales are on credit. Recent experience shows that 28% ofcredit sales is collected in the month of the sale, 42% in themonth after the sale, 25% in the second month after the sale, and5% proves to be uncollectible. The productâs purchase price is $110per unit. All purchases are payable within 13 days. Thus, 60% ofpurchases made in a month is paid in that month and the other 40%is paid in the next month. The company has a policy to maintain anending monthly inventory of 21% of the next monthâs unit sales plusa safety stock of 185 units. The April 30 and May 31 actualinventory levels are consistent with this policy. Selling andadministrative expenses for the year are $1,548,000 and are paidevenly throughout the year in cash. The companyâs minimum cashbalance at month-end is $100,000. This minimum is maintained, ifnecessary, by borrowing cash from the bank. If the balance exceeds$100,000, the company repays as much of the loan as it can withoutgoing below the minimum. This type of loan carries an annual 11%interest rate. On May 31, the loan balance is $41,000, and thecompanyâs cash balance is $100,000. (Round final answers to thenearest whole dollar.) Prepare a table that shows the computationof cash collections of its credit sales (accounts receivable) ineach of the months of June and July Prepare a table that shows thecomputation of budgeted ending inventories (in units) for April,May, June, and July Prepare the merchandise purchases budget forMay, June, and July. Report calculations in units and then show thedollar amount of purchases for each month. Prepare a table showingthe computation of cash payments on product purchases for June andJuly. Prepare a cash budget for June and July, including any loanactivity and interest expense. Compute the loan balance at the endof each month. (Do not round intermediate calculations.)
