1.
Introduction:
Step-down method: The overhead costs of supporting incurred by the supporting department are allocated to other supporting departments and also the operating department based on the allocation base.
Allocation of the service department’s cost to the consuming department and the predetermined overhead rates in the operating department.
2.
Introduction:
Direct method: Under the direct method, the overhead costs incurred by the supporting department are directly allocated to the operating department.
Allocation of the service department’s cost to the consuming department using the direct method and the predetermined overhead rate.
3.
a.
Step-down method: The overhead costs of supporting incurred by the supporting department are allocated to other supporting departments and also the operating department based on the allocation base.
The amount of overhead cost for the job using overhead rates computed in parts 1 and 2.
3.
b.
Step-down method: The overhead costs of supporting incurred by the supporting department are allocated to other supporting departments and also the operating department based on the allocation base.
The reason the step-down method is a better base for computing the predetermined rates than the direct method.
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Chapter 5 Solutions
FUND.ACCT.PRIN.-CONNECT ACCESS
- 4. Comment on the company’s ability to utilize its assets and manage its liabilities effectively using the following efficiency ratios a. Total Asset Turnoverb. Accounts Payable Turnoverc. Return on Total Assets (ROA)arrow_forwardDo the following: (1) Assign a formula to (1) Tot. current assets, (2) Net fixed assets, (3) Total assets (2) Do the same to other cells if they are calculated. This can vary depending on YOUR financial statements FIN CF and Toves Last Namo vlex (sheet name:arrow_forwardIndicate the effect of the transactions listed in the following table on total current assets, current ration, and net income. Use (+) to indicate an increase, (-) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. A fixed asset is sold for more than book value.arrow_forward
- Which business transaction will affect the quick ratio? a. Purchase a fixed asset with money borrowed long term b. Liquidate a temporary investment and put the money in a checking account c. Sell some inventory and use the cash immediately to buy a fixed asset d. Make a payment to a vendor on an account payablearrow_forwardABS GMA Ratio Analysis 2010 2009 2008 2007 2010 2009 2008 2007 Liquidity Management Working capital Current ratio Quick ratio 3,885.7 2,802.1 1,585.5 2.444.9 5,786.1 6,126.0 5,030.3 4,157.9 1.36 1.33 1.19 1.38 3.70 3.60 3.23 2.52 1.35 1.31 1.16 1.35 3.65 3.55 3.19 2.49 Asset Management AR Turnover ratio Average collection period Inventory Turnover ratio Inventory conversion period Asset Turnover ratio 1.06 1.05 1.05 1.00 1.03 1.08 0.96 1.00 344.71 346.70 349.28 365.00 352.77 338.15 380.43 365.00 90.62 65.15 59.07 55.99 43.78 44.20 50.07 50.79 4.03 5.60 6.18 6.52 8.34 8.26 7.29 7.19 0.75 0.65 0.66 0.66 0.92 0.89 0.87 0.87 Debt Management Times interest earned ratio Debt to equity ratio Equity multiplier 4.66 3.00 3.17 4.70 975.58 423.76 373.25 143.52 1.20 1.16 1.18 0.82 0.25 0.26 0.28 0.37 2.18 2.17 2.01 1.82 1.25 1.27 1.32 1.37arrow_forwardWhats the equation to find current ratio when current assets isnt given? Also how do you find debit to equity ratio in this kind of problem?arrow_forward
- analyze a campany's liquidity and solvency by using simple financial ratios. here you will answer questions relayed to saturn sales comapny ltd. analyze the both financial statements and answer the following question.arrow_forwardIndicate the effect of the transactions listed in the following table on total current assets, current ration, and net income. Use (+) to indicate an increase, (-) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. A fixed asset is sold for less than book value.arrow_forwardWhich of the following is the correct formula for calculating rate of return on total assets? A. (Net income minus− Interest expense) / Average total asset B. Total equity / Total assets C. (Net income + Interest expense) / Average total assets D. (Net income minus− Interest expense) / Total assetsarrow_forward
- Find the following using the data bellow a. Accounts receivable B. Current assets C. Total assets D. Return on assets E. Common equity F. Quick ratioarrow_forwardShow the calculation of the following activity ratios: (1) the receivables turnover ratio, (2) the inventory turnover ratio, and (3) the asset turnover ratio. What information about a company do these ratios offer?arrow_forwardWhich of the following statement is correct? Select one: O a. Return on assets is the ratio of net income after interest expense to total assets O b. All options are correct statement C. Average collection period is the average number of times it takes for the company's customers to pay their bills o d. Increase in the debt ratio indicate more reliance on debt as a source of financingarrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
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