Lynn Devers, a recent graduate of Smith’s accounting program, evaluated the operating performance of Knutson Company’s six divisions. Lynn made the following presentation to Knutson’s Board of Directors and suggested the Adams Division be eliminated. “If the Adams Division is eliminated,” she said “Our net income would increase by $23,200.” The Other Adams Total Five Divisions Division Sales $ 2,422.600 $ 249,400 $ 2,672,000 Cost […]

Mighty Bright Window Cleaners” monthly income statement at several levels of activity is as follows: Windows washed 2,000 4,000 6,000 Sales $3,000 $6,000 $9,000 Cost of goods sold 1,200 2,400 3,600 Gross profit 1,800 3,600 5,400 Operating expenses Advertising 400 400 400 Salaries and wages 700 900 1,100 Insurance 200 200 200 Postage 400 800 1,200 Total operating expenses 1,700 2,300 2,900 Operating income $ […]

Indicate whether each of the following is true (T) or false (F) in the space provided. 1.  Accounting contributes to management’s decision making process through internal reports that review the actual impact of the decision. 2.  In making business decisions, management ordinarily considers both financial and nonfinancial information. 3.  The process used to identify the financial data that change under alternative courses of action is […]

J Bryant, Ltd., is a local coat retailer. The store”s accountant prepared the following income statement for the month ended January 31. Sales 8750,000 Cost of goods sold 300,000 Gross margin 450,000 Less operating expenses Selling $23,560 Administrative 49,500 73,060 Net operating income $376,940 Bryant sells its coats for $250 each. Selling expenses consist of fixed costs plus a commission of $6.50 per coat. Administrative […]

McAlister Corporation incurs the following annual costs in producing 30,000 floppy drives for computers: Direct materials $ 60,000 Direct labor 100,000 Variable manufacturing overhead 80,000 Fixed manufacturing overhead 90,000 Total manufacturing costs. $330,000 However, if McAlister purchases the floppy drives from another company at a price of $10, what is the increase (decrease) in net income for McAlister? ($90,000) ($60,000) $30,000 $60,000

Henley Horticulture provides and maintains live plants in office buildings. The company”s 850 customers are charged $30 per month for this service, which includes weekly watering visits. The variable cost to service a customer”s location is $17 per month. The company incurs $2,000 each month to maintain its fleet of four service vans and $3,000 each month in salaries. Henley pays a bookkeeping service $2 […]

Calvin Company manufactures its own subassembly units known by the code name “ekrob.” Calvin incurs the following annual costs in producing 40,000 ekrobs: Direct materials $ 60,000 Direct labor 90,000 Variable overhead 50:000 Fixed overhead 80:000 Total $280,000 Calvin can purchase the ekrobs from Hobbes Corporation for $6.00 per unit. If they purchase the ekrobs, only $30,000 of the fixed overhead will be eliminated. However, […]

Sharon’s Affairs and Parties (SAAP) engaged in the following transactions in 1999: 1. SAAP borrowed $150,000 at 10 percent per year to begin operations. 2. SAAP accrued the first month’s interest on the loan. 3. SAAP accrued the second month’s interest. 4. SAAP paid the interest due at the end of the second month. 5. Sharon loaned SAAP $10,000 at 24 percent interest per year. […]

Time Value Calculations Evaluate each independent situation using the appropriate table and an interest rate of 12 percent. a. You would like to relax and not work for the next six years, but you would like to withdraw $25,000 at the end of each year. How much must you have in your investment account now to be able to do this? b. You would like […]

Present Value Calculations Calculate the present value of the cash flows associated with the retirement options under your pension plan, using an eight percent interest rate. a. One retirement option under the pension plan is to receive 90 percent of your current annual salary of $80,000 at the end of the year, for life, which is expected to be 20 years. b. Another option is […]