Use the Information That Follows Taken from Campbell Company's Financial

question 37

Multiple Choice

Use the information that follows taken from Campbell Company's financial statements for the years ending December 31, 2017 and 2016.
$\begin{array}{lrr}\text { Balance Sheet Information }&2017&2016\\\hline \text { Assets}\\\text { Cash } & \$ 25 & \$ 50 \\\text { Accounts receivable } & 60 & 70 \\\text { Inventory } & 40 & 30 \\\text { Land, building, and equipment } & \underline{225} & \underline{250} \\\text { Total Assets } & \$ \underline{350} & \$ \underline{400} \\\end{array}$

$\begin{array}{l}\text { Liabilities and Shareholders' Equity }\\\hline \text { Accounts payable } & \$ 85 & \$ 100 \\\text { Long term note payable } & 180 & 200 \\\text { Common stock } & 150 & 150 \\\text { Retained earnings } & \underline{(65) } &\underline{ (50) } \\\text { Total Liabilities \& Shareholders' Equity }& \underline{\$ 350 }& \underline{\$ 400 }\\\end{array}$

$\begin{array}{lr}\text { Income Statement Information }\\\text { Sales (all sales are on credit) } & \$ 850 \\\text { Cost of goods sold } & \underline{425} \\\text { Gross profit } & {425}\\\text { Operating expenses } & \underline{ 440} \\\text { Net income } &\$(15) \end{array}$
Calculate Campbell's inventory turnover ratio and accounts receivable turnover ratio for the year ended 2017. Further, assume that in Campbell's industry, the industry average inventory turnover ratio is 12 and the industry average receivables turnover ratio is 14.

• A)Campbell's inventory turnover ratio and accounts receivable turnover ratios are better than average for Campbell's industry.
• B)Campbell's inventory turnover ratio and accounts receivable turnover ratios are worse than average for Campbell's industry.
• C)Campbell's inventory turnover ratio is better but the accounts receivable turnover ratio is worse than average for Campbell's industry.
• D)Campbell's inventory turnover ratio is worse and accounts receivable turnover ratio is better than average for Campbell's industry.

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Definitions:

Direct Labor Time Variance

The difference between the actual time taken to manufacture a product and the standard time expected, multiplied by the wage rate.

Direct Labor Time Variance

The difference between the estimated time for production and the actual time taken, multiplied by the wage rate.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the standard cost, indicating efficiency in labor usage.

Direct Labor Rate Variance

The difference between the actual labor cost incurred and the expected (or standard) labor cost for the actual production level.