Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 8,420 hours of direct labor time were needed to make 19,700 units of the Jogging Mate. The direct labor cost totaled $46,310 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,700 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,700 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.10 per direct labor-hour. During August, the company incurred $37,048 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

(For requirements 3 through 5, 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. Do not round intermediate calculations.)

2. Cheese Please Ltd produces cheese topping for the fast pizza industry. At the beginning of April 60,000 kilograms of cheese topping was in process, 100% complete as to raw materials and 50% complete as to conversion costs. During the month, the company started 300,000 kilograms of cheese topping in production. At the end of the month, 40,000 kilograms of cheese topping was in work in process inventory, 100% completed as to raw materials and 40% completed in terms of conversion costs. Assume that the following costs were recorded by Cheese Please Ltd for the beginning work in process and the production performance for April: Beginning inventory: Raw materials costs $ 60,000 Conversion costs 36,000 October production costs: Raw materials costs 300,000 Conversion costs 284,200 Required: a)Prepare a schedule analysing the physical flow of units and calculating the equivalent units of both direct material and conversion for April. Use weighted average process costing. b)Calculate the unit cost for each kilogram of cheese topping. c)Determine the total costs of the kilogram of cheese topping finished during April. What is the balance of the ending work in process inventory?

ATC 15-1 Business Applications Case   Static versus flexible budget variances

David Catrow is the manufacturing production supervisor for Faraday Motor Works (FMW), a company that manufactures electrical motors for industrial applications. Trying to explain why he did not get the year-end bonus that he had expected, he told his wife, “This is the dumbest place I’ve ever worked. Last year the company set up this budget assuming it would sell 150,000 units. Well, it sold only 140,000. The company lost money and gave me a bonus for not using as much materials and labor as was called for in the budget. This year, the company has the same 150,000 units goal and it sells 160,000. The company’s making all kinds of money. You’d think I’d get this big fat bonus. Instead, management tells me I used more materials and labor than was budgeted. They said the company would have made a lot more money if I’d stayed within my budget. I guess I gotta wait for another bad year before I get a bonus. Like I said, this is the dumbest place I’ve ever worked.”

FMW’s master budget and the actual results for the most recent year of operating activity follow.

Required

1. Assume that the company’s materials price variance was favorable and its materials usage variance was unfavorable. Explain why Mr. Catrow may not be responsible for these variances. Now, explain why he may have been responsible for the materials usage variance.
2. Assume the labor price variance is unfavorable. Was the labor usage variance favorable or unfavorable?
3. Is the fixed cost volume variance favorable or unfavorable? Explain the effect of this variance on the cost of each unit produced.

1. The statement of financial position is another name for the income statement

True

False

2. The income statement only statement dated as of a point in time.

True

False

3. Assets and liabilities come into existence at different times and are not affected the same way by inflation and specific price level changes

True

False

4. For the purposes of the balance sheet preparation, there are several different measurement bases are used (historical cost, depreciated historical cost, market value, realizable value, present value) which compromises the comparability characteristic of accounting information

True

False

5. The present value of a future cash flow is its discounted value and it is the primary measurement basis for long term investmests

True

False

6. Current asset (CA): an asset expected to be realized in cash or to be consumed or sold during the normal operating cycle, or within one year of the balance sheet date, whichever is shorter.

True

False

7. Gains represent increases in net assets or settlements of liabilities by providing goods and services

True

False

8. Expenses represent decreases in net assets or incurred liabilities through the provision of goods or services

True

False

9. The requirement to disclose comprehensive income affects the computation of net income

True

False

10. Statement of Cash Flows is required for all business enterprises which report both financial position (Balance Sheet) and results of operations (Income Statement) for a period.

True

False

11. Under the net method of accounting for the cash discounts, if the customer does not pay within the discount period, a sales discount forfeit is recognized (revenue account):

True

False

12. Under the allowance method, we can estimate the uncollectable accounts receivable using either the 1) Percentage-of-Sales Approach and