An entity has a majority of its customers located in states A and B. A major west coast bank has agreed to provide a lockbox system to the entity at a fixed fee of US $50,000 per year and a variable fee of US $0.50 for each payment processed by the bank. On average, the entity receives 50 payments per day, each averaging US $20,000. With the lockbox system, the entity's collection float will decrease by 2 days. The annual interest rate on money market securities is 6%. If the entity makes use of the lockbox system, what would be the net benefit to the entity? Use 365 days per year.

• A.US $55.125
• B.US $60,875
• C.US $50,000
• D.US $120,000

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If the amount to be received in 4 years is US $137,350, and given the correct factor from the 10% time-value-of-money table below, what is the current investment?

• A.US $30,034.33
• B.US $43,329.44
• C.US $93.810.05
• D.US $201,094.14

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In a process-costing system, the cost of abnormal spoilage should be:

• A.Prorated between units transferred out and ending inventory
• B.Included in the cost of units transferred out.
• C.Treated as a loss in the period incurred.
• D.Ignored.

Correct Answer: C

Abnormal spoilage is spoilage that is not expected to occur under normal, efficient operating conditions. Because of its unusual nature, abnormal spoilage is typically treated as a loss in the period in which it is incurred. Believing that its traditional cost system may be providing misleading information, an organization is considering an activity-based costing ABC) approach. It now employs a full cost system and has been applying its manufacturing overhead on the basis of machine hours. The organization plans on using
50.000 direct labor hours and 30.000 machine hours in the coming year. The following data show the manufacturing overhead that is budgeted.

Cost, sales, and production data for one of the organization' s products for the coming year are as follows:

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Assuming a 360-day year and that CyberAge continues paying on the last day of the credit period, the entity's weighted-average annual interest rate for trade credit ignoring the effects of compounding) for these two vendors is:

• A.27.0%
• B.25.2%
• C.28.0%
• D.30.2%

Correct Answer: B

If the entity pays Web [...Taster within 10 days, it will save US $500 $25,000 2%). Thus, the entity is effectively paying US $500 to retain US $24,500 $25,000 - $500) for 20 days 30 10). The annualized interest rate on this borrowing is 36.7346% [(US $500 + $24,500) x 360 days / 20 days)]. Similarly, the entity is, in effect, paying Softidee US $2,500 $50,000 5%) to hold US $47.500 $50,000 - $2,500) for 80 days 90 - 1 0). The annualized rate on this borrowing is 23.6842% [(US $2,501-1 - $47,500) 361 r days - 80 days)]. The average amount burrowed from Web Master is US $16,333 33 [$24,500 x 1 month x 20 days - 30 days)]. The average amount borrowed from web master is US $126,666.67 [$47,500 x 3 months x 80 days / 90 days)]. Thus, the weighted average of these two rates based on average borrowing is 25.2% [(US16,333,33 x 36.7346%) + ($126,666,67 x 23,6824%] / $16,333.33 + $126,666.67)]. This calculation however, understates the true cost of not taking the discount because it does not consider the effects of compound. CyberAge Outlet, a relatively new store, is a cafe that offers customers the opportunity to browse the Internet or play computer games at their tables while they drink coffee. The customer pays a fee based on the amount of time spent signed on to the computer. The store also sells books. tee-shirts, and computer accessories. CyberAge has been paying all of its bills on the last day of the payment period, thus forfeiting all supplier discounts. Shown below are data on CyberAge's two major vendors, including average monthly purchases and credit terms.

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A validation check used to determine if a quantity ordered field contains only numbers is an example of a(n):

• A.Input control.
• B.Audit trail control.
• C.Processing control.
• D.Data security control.

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