141. The Buy-It-For-Yourself Company had the following assets and liabilities as of December 31, 2006:
 

ASSETS 

Cash$25,000

Accounts receivable15,000

Inventory30,000

Equipment50,000

LIABILITIES 

Current portion of long-term debt10,000

Accounts payable2,000

Long-term debt25,000

Determine the quick ration for the end of the year (rounded to one decimal point). 
A. 5.8
B. 3.2
C. 3.3
D. 2.4

142. Elgor Company sells merchandise with a one year warranty. In 2007, sales consisted of 2,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2007 and 70% in 2008. In the 2007 income statement, Elgor should show warranty expense of 
A. $7,500
B. $17,500
C. $25,000
D. $0

143. Elgor Company sells merchandise with a one year warranty. In 2007, sales consisted of 2,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2007 and 70% in 2008. In the 2008 income statement, Elgor should show warranty expense of 
A. $7,500
B. $17,500
C. $25,000
D. $0

144. The cost of a product warranty should be included as an expense in the 
A. period the cash is collected for a product sold on account
B. future period when the cost of repairing the product is paid
C. period of the sale of the product
D. future period when the product is repaired or replaced

145. Pilgrim Company sells merchandise with a one year warranty. In 2007, sales consisted of 1,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2007 and 70% in 2008. In the 2007 income statement, Pilgrim should show warranty expense of 
A. $4,500
B. $10,500
C. $15,000
D. $0

146. During May, CircuitSound sold 500 portable CD players for $50 each. Each CD player cost CircuitSound $25 to purchase and carried a one-year warranty. If 10 percent typically need to be replaced over the warranty period, what amount should CircuitSound debit Product Warranty Expense for in June? 
A. $2,500
B. $1,250
C. $250
D. $1,000

147. During June, CircuitSound sold 800 portable CD players for $50 each. Each CD player cost CircuitSound $25 to purchase and carried a one-year warranty. If 10 percent typically need to be replaced over the warranty period, what amount should CircuitSound debit Product Warranty Expense for in June? 
A. $4,000
B. $400
C. $2,000
D. $1,000

148. Estimating and recording product warranty expense in the period of the sale best follows which of the following accounting concepts? 
A. Cost concept
B. Business entity concept
C. Matching Concept
D. Materiality concept

149. The Buy-It-For-Yourself Company had the following assets and liabilities as of December 31, 2007:
 

ASSETS 

Cash$28,000

Accounts receivable15,000

Inventory20,000

Equipment50,000

LIABILITIES 

Current portion of long-term debt10,000

Accounts payable2,000

Long-term debt25,000

Determine the quick ration for the end of the year (rounded to one decimal point). 
A. 5.3
B. 3.6
C. 3.3
D. 2.3

150. The journal entry a company uses to record the estimated accrued product warranty liability is 
A. debit Product Warranty Expense; credit Product Warranty Payable
B. debit Product Warranty Payable; credit Cash
C. debit Product Warranty Expense; credit Cash
D. debit Product Warranty Payable; credit Product Warranty Expense

15) Strykerz Corp expects to spend $800,000 in 2015 in appraisal costs if it does not change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $60,000 in fixed appraisal costs and variable costs of $0.50 per unit of finished product. The new method involves $140,000 in training costs and an additional $150,000 in annual equipment rental.

Internal failure costs average $160 per failed unit of finished goods. During 2014, 5% of all completed items had to be reworked. External failure costs average $400 per failed unit. The company's average external failures are 1% of units sold. The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used.

How much will external failure costs change assuming 800,000 units of materials are received and that product failures with customers are cut in half with the new receiving method?

A) $20,000 increase

B) $400,000 decrease

C) $640,000 decrease

D) $800,000 decrease

16) In successful quality programs, companies decrease costs of quality and, in particular, internal and external failure costs as a percentage of revenues.

17) The financial cost of quality measures serves as a common denominator for evaluating trade-offs among prevention costs and failure costs.

18) COQ reports provide more insight about quality improvements and allow managers to compare

trends over time.

19) Cost of quality financial measures will usually deteriorate when nonfinancial measures of quality are emphasized and improved.

20) Venlaz Corp makes small motorcycles. The monthly demand ranges from 80 to 100 motorcycles. The average demand is 92 motorcycles. The plant operates 300 hours a month. Each cycle takes approximately 1.5 hours.

If the company adds a new line of scooters, initial demand will be 20 per month. Each scooter will take 1 hour to make. To offset approaching production capacity, expanding the assembly line is possible. This will decrease manufacturing time for all products by 20%. However, this will increase the costs of cycles from $400 to $500 and scooters from $200 to $240. The change will also cause increases in prices from $700 to $750 for cycles and from $450 to $500 for scooters.

Required:

a.What is the average waiting time for cycles if they are the only item manufactured?

b.What are the average waiting times if both cycles and scooters are produced and the assembly line is not enlarged?

c.What are the average waiting times if both cycles and scooters are produced and the assembly line is enlarged?

d.What is the expected monthly margin without scooters if the company sells all 92 cycles it manufactures?

e.What are the expected monthly contribution margins if scooters are made with the current assembly line and with the new assembly line? Assume average sales and that sales equal production.

f.What action do you recommend?

15) Strykerz Corp expects to spend $800,000 in 2015 in appraisal costs if it does not change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $60,000 in fixed appraisal costs and variable costs of $0.50 per unit of finished product. The new method involves $140,000 in training costs and an additional $150,000 in annual equipment rental.

Internal failure costs average $160 per failed unit of finished goods. During 2014, 5% of all completed items had to be reworked. External failure costs average $400 per failed unit. The company's average external failures are 1% of units sold. The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used.

How much will external failure costs change assuming 800,000 units of materials are received and that product failures with customers are cut in half with the new receiving method?

A) $20,000 increase

B) $400,000 decrease

C) $640,000 decrease

D) $800,000 decrease

16) In successful quality programs, companies decrease costs of quality and, in particular, internal and external failure costs as a percentage of revenues.

17) The financial cost of quality measures serves as a common denominator for evaluating trade-offs among prevention costs and failure costs.

18) COQ reports provide more insight about quality improvements and allow managers to compare

trends over time.

19) Cost of quality financial measures will usually deteriorate when nonfinancial measures of quality are emphasized and improved.

20) Venlaz Corp makes small motorcycles. The monthly demand ranges from 80 to 100 motorcycles. The average demand is 92 motorcycles. The plant operates 300 hours a month. Each cycle takes approximately 1.5 hours.

If the company adds a new line of scooters, initial demand will be 20 per month. Each scooter will take 1 hour to make. To offset approaching production capacity, expanding the assembly line is possible. This will decrease manufacturing time for all products by 20%. However, this will increase the costs of cycles from $400 to $500 and scooters from $200 to $240. The change will also cause increases in prices from $700 to $750 for cycles and from $450 to $500 for scooters.

Required:

a.What is the average waiting time for cycles if they are the only item manufactured?

b.What are the average waiting times if both cycles and scooters are produced and the assembly line is not enlarged?

c.What are the average waiting times if both cycles and scooters are produced and the assembly line is enlarged?

d.What is the expected monthly margin without scooters if the company sells all 92 cycles it manufactures?

e.What are the expected monthly contribution margins if scooters are made with the current assembly line and with the new assembly line? Assume average sales and that sales equal production.

f.What action do you recommend?

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