Activity-Based Costing, Unit Cost, Ending Work-in-Process Inventory Salazar Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Salazar identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Setting up design $168,000 Setups 1,200 Purchasing 186,000 Number of parts 15,000 Other overhead 415,000 Direct labor hours 50,000 Salazar worked on five jobs in March. Data are as follows: Job 15 Job 16 Job 17 Job 18 Job 19 Balance, March 1 $34,600 $39,890 $24,090 $0 $0 Direct materials $28,000 $37,900 $25,350 $11,000 $13,550 Direct labor $10,000 $8,500 $23,000 $12,700 $8,000 Setups 20 14 35 8 15 Number of parts 150 180 200 500 300 Direct labor hours 650 580 1,600 870 520 By March 31, Jobs 15, 16, and 17 were completed and sold. The remaining jobs were in process. Required: 1. Calculate the activity rates for each of the three overhead activities. If required, round your answers to the nearest cent. Setup rate $ 140 per set up Purchasing rate $ 12.4 per part Other overhead rate $ 8.3 per direct labor hour Feedback 1. Remember OH rate = estimated annual OH ÷ by the related driver. 2. Prepare job-order cost sheets for each job showing all costs through March 31. What is the cost of each job by the end of March?. If an amount is zero, enter "0". Salazar Company Job-Order Cost Sheets Job 15 Job 16 Job 17 Job 18 Job 19 Balance, March 1 $ 34,600 $ 39,890 $ 24,090 $ 0 $ 0 Direct materials 28,000 37,900 25,350 11,000 13,550 Direct labor 10,000 8,500 23,000 12,700 8,000 Applied overhead: Setups Purchasing Other overhead Total cost $ $ $ $ $ Feedback 2. The job-order cost sheet must include a unique number or name for this particular job, all direct costs, and all overhead costs associated with the job. 3. Calculate the balance in Work in Process on March 31. $ 4. Calculate the cost of goods sold for March. $

Presented Below is Information related to Matrix Company at December 31,2018 the end of its first year of operations:

Account Balance

Question 1: What is income from continuing operations?

Question 2: What is the difference between continuing operations and net income?

Kollar Corp.’s transactions for the year ended December 31, Year 6, included the following:

Kollar’s net cash used in financing activities for Year 6 was

A $450,000

B $500,000

C $250,000

D $50,000

The following is the balance sheet of Korver Supply Company at December 31, 2020 (prior year). KORVER SUPPLY COMPANY Balance Sheet At December 31, 2020 Assets Cash $120,000 Accounts receivable 300,000 Inventory 200,000 Furniture and fixtures (net)  150,000 Total assets $770,000 Liabilities and Shareholders’ Equity Accounts payable (for merchandise) $190,000 Notes payable 200,000 Interest payable 6,000 Common stock 100,000 Retained earnings  274,000 Total liabilities and shareholders’ equity $770,000 Transactions during 2021 (current year) were as follows: 1. Sales to customers on account $800,000 2. Cash collected from customers 780,000 3. Purchase of merchandise on account 550,000 4. Cash payment to suppliers 560,000 5. Cost of merchandise sold 500,000 6. Cash paid for operating expenses 160,000 7. Cash paid for interest on notes 12,000 Additional Information: The notes payable are dated June 30, 2020, and are due on June 30, 2022. Interest at 6% is payable annually on June 30. Depreciation on the furniture and fixtures for 2021 is $20,000. The furniture and fixtures originally cost $300,000.

Required: Prepare a classified balance sheet at December 31, 2021, by updating ending balances from 2020 for transactions during 2021 and the additional information. The cost of furniture and fixtures and their accumulated depreciation are shown separately.

Acme Company Balance Sheet As of January 5, 2019 (amounts in thousands)

Cash 9,100                                              Accounts Payable 1,900

Accounts Receivable 4,400                        Debt 2,400

Inventory 4,800                                         Other Liabilities 600

Property Plant & Equipment 15,600            Total Liabilities 4,900

Other Assets 2,600                                  Paid-In Capital 6,900

                                                               Retained Earnings 24,700

                                                              Total Equity 31,600

Total Assets 36,500                                 Total Liabilities & Equity 36,500

Update the balance sheet above to reflect the transactions below, which occur on January 6, 2019

1. Sell product for $25,000 with historical cost of $20,000

2. Sell product for $30,000 with historical cost of $24,000

3. Sell product for $40,000 with historical cost of $32,000

What is the final amount in Retained Earnings?

Please specify your answer in the same units as the balance sheet.

Ahmed’s income statement is as follows:

1. If Sales increase by $10,000, what is the new operating income?
2. Calculate the Break-even point in units for Herman.
3. Herman wants to earn operating income of $20,000. What amount of sales dollars will he need in to accomplish this goal?
4. Herman wants to earn net income (after taxes) of $35,000 and his tax rate is 30%. What amount of sales dollars will he need to accomplish this goal?

Chamberlain Enterprises Inc. reported the following receivables in its December 31, 2021, year-end balance sheet:

Additional Information:

1. The notes receivable account consists of two notes, a $100,000 note and a $270,000 note. The $100,000 note is dated October 31, 2021, with principal and interest payable on October 31, 2022. The $270,000 note is dated June 30, 2021, with principal and 6% interest payable on June 30, 2022.
2. During 2022, sales revenue totaled $1,450,000, $1,335,000 cash was collected from customers, and $33,000 in accounts receivable were written off. All sales are made on a credit basis. Bad debt expense is recorded at year-end by adjusting the allowance account to an amount equal to 10% of year-end accounts receivable.
3. On March 31, 2022, the $270,000 note receivable was discounted at the Bank of Commerce. The bank's discount rate is 10%. Chamberlain accounts for the discounting as a sale.

