BUSA 102

Test No. 2 -

Mr. Moloney

True/False (2 points each)

Indicate whether the sentence or statement is true or false.
____

1. Statements in which all items are expressed in relative terms are called common-size statements.

Multiple Choice (2 points each)

Identify the letter of the choice that best completes the statement or answers the question.
Problem
31. (10 Points)
Hitch Company sells Products S and T and has made the following estimates for the coming year:
Product

Unit Selling Price

Unit Variable Cost

Sales Mix

S
T

$30
70

$24
56

60%
40

Fixed costs are estimated at $202,400. Determine (a) the estimated sales in units of the overall product necessary to
reach the break-even point for the coming year, (b) the estimated number of units of each product necessary to be
sold to reach the break-even point for the coming year, and (c) the estimated sales in units of the overall product
necessary to realize an operating income of $119,600 for the coming year.
32.(10 points total)
On January 1 of the current year, C. F. Hartley Co. commenced operations. It operated its plant at 100% of capacity
during January. The following data summarized the results for January:
Units
50,000
Units Manufactured
42,000
Units sold ($18 per unit)
8,000
Inventory, January 31
======

Total Cost or Expense

Manufacturing costs:
Direct Materials
Direct Labor
Variable manufacturing costs
Fixed manufacturing costs
Total
Selling and administrative expenses:
Variable
Fixed
Total
(a)
(b)

$400,000
$105,000
70,000
75,000
$650,000
========
$ 33,600
10,500
$ 44,100
========

Prepare an income statement in accordance with

absorption costing.
Prepare an income statement in accordance with
variable costing.

Made
Sold
Ending Inve
Product Costs:
DM
DL
FOH - variable
FOH - fixed
TOTAL PRD CST
divide by made
Cost/Unit
Units Sold
Cost of Goods Sold

50,000
42,000
8,000

$ 400,000
$ 105,000
$ 70,000
$ 75,000
$ 650,000
50,000
$ 13.00
42,000
546,000

CF Hartley

Absorption Income Statement

For Month Ended January 31, 2000

Sales
- C of GS
= Gross Profit
- Period Costs:
Variable Selling
Fixed Selling
Inc. From Operations

$
$
$

756,000
546,000
210,000

$
$
$

33,600
10,500
165,900

CF Hartley
Variable Costing Income Statement
For Month Ended January 31, 2000
Product Costs:
DM
DL
FOH - variable
TOTAL PRD CST
divide by made
Cost/Unit
Units Sold
Cost of Goods Sold

$ 400,000
$ 105,000
$ 70,000
$ 575,000
50,000
$ 11.50
42,000
$ 483,000

Sales
- Variable C of GS
= Manuf. Margin
- Variable Selling
Contribution Margin
- Fixed Selling
- Fixed Factory Over

$
$
$
$
$
$
$
$

756,000
483,000
273,000
33,600
239,400
10,500
75,000
153,900

33. (20 Points Total: 10 for the vertical analysis; 10 for the ratio's and interpretation)
From the comparative financial statements provided, complete the following:
Part 1: A horizontal analysis, in good form, of the balance sheet for the most RECENT year ONLY.
Part 2: Calculate the following ratios, showing all your work and calculations to
credit.
a) Working capital.
b) Current ratio.
c) Acid-test ratio.
d) Accounts receivable turnover.
e) Inventory turnover
Now, interpret the financial status of the company based on your work in part 1 and part 2.
33. Part 1.

Cash
Marketable securities
Accounts receivable (net)
Inventories

1997
100,000
195,000
535,000
680,600

White Cloud Flour Company

Horizontal Analysis of Balance Sheet
and Liabilities
For the Year Ended December 31,
1997
1996
Increase (decrease)
90,000
10,000
11%
165,000
30,000
18%
359,000
176,000
49%
428,400
252,200
59%

receive full

Prepaid Expenses
Total Current Assets
Long-term investments
Plant assets
Total Assets
Part 2.
Working Capital =

Current Ratio =

Acid-test

AR Turns

35,400
1,546,000
300,000
3,442,000
5,288,000

26,600
1,069,000
200,000
2,945,000
4,214,000

CA - CL

1,546,000

720,000

CA
CL

1,546,000
720,000

2.15

CA (less inventories and prepaids) - CL

1,546,000
-680600

Net Sales
Avg AR

4,268,000
447,000

8,800
477,000
100,000
497,000
1,074,000

826,000

-35400

9.55

(535,000 + 359,000)/2
Inventory Turns

Cost of Goods Sold

Avg Inventory

2,050,000
554,500

(680,600 + 428,400)/2

33%
45%
50%
17%
25%

3.70

830,000
720,000

1.15

BUSA 102
Answer Section

Test No. 2 - F15, M3, and M4

TRUE/FALSE
1.
2.
3.
4.

T
F
T
T

MULTIPLE CHOICE
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.

B
A
C
C
B
A
A
C
C
C
C
A
B
A
B
C
D
A
A
B
C
D
C
D
B
A

PROBLEM
31.
(a)

Unit selling price of C* = ($30 60%) + ($70 40%) = $46.00

Unit variable cost of C = ($24 60%) + ($56 40%) = $36.80
Unit contribution margin = $46 - $36.80 = $9.20
Sales = $202,400 / $9.20 = 22,000 units
*Overall product

(b)

S: 13,200 units (22,000 units 60%)

T: 8,800 units (22,000 units 40%)

Mr. Moloney

(c)
32. (a)

Sales = ($202,400 + $119,600) / $9.20 = 35,000 units