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COB 242 Practice 1. Luella Corporation prepares its statement of cash flows using the indirect method. Which of the following would be added to net income in the operating activities section of the statement? 2. Which of the following should be classified as an investing activity on a statement of cash flows? A. cash received from the sale of office equipment that was sold at a loss. B. cash used to purchase a long-term investment in bonds of another corporation. C. cash received from the issuance of Iguato Corporation common stock. D. both A and B above E. all of the above 3. What type of cost exhibits the behavior shown below? Manufacturing Volume (Units) Total Cost Cost Per Unit 50,000 $150,000 $3.00 80,000 150,000 1.88 A. Variable cost. B. Fixed cost. C. Semivariable cost. D. Step-variable cost. E. Mixed cost.
COB 242 Practice Use the following information to answer the next three questions. Narchie sells a single product for $50. Variable costs are 60% of the selling price, and the company has fixed costs that amount to $400,000. Current sales total 16,000 units. 4. Narchie: A. will break-even by selling 8,000 units. B. will break-even by selling 13,333 units. C. will break-even by selling 20,000 units. D. will break-even by selling 1,000,000 units. E. cannot break-even because it loses money on every unit sold. 5. Each unit that Narchie sells will: A. increase profit by $20. B. increase profit by $30. C. increase profit by $50. D. increase profit by some other amount. E. decrease profit by $5. 6. In order to produce a target profit of $22,000, Narchie's dollar sales must total: A. $8,440. B. $21,100. C. $1,000,000. D. $1,055,000. E. None of the answers is correct. 7. The unit contribution margin is calculated as the difference between: A. selling price and fixed cost per unit. B. selling price and variable cost per unit. C. selling price and product cost per unit. D. fixed cost per unit and variable cost per unit. E. fixed cost per unit and product cost per unit. 8. Which of the following occurs if a company was able to reduce its variable cost per unit? Contribution Margin Break-even Point A. Increase Increase B. Increase Decrease C. Decrease Increase D. Decrease Decrease E. Increase No effect
COB 242 Practice 9. Sunnripe Corporation manufactures and sells two types of beach towels, standard and deluxe. Sunnripe expects the following operating results next year: Standard Deluxe Total sales $ 450,000 $ 50,000 Total variable expenses $ 360,000 $ 20,000 Sunnripe expects to have a total of $57,600 in fixed expenses next year. What is Sunnripe's overall break-even point next year in sales dollars? A. $72,000 B. $144,000 C. $192,000 D. $240,000 10. XYZ has forecast sales for the next three months as follows: January, 10,000 units; February, 15,000 units; and March, 20,000 units. Inventory as of January 1 is expected to be 2,000 units. Ending inventories should equal 25% of the coming month’s sales needs. How many units should be produced in February? A. 13,750 units B. 15,000 units C. 16,250 units D. 18,000 units E. none of the above 11. Acme Company has observed its accounts receivable collection pattern to be as follows: 40% in the month of the sale, 45% in the month following the sale, and 13% in the second month following the sale. Sales for the last three months of the year were as follows: October, $300,000; November, $450,000; and December, $625,000. Sales for January are budgeted to be $375,000. What are the budgeted cash collections for January? A. $375,000 B. $489,750 C. $495,750 D. $625,000 E. none of the above
COB 242 Practice Morgan Company's budgeted income statement reflects the following amounts: Sales Purchases Expenses January $120,000 $78,000 $24,000 February 110,000 66,000 24,200 March 125,000 81,250 27,000 April 130,000 84,500 28,600 Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the second month following sale. One percent of sales is uncollectible and expensed at the end of the year. Morgan pays for all purchases in the month following purchase and takes advantage of a 3% discount. The following balances are as of January 1: Cash $88,000 Accounts receivable* 58,000 Accounts payable 72,000 *Of this balance, $35,000 will be collected in January and the remaining amount will be collected in February. The monthly expense figures include $5,000 of depreciation. The expenses are paid in the month incurred. 12. Morgan’s expected cash balance at the end of January is: A. $87,000. B. $89,160. C. $92,000. D. $94,160. E. $113,160. 13. Morgan’s budgeted cash receipts in February are: A. $91,000. B. $95,000. C. $113,090. D. $113,640. E. $114,000. 14. Morgan’s budgeted cash payments in February are: A. $75,660. B. $94,860. C. $97,200. D. $99,860. E. $102,200.
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