Required:
In addition to sales revenue, what revenue and expense amounts related to receivables will appear in Chamberlain’s 2022 income statement?
What amounts will appear in the 2022 year-end balance sheet for accounts receivable and Calculate the receivables turnover ratio for 2022.

Square Manufacturing is considering investing in a robotics manufacturing line. Installation of the line will cost an estimated $10.5 million. This amount must be paid immediately even though construction will take three years to complete (years 0, 1, and 2). Year 3 will be spent testing the production line and, hence, it will not yield any positive cash flows. If the operation is very successful, the company can expect after-tax cash savings of $7.5 million per year in each of years 4 through 7. After reviewing the use of these systems with the management of other companies, Square’s controller has concluded that the operation will most probably result in annual savings of $4.9 million per year for each of years 4 through 7. However, it is entirely possible that the savings could be as low as $3.3 million per year for each of years 4 through 7. The company uses a 14 percent discount rate. Use Exhibit A.8.

Required:

Compute the NPV under the three scenarios. (Round PV factor to 3 decimal places. Enter your answers in thousands of dollars. Negative amounts should be indicated by a minus sign.)

Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $28,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Use Exhibit 3.1.

a. What is the after-tax income if Hank sends his client the bill in December?

b. What is the after-tax income if Hank sends his client the bill in January? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return
4%   5%   6%   7%   8%   9%   10%   11%   12%
Year 1   .962   .952   .943   .935   .926   .917   .909   .901   .893
Year 2   .925   .907   .890   .873   .857   .842   .826   .812   .797
Year 3   .889   .864   .840   .816   .794   .772   .751   .731   .712
Year 4   .855   .823   .792   .763   .735   .708   .683   .659   .636
Year 5   .822   .784   .747   .713   .681   .650   .621   .593   .567
Year 6   .790   .746   .705   .666   .630   .596   .564   .535   .507
Year 7   .760   .711   .665   .623   .583   .547   .513   .482   .452
Year 8   .731   .677   .627   .582   .540   .502   .467   .434   .404
Year 9   .703   .645   .592   .544   .500   .460   .424   .391   .361
Year 10   .676   .614   .558   .508   .463   .422   .386   .352   .322
Year 11   .650   .585   .527   .475   .429   .388   .350   .317   .287
Year 12   .625   .557   .497   .444   .397   .356   .319   .286   .257
Year 13   .601   .530   .469   .415   .368   .326   .290   .258   .229
Year 14   .577   .505   .442   .388   .340   .299   .263   .232   .205
Year 15   .555   .481   .417   .362   .315   .275   .239   .209   .183

c. Should Hank send his client the bill in December or January?

• December

• January

d. What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

e. Should Hank send his client the bill in December or January if he expects his marginal tax rate to be 32 percent this year and 24 percent next year?

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 5,200 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

take the role of mentor to a new project manager within your organization. This assignment focuses on guidance the mentor provides the new project manager regarding cost.

Cost serves several purposes for an organization: (1) planning and budgeting, (2) assisting in decision making, (3) comparing actual to budget (control), and (4) calculating income generated from operations and projects (score-keeping). Select one these areas and prepare a short document outlining the following items:

• Identify one of the cost purposes listed above.
• Select two of the five cost classifications described in the text: financial statement presentation (cost function): cost behavior, assigning costs to products and services, costs for decision making, and cost of quality (see page 75).
• Describe how knowledge of cost, as described within its classification, is needed to effectively manage costs and improve the success of a project for the stated purpose.

The total factory overhead for Diva-nation is budgeted for the year at $169,465, divided into four activities: cutting, $18,130; sewing, $34,121; setup, $87,055; and inspection, $30,159. Diva-nation manufactures two types of men’s pants: jeans and khakis. The activity-base usage quantities for each product by each activity are as follows:

Each product is budgeted for 20,000 units of production for the year.

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,065 hours each month to produce 2,130 sets of covers. The standard costs associated with this level of production are:

During August, the factory worked only 1,050 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 2.0 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

QUESTIONS TO ANSWER:

1. Materials Price Variance

Materials Quantity Variance

2. Labor Rate Variance

Labor Efficiency Variance

3. Variable Overhead Rate Variance

Variable Overhead Efficiency Variance

Computer Gaming Industries has just started business as a computer-based gaming company. Knowing that small computer businesses rarely remain in business longer than five years, Computer Gaming depreciates all its assets for five years. The assets include a building, integrated circuit shaper, and vehicles. Is this ethical? What impact will its action have on the net income? What, if any, is the correct action?

Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow.

   
Additional production information concerning its two product lines follows.

  
Required:
1. Using ABC, compute the overhead cost per unit for each product line.
2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $190 for Model 145 and $116 for Model 212.
3. If the market price for Model 145 is $821.61 and the market price for Model 212 is $498.56, determine the profit or loss per unit for each model.

Using ABC, compute the overhead cost per unit for each product line. (Round your final answers to 2 decimal places.)

Required 1:

Required 2:

Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $190 for Model 145 and $116 for Model 212. (Round your final answers to 2 decimal places.)

Required 3:

If the market price for Model 145 is $821.61 and the market price for Model 212 is $498.56, determine the profit or loss per unit for each model. (Round your final answers to 2 decimal places.)