Auditing and Assurance Services, Student Value Edition (16th Edition)
Auditing and Assurance Services, Student Value Edition (16th Edition)
16th Edition
ISBN: 9780134075754
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Chapter 19, Problem 6RQ
To determine

Discuss the relationship between substantive test of transactions for the acquisition and payment cycle and tests of details of balances for the verification of prepaid insurance.

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Bella Brands operates with two divisions, Aftershave and Deodorant. The Aftershave Division produces a chemical that the Deodorant Division also uses. The Aftershave Division also sells this chemical to other firms for $10 per ounce. The cost information for the Aftershave Division is as follows:  Variable costs per ounce $ 6.00   Fixed costs per ounce $ 15.00   Monthly production capacity 30,000 ounces If the Aftershave Division is not operating at full capacity and is able to supply the Deodorant Division with its needs for the chemical, what is the minimum transfer price that the Aftershave Division will accept?   Multiple Choice   None of the choices is correct.   $10.00 per ounce   $6.00 per ounce   $15.00 per ounce   $3.00 per ounce
Brar Incorporated supplied the following financial information for analysis:   Depreciable assets (purchased at the beginning of year 1) $ 4,500,000 Profits before depreciation (all in cash flows at end of year):   Year 1 960,000 Year 2 1,400,000 Year 3 2,100,000 Replacement cost of depreciable assets at end of:   Year 1 $ 5,000,000 Year 2 6,200,000 Year 3 7,600,000   The assets are depreciated at a rate of 12% per year and have no salvage value. What is the ROI for year 2 using historical cost, net book value?   Multiple Choice   26.60%   24.72%   25.15%   22.64%   None of these.
Bella Brands operates with two divisions, Aftershave and Deodorant. The Aftershave Division produces a chemical that the Deodorant Division also uses. The Aftershave Division also sells this chemical to other firms for $27 per ounce. The cost information for the Aftershave Division is as follows:  Variable costs per ounce $ 6.00   Fixed costs per ounce $ 15.00   Monthly production capacity 30,000 ounces If the Aftershave Division is operating at full capacity and can sell all of the chemical that it can produce, what is the minimum transfer price that the Aftershave Division will accept?   Multiple Choice   None of the choices is correct.   $6.00 per ounce   $21.00 per ounce   $15.00 per ounce   $27.00 per ounce
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