Please indicate the best/correct answer by indicating your choice on the answer sheet provided.

1. A budget, also known as a forecast, that is typically prepared for a 5- to 10-year period is called a (a)

a. Payback analysis

b. operational budget

c. Strategic budget

d. Project budget

2. In the master budget, which of the following budget should planners prepare first?

a. cash receipts

b. production

c. purchases

d. sales

3. The pro forma balance sheet indicates

a. the expected cash receipts and disbursements for the budget period.

b. the expected profit for the budget period

c. the expected sales for the budget period

d. the expected balance of the assets, liabilities, and owners' equity at the end of the budget period.

4. Sunk costs are

a. future costs

b. never relevant

c. sometimes relevant

d. always relevant

5. All other thinks equal, in a make-or-buy decision, the company should make the product if

a. the total cost to make it does not exceed the incremental revenues

b. the total cost to make it exceeds the cost to buy it

c. the relevant cost to make it is less than the relevant cost to buy it

d. never, the company should outsource whenever possible

6. Accounting designed to meet the needs of decision makers inside the business is referred to as:

a. Management accounting

b. Financial accounting

c. Flexible accounting

d. Decision accounting

7. All of the following would probably be considered a direct material except:

a. Lumber

b. Steel

c. Leather

d. Glue

8. Factory overhead includes:

a. Direct materials and direct labor

b. Conversion costs

c. Indirect labor and indirect materials

d. Wages of machine operators

9. Freight-out would normally be recorded as a

a. Marketing expenses

b. Part of Cost of Goods Sold

c. General and Administrative expenses

d. Inventory item

10. When a company initially prices its products high, it is practicing a price strategy of

a. penetration pricing

b. price skimming

c. life-cycle pricing

d. target pricing

11. A variable cost

a. varies per unit of activity throughout a relevant range

b. varies in total throughout the relevant range

c. varies in total and per unit of activity throughout the relevant range

d. does not vary in total or per unit throughout the relevant range.

12. If a company increases its estimated fixed costs, then

a. the breakeven point in units will increase

b. the contribution margin per unit will increase

c. the breakeven point in units will decrease

d. both the breakeven point in units and the contribution margin per unit will increase

13. The cash received from a $3,000,000 bond issue if the bonds were issued at 101 7/8 would be

a. $3,000,000

b. $1,101,780

c. $3,056,250

d. $356,000

14. The date on which the secretary of the corporation examines the stock ownership transfer book to determine who is officially registered as a stockholder of the corporation and, therefore, eligible to receive the corporation's dividends is called

a. Date of record

b. Date of payment

c. Ex-dividend date

d. Date of declaration

15. On May 1, 1997, Clifford Industries borrowed $100,000 at 10% on a four-year installment loan. Annual payments starting May 1, 1998, are $ 31,547. How much of the second $31,547 payment is principal.

a. $10,000

b. $21,547

c. $31,547

d. $23,702

16. Alpha Corporation issued 3,000 shares of $1 par value common stock for $50 per share and 500 shares of its $100 par value preferred stock for $102 per share. What is Alpha's legal capital?

a. $53,000

b. $54,000

c. $50,000

d. $66,000

17. All of the following are extraordinary items except

a. losses sustained from a disaster

b. material gains and losses from early extinguishment of debt

c. An unexpected large write-off of a receivable

d. Assets expropriated by a foreign government

18. Which item would appear first on an income statement

a. Discontinued operations

b. Income before extraordinary items

c. cumulative effect of change in depreciation method, net of applicable taxes

d. Earnings per share

19. Accumulated Depreciation would appear on a classified balance sheet under the following category

a. Current assets

b. Investments

c. Property, plant, and equipment

d. Other liabilities

20. Which ratio has as its numerator the current assets excluding assets that are not readily convertible to cash, such as inventory and prepaid items, and a denominator of current liabilities.

a. Current ratio

b. Inventory turnover ratio

c. Quick ratio

d. Cash flow per share

1. Fishe Car Care, Inc. is an automobile maintenance and report organization with outlets throughout the midwestern United States. Cynthia Sears, budget director for the home office, is beginning to assemble next quarter's operating cash budget. Sales are projected as follows:

	Cash	On Account
October 1999	$196,800	$452,000
November 1999	$214,000	$590,000
December 1999	$218,400	$720,500

Fishe's past collection results for sales on account indicate the following pattern:

Month of sale 40%

First month following sale 30%

Second month after sale 28%

Uncollectible 2%

Sales on account during the months of August and September were $346,000 and $395,000, respectively.

Required:

Compute the amount of cash to be collected from sales during each month of the last quarter.

2. Don Juan, Inc. which manufactures plastic swords, gathered the following financial information:

Required:

1. Breakeven sales in units

2. Breakeven sales in dollars

3. The data below comes from the Dubinsky Lighting Shop's adjusted trial balance as of the fiscal year ended September 30, 1997. The company's beginning inventory was $162,444; ending merchandise inventory is $153,328.

Dubinsky Lighting Shop
Partial Adjusted Trial Balance
September 30, 1997
Sales			$867,824
Sales returns and allowances		$22,500
Purchases		442,370
Purchases returns and allowances			60,476
Freight in		20,156
Store Salaries expense		215,100
Office salaries expense		53,000
Advertising expense		36,400
Rent expense		28,800
Insurance expense		5,600
Utilities expense		37,520
Store supplies expense		928
Office supplies expense		1,628
Depreciation expense, store equipment		3,600
Depreciation expense, office equipment		3,700

Required:

Prepare an income statement for the Dubinsky Lighting Shop. Store Salaries expense; Advertising expense; Store Supplies expense, and Depreciation Expense, Store Equipment are selling expenses. The other expenses are general and administrative expenses.

4. The following data represent selected information from the comparative income statement and balance sheet of Lion King Corporation for the years ended December 31, 1994 and 1995

	1995	1994
Net sales	$370,000	$333,000
Cost of Goods Sold	160,000	150,000
Gross profit	210,000	183,000
Income from operations	95,000	87,000
Interest expense	8,000	8,000
Net income	70,000	57,000
Cash	$10,000	$14,000
Accounts receivable, net	30,000	25,000
Inventory	43,000	40,000
Prepaid expenses	5,000	7,000
Total current assets	88,000	86,000
Total noncurrent assets	112,000	104,000
Total current liabilities	70,000	60,000
Total noncurrent liabilities	40,000	45,000
Common stock, no-par	60,000	601000
Retained earnings	30,000	25,000

Note: 10,000 shares of common stock have been issued and outstanding since the company was established. They had a market value of $90 per share at 12/31/94 and they were selling for $91.50 per share at 12/31/95.

Required:

a. The current ratio for the Company at 12/31/95 is

b. The Company's debt to equity ratio at 12/31/95 is

c. For the 12/31/95, the Company's rate of return on net sales was

d. The Company's earnings per share for the year ended 12/31/95 was

e. The Company's rate of return on total assets for the year ended 12/31/95 was

5. My Cup Runneth Over is a local coffee shop. Its most recent profit report is shown below.

	Cappuccino	Espresso	Coffee
Sales	$65,000	$80,000	$60,000
Variable costs	52,000	48,000	24,000
Contribution margin	23,000	32,000	36,000
Machine costs	2,000	1,000	500
Fixed costs (divided equally)	20,000	20,000	20,000
Profit	$1,000	$12,000	$15,500

Management is concerned about the lower profit reported on Cappuccino sales and is considering whether to drop this product line. It is estimated that if Cappuccino is dropped, sales of Espresso will increase by 10 percent. Should e Cappuccino product line be discontinued?