A Firm Has the Following Balance Sheet According to the Unmodified Percentage of Sales Method, the Amount

question 97

Multiple Choice

A firm has the following balance sheet. It expects sales to increase 30% over the previous year's level of $9,000, and anticipates retaining $3,000 of its earnings. $\begin{array}{lclc}\text { Cash } & \$ 4,000 & \text { Accountspayable } & \$ 2,500 \\\text { Accountsreceivable } & 3,000 & \text { Accrued expenses payable } & 1,000 \\\text { Inventories } & 2,000 & \text { Longterm debt } & 6,000 \\\text { Net fixed assets } & 12,500 & \text { Common stock } & 8,500\\&&\text { Retained earnings } & 3,500\\\text { Total asssets }&\$21,500&\text { Total liabilities and capjital }&\$21,500\end{array}$ According to the unmodified percentage of sales method, the amount of external funds needed will be:

• A) $2,400.
• B) $6,450.
• C) $3,450.
• D) None of the above

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Definitions:

Variable Overhead

Costs that vary with the level of production output, such as utilities and commissions.

Materials Price Variance

The difference between the actual cost of materials and the standard cost, multiplied by the actual quantity of materials used.

Variable Manufacturing Overhead

This refers to the manufacturing overhead costs that vary with the level of production, such as utilities or indirect materials.

Materials Price Variance

The variance between the standard cost and the actual expense of materials, factored by the number of materials acquired.