1. Decision on Accepting Additional Business

   Brightstone Tire and Rubber Company has capacity to produce 153,000 tires. Brightstone presently produces and sells 117,000 tires for the North American market at a price of $111 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 18,000 tires for $93.95 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:

   Direct materials	$42
   Direct labor	16
   Factory overhead (70% variable)	26
   Selling and administrative expenses (40% variable)	22
   Total	$106

   Brightstone pays a selling commission equal to 5% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $6 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $106,200.

   a. Prepare a The area of accounting concerned with the effect of alternative courses of action on revenues and costs.differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. If an amount is zero, enter zero "0". If required, round interim calculations to two decimal places.

   Differential Analysis
   Reject Order (Alt. 1) or Accept Order (Alt. 2)
   January 21
   	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effect on Income (Alternative 2)
   Revenues	$	$	$
   Costs:
   Direct materials
   Direct labor
   Variable factory overhead
   Variable selling and admin. expenses
   Shipping costs
   Certification costs
   Income (Loss)	$	$	$

   Feedback

   Determine whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors.
   

   • Accept the special order
   • Reject the special order

   b. What is the minimum price per unit that would be financially acceptable to Brightstone? Round your answer to two decimal places.
   $per unit

Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:

The following supplier information is given:

Which supplier is least costly?

a.Y2

b.Z1

c.X3

d.They are equally costly.

Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:

The following supplier information is given:

Which supplier is least costly?

a.Y2

b.Z1

c.X3

d.They are equally costly.

The following inventory transactions occurred at Zinc, Inc., which uses a perpetual inventory system:

October 2 Purchased 50 units of inventory from supplier on credit. The goods cost $30 each and the credit terms were 2/10, n/30. The shipping costs were $100 under the terms FOB destination and Zinc received the inventory on October 3rd.

October 4 Returned 5 units of inventory from the October 2nd transaction to to the supplier.

October 6    Sold 15 of the units purchased on October 2nd for $50 each to customers for cash.

October 7 Accepted a return of one unit of inventory from an October 6th customer for a cash refund.

October 10 Established a petty cash fund for $300.

October 11 Paid the supplier for one-half of the inventory purchased on October 2nd, net of any returns.

October 15 Used $20 out of petty cash to pay for stamps (postage expense).

October 28 Purchased 10 units of inventory from a supplier on credit. The good cost #25 each and no credit terms were granted. The shipping costs were $50 under the terms FOB destination and Zinc received the inventory on November 2.

October 30 Paid the remaining balance owed to the supplier from the October 2nd transaction.

October 31 Replenished petty cash.

Using the space provided below and on the next page, record the appropriate journal entries for these transactions with the appropriate date (no journal entry description is required). Include only journal entries that relate to October business. If no journal entry is needed, write the transaction date and NO Entry.   

Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system.

A report for the company's Assembly Department for the month of March follows:

After receiving a copy of this cost report, the supervisor of the Assembly Department stated, “These reports are super. It makes me feel really good to see how well things are going in my department. I can’t understand why those people upstairs complain so much about the reports.”

For the last several years, the company’s marketing department has chronically failed to meet the sales goals expressed in the company’s monthly budgets.

Required:

1. The company’s president is uneasy about the cost reports, identify at least two reasons.

2. What kind of reports should be used to give better insight into how well departmental supervisors are controlling costs?

3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach.

4. Were costs well controlled in March?

The company’s president is uneasy about the cost reports, identify at least two reasons. (Select "X" if the item is one of the reasons.)

• What changes, if any, should be made in the reports to give better insight into how well departmental supervisors are controlling costs?

  	Flexible budget performance reports must be usedradio button unchecked1 of 2 Fixed budget performance reports must be usedradio button unchecked

• prepare a new performance report for the quarter, (Do not round your intermediate calculations. 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.)

  	Westmont Corporation Assembly Department Flexible Budget Performance Report For the Month Ended March 31 Actual Results Flexible Budget Planning Budget Machine-hours (q) 15,000 20,000 Supplies $10,500 $11,100 Scrap 37,800 40,500 Indirect materials 108,200 129,000 Wages and salaries 82,300 77,000 Equipment depreciation 107,000 107,000 Total $345,800 $364,600

• How well were costs controlled in the Assembly Department in March?

  	Costs were well controlledradio button unchecked1 of 2 Costs were not well controlledradio button unchecked2 of 2

Creative Computing sells a tablet computer called the Protab. The $970 sales price of a Protab Package includes the following:

• One Protab computer.
• A 6-month limited warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to six months.
• A coupon to purchase a Creative Probook e-book reader for $375, a price that represents a 40% discount from the regular Probook price of $625. It is expected that 20% of the discount coupons will be utilized.
• A coupon to purchase a one-year extended warranty for $60. Customers can buy the extended warranty for $95 at other times if they do not use the $60 coupon. Creative estimates that 30% of customers will purchase an extended warranty.
• Creative does not sell the Protab without the limited warranty, option to purchase a Probook, and the option to purchase an extended warranty, but estimates that if it did so, a Protab alone would sell for $950.

