Accounting Basics for Managers Final Exam

Problem 1: The balance sheet presents the following common stock information: Common stock, $10 par value, 7,000,000 shares authorized, 5,700,000 shares issued, 5,500,000 shares outstanding. (a.) Calculate the dollar amount that will be presented as Common stock. = 5,700,000 $10 = $57,000,000 (b.) Calculate the total amount of a cash dividend of $1.00 per share. = 5,500,000 $1 = $5,500,000 (c.) What accounts for the difference between issued shares and outstanding shares?

Treasury Stock is what accounts for the difference between issued shares and outstanding shares

Problem 2: Presented below is the income statement for Smith Food Center for the month of July:

Based on an analysis of cost behavior patterns, it has been determined that the company's contribution margin ratio is 15 percent. (a.) Rearrange the above income statement to the contribution margin format.

a)

Smith Food Center Income Statement Sales Variable Expenses Contribution Margin Fixed Expenses Operating Income $1,280,000 $1,088,000 $192,000 $156,000 $36,000 100% 85% 15%

Problem 2 (continued): (b.) If sales increase by 10 percent, what will be the firm's operating income? 10% 15% Increase in Sales Increase in Contribution Margin Previous Operating Income Adjusted Operating Income $128,000 $19,200 $36,000 $55,200

(c.) Calculate the amount of revenue required for Smiths Food Center to break even.

Breakeven in Dollars (Fixed Expenses/CMR)

$1,040,000

Problem 3: The cost formula for the maintenance department of the Eifel Co. is $6,500 per month plus $3.50 per machine hour used by the production department. a. Calculate the maintenance cost that would be budgeted for the month of May in which 5,700 machine hours are planned to be used. Budgeted Cost = $6,500 + ($3.50 5,700) = $26,450 b. Prepare an appropriate performance report (contains columns for the original budget, flex budget, actual cost, variance) for the maintenance department assuming that 5,860 machine

hours were actually used in the month of May, and the total maintenance cost incurred was $28,010. Original Budget (5,700 MH) $26,450 Problem 4: Danzi, Inc., has budgeted sales for the month of July and estimated cost behavior patterns for a number of its expense items listed below. From this information prepare an operating expense budget for the month of July. Flexed Budget (5,860 MH) $27,010 Actual Cost $28,010 Variance $1,000 U

Selling Expenses: Variable Selling Expenses: Sales Commission (5% $230,000) Marketing Promotions ($0.75 4,600) Delivery Expense ($0.50 4,600) Bad Debts Expense (1% $230,000) Total Variable Selling Expenses Fixed Selling Expenses: Sales Salaries Advertising Total Fixed Selling Expenses Total Selling Expenses Administrative Expenses: Administrative Salaries Facility Expense Depreciation on Office Equipment Property Taxes on Office Total Administrative Expenses Budgeted Operating Expenses

$11,500 $3,450 $2,300 $2,300 $19,550 $6,800 $4,200 $11,000 $30,550 $9,400 $8,000 $2,500 $3,000 $22,900 $53,450