Oyolium Ltd was incorporated 10 years ago and has been quite successful. The company wants to expand and requires further funds to do so. Rather than seeking finance from Banks it decides to offer Ordinary shares to the public. A Prospectus was issued on 1^st August 20X3 seeking applications for 5,000,000 Ordinary share at $10.00 each. Details of the offer are:

• $3.00 on Application to be received on or by 30^th September 20X3
• $2.00 payable on Allotment
• The remaining $5.00 to be available for Call at the company’s discretion.

Applications for 7,000,000 shares were received by the required date. Details are:

• 1,000,000 applications paid for the shares in full (ie $10.00)
• The remaining applications (6,000,000) paid $3.00 as requested.

The company decided to deal with the oversubscription as follows:

• The applications who paid for their shares in full were allotted all the share applied for. Excess money was held by the company.
• Of the remaining applications:
• 1,000,000 applicants had their applications refused and their money refunded.
• The remaining applications (5,000,000) were allotted shares in proportion to their applications (ie 4/5). Any excess money was retained by the company.

Shares were allotted on the 1^st October 20X3 and all allotment monies were received on 31^st October 20X3.

On the 1^st January 20X4 the company made a call of $2.50 per share required to be paid by the 28^th February 20X4. All shareholders paid their monies as required.

REQUIRED

Prepare all the general journal entries in the records of Oyolium Ltd to record all the described events above.

Adams Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of 2018 (during which Adams made 70,000 tennis racquets and 29,400 badminton racquets).

   
Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter. Facility-level cost includes depreciation of all production equipment.

   
Required

1. Compute the cost per unit for each product.

2. If management wants to price badminton racquets 30 percent above cost, what price should the company set?

Apache Corporation manufactures a single product called E-Z Printer. The standard cost per unit of product is shown below.

The predetermined manufacturing overhead rate is $7 per direct labor hour. It was computed from a master manufacturing overhead budget based on normal production of 20,000 direct labor hours (10,000 units) for the month. The master budget showed total variable costs of $80,000 ($4.00 per hour) and total fixed overhead costs of $60,000 ($3.00 per hour). Actual costs for October in producing 9,700 units were as follows.

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

Instructions

Compute the following variances for the E-Z Printer for the Apache Corporation and indicate whether the variance is favorable or unfavorable (F or U). Round computations and final answers to 0 decimal places. Show ALL computations or NO credit given.

1. Total materials variance
2. Direct materials price variance
3. Direct materials quantity variance
4. Total labor variance
5. Direct labor price variance
6. Direct labor quantity variance
7. Total overhead variance

Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system:

*Applied to Work in Process during the period.

The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored.

Required:

1. How many units were produced last period?

2. How many pounds of direct material were purchased and used in production?

3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.)

4. How many actual direct labor-hours were worked during the period?

5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.)

6. How much actual variable manufacturing overhead cost was incurred during the period?

Boyne University offers an extensive continuing education program in many cities throughout the state. For the convenience of its faculty and administrative staff and to save costs, the university operates a motor pool. The motor pool’s monthly planning budget is based on operating 19 vehicles; however, for the month of March the university purchased one additional vehicle. The motor pool furnishes gasoline, oil, and other supplies for its automobiles. A mechanic does routine maintenance and minor repairs. Major repairs are performed at a nearby commercial garage.

The following cost control report shows actual operating costs for March of the current year compared to the planning budget for March.

The planning budget was based on the following assumptions:

1. $0.22 per mile for gasoline.
2. $0.11 per mile for oil, minor repairs, and parts.
3. $46 per automobile per month for outside repairs.
4. $81 per automobile per month for insurance.
5. $8,610 per month for salaries and benefits.
6. $206 per automobile per month for depreciation.

The supervisor of the motor pool is unhappy with the report, claiming it paints an unfair picture of the motor pool’s performance.

Required:

1. 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.)

7

Decision on Accepting Additional Business

Brightstone Tire and Rubber Company has capacity to produce 196,000 tires. Brightstone presently produces and sells 150,000 tires for the North American market at a price of $97 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 23,000 tires for $81.75 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:

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 $5 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $117,300.

a. Prepare a 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.

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

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

$per unit

Q#1: As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients.

Suit Up produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Suit Up reports the following cost data for the past​ year:

Requirements

1. Compute the predetermined manufacturing overhead rate.

2. Calculate the allocated manufacturing overhead for the past year.

3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed​ of?

4. How can managers use accounting information to help control manufacturing overhead​ costs?

Budget Actual

Direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100 hours 6,100 hours

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400 hours 6,400 hours

Depreciation on salespeople's autos . . . . . . . . . . . . . . . .$22,000 $22,000

Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,000 $50,500

Depreciation on trucks used to deliver uniforms to customers . . . . . . . . . . . . . . . . . . . . . . . $13,500 $11,500

Depreciation on plant and equipment . . . . . . . . . . . $70,000 $71,500

Indirect manufacturing labor . . . . . . . . . . . . . . . . . . . . $42,000 $45,000

Customer service hotline . . . . . . . . . . . . . . . . . . . . . . $19,500 $21,500

Plant utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,200 $21,200

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,000 $85,000

Budget Actual Direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100 hours 6,100 hours

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400 hours 6,400 hours

Depreciation on salespeople's autos . . . . . . . . . . . $22,000 $22,000

Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,000 $50,500

Depreciation on trucks used to deliver uniforms to customers . . . . . . . . . . . . . . . . . . . . . . . $13,500 $11,500

Depreciation on plant and equipment . . . . . . . . . . . $70,000 $71,500

Indirect manufacturing labor . . . . . . . . . . . . . . . . . . . . $42,000 $45,000

Customer service hotline . . . . . . . . . . . . . . . . . . . . . . $19,500 $21,500

Plant utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,200 $21,200

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,000 $85,000

4

Machine Replacement Decision

A company is considering replacing an old piece of machinery, which cost $597,400 and has $350,500 of accumulated depreciation to date, with a new machine that has a purchase price of $485,900. The old machine could be sold for $62,300. The annual variable production costs associated with the old machine are estimated to be $157,000 per year for eight years. The annual variable production costs for the new machine are estimated to be $101,300 per year for eight years.

a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.

b. What is the sunk cost in this situation?

The sunk cost is $.

6

Decision on Accepting Additional Business

Down Home Jeans Co. has an annual plant capacity of 64,700 units, and current production is 44,500 units. Monthly fixed costs are $40,600, and variable costs are $25 per unit. The present selling price is $36 per unit. On November 12 of the current year, the company received an offer from Fields Company for 13,100 units of the product at $26 each. Fields Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Down Home Jeans Co.

a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

b. Having unused capacity available is

to this decision. The differential revenue is

than the differential cost. Thus, accepting this additional business will result in a net

.

c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.

$

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

1. The gross margin is 25% of sales.

2. Actual and budgeted sales data:

3. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.

4. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.

5. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

6. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $972 per month (includes depreciation on new assets).

7. Equipment costing $1,700 will be purchased for cash in April.

8. Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required:

Using the preceding data:

1. Complete the schedule of expected cash collections.

2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases.

3. Complete the cash budget.

4. Prepare an absorption costing income statement for the quarter ended June 30.

5. Prepare a balance sheet as of June 30.

can you please explain to me what is the meaning of cost structure and profit stability? and the operating leverage? can you give an example to these two questions of mine? thank you.

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

The following data appear in the company records for the current period:

Required:

Use the direct method to allocate these service department costs to the operating departments.

Jacob is a member of WCC (an LLC taxed as a partnership). Jacob was allocated $90,000 of business income from WCC for the year. Jacob’s marginal income tax rate is 37 percent. The business allocation is subject to 2.9 percent of self-employment tax and 0.9 percent additional Medicare tax. (Round your intermediate calculations to the nearest whole dollar amount.)

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek produced and sold 60,500 units of B300 at a price of $19 per unit and 12,600 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $55,000 and $103,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.