Required:
1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 80,000 Protab Packages to the separate performance obligations in the contract.
3. Prepare a journal entry to record sales of 80,000 Protab Packages (ignore any sales of extended warranties).

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000 machine-hours during March.

Required:

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

Calculate the activity variances for March. (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.)

Calculate the spending variances for March. (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.)

Case 9-31 Master Budget with Supporting Schedules [LO9-2, LO9-4, LO9-8, LO9-9, LO9-10]

You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash.

Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter in order to show management the benefits that can be gained from an integrated budgeting program. To this end, you have worked with accounting and other areas to gather the information assembled below.

The company sells many styles of earrings, but all are sold for the same price—$18 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):

The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.

Suppliers are paid $5.4 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.

Monthly operating expenses for the company are given below:

Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $23,000 in new equipment during May and $54,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $25,500 each quarter, payable in the first month of the following quarter.

A listing of the company’s ledger accounts as of March 31 is given below:

The company maintains a minimum cash balance of $64,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $64,000 in cash.

Required:

1. Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets:

a. A sales budget, by month and in total.

b. A schedule of expected cash collections from sales, by month and in total.

c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. (Round unit cost of purchases to 1 decimal place.)

d. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.

189. Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $137,000; Chris, $97,000; and Molly, $117,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $77,000. The balance in Caitlin’s capital account immediately after Paul’s admission is:

• $139,580

• $134,420

• $77,000

• $85,600

• $137,000

195. Martin Company purchases a machine at the beginning of the year at a cost of $69,000. The machine is depreciated using the straight-line method. The machine’s useful life is estimated to be 5 years with a $6,000 salvage value. The book value of the machine at the end of year 5 is:

• $27,600.

• $12,600.

• $6,000.

• $63,000.

• $0.

The assignment is to imagine yourself 10 years in the future. I'm basing my salary off the average financial adviser for myself and a school teacher for my wife. (PA). Me $ 76,035 Her $62,260. I need to make a budget.

Personal and Family Expenses

Personal and Family Expenses (continued)

High-Low Method. Castanza Company produces computer printers. Management wants to estimate the cost of production equipment used to produce printers. The company reported the following monthly cost data related to production equipment:

Required:

1. Use the four steps of the high-low method to estimate total fixed costs per month and the variable cost per machine hour. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.
2. What would Castanza Company’s estimated costs be if it used 50,000 machine hours next month?
3. What would Castanza Company’s estimated costs be if it used 15,000 machine hours next month? Why should you feel uncomfortable estimating costs for 15,000 machine hours?

Creative Computing sells a tablet computer called the Protab. The $970 sales price of a Protab Package includes the following: One Protab computer. A 6-month limited warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to six months. A coupon to purchase a Creative Probook e-book reader for $200, a price that represents a 50% discount from the regular Probook price of $400. It is expected that 25% of the discount coupons will be utilized. A coupon to purchase a one-year extended warranty for $70. Customers can buy the extended warranty for $70 at other times as well. Creative estimates that 35% of customers will purchase an extended warranty. Creative does not sell the Protab without the limited warranty, option to purchase a Probook, and the option to purchase an extended warranty, but estimates that if it did so, a Protab alone would sell for $950. All Protab sales are made in cash. Required: 1. & 2. Indicated below whether each item is a separate performance obligation and allocate the transaction price of 90,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 90,000 Protab Packages (ignore any sales of extended warranties).

Average Rate of Return Method, Net Present Value Method, and Analysis

The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows:

Each project requires an investment of $380,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis.

Required:

1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.

1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value.

2. The warehouse has a   net present value as tracking technology cash flows occur   in time. Thus, if only one of the two projects can be accepted, the   would be the more attractive.

NUMBER THREE:

The financial statements for Castile Products, Inc., are given below:

Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $310,000. All sales were on account.

Required:

Compute the following financial data and ratios:

1. Working capital.

2. Current ratio. (Round your answer to 1 decimal place.)

3. Acid-test ratio. (Round your answer to 2 decimal places.)

4. Debt-to-equity ratio. (Round your answer to 2 decimal places.)

5. Times interest earned ratio. (Round your answer to 2 decimal places.)

6. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)

7. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)

8. Operating cycle. (Round your intermediate calculations and final answer to 1 decimal place.)

Tolson Company purchased a building by paying $85,000. The building has an estimated life of 40 years and an estimated residual value of $5,000.

Required: