Spring_2011_Midterm_D%5b1%5d - 1 A company sells computers...

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1. A company sells computers with a 15-month warranty. As of December 31st, 2010 the company reported a Warranty Obligation of $185,000. In January of 2011, the company sold 100,000 computers at $1,750 each; and 1,500 computers were turned in for repairs during that same month. The total repairs amounted to $285,000 of cost (mainly from the computer parts inventory). It is estimated that 2% of all units sold, in any particular year, will need repairs under warranty at an estimated cost of $200 per unit. What is the value of the warranty obligation reported on the company's January 31st balance sheet? A. $280,000 B. $215,000 C. $300,000 D. $400,000 E. None of the above 2. For many retail companies, the holiday shopping season represents a large portion of annual sales. These companies recognize the importance of their customers walking away from their shopping experience with a positive attitude toward the company. Many retailers invest substantial funds in hiring, training and supervising their employees. In addition, some companies also hire “mystery shoppers” during the peak shopping season. These mystery shoppers pose as regular customers, engage in transactions and provide detailed feedback (including employee name, store location) to the company about their shopping experience. For our purposes, assume that management has not informed their employees about the company's use of mystery shoppers. In class we learned that control procedures could be classified as (i) preventative (ii) detective and (iii) corrective. Given this information, how would the use of mystery shoppers be classified? A. (ii) only B. (i) only C. (i) and (ii) D. (ii) and (iii) E. (i), (ii) and (iii) 3. Martinez Aerospace Company uses a job-order costing system. The direct materials for Job #045391 were purchased in July and put into production in August. The job was completed but not yet sold by the end of August. At the end of August, in what account would the direct material cost assigned to Job #045391 be located? A. Raw materials inventory B. Finished goods inventory C. Work in process inventory D. Cost of goods manufactured E. Cost of Goods Sold
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Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers: During the year, 750 laptop computers were sold. What was cost of goods sold using the LIFO cost flow assumption? A. $717,500 B. $730,000 C. $703,125 D. $725,500 E. None of the above 5. In a job-order costing system, the purchase of indirect materials available for production would usually be recorded as a debit to: A. Raw Materials. B. Work in Process. C. Manufacturing Overhead.
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Spring_2011_Midterm_D%5b1%5d - 1 A company sells computers...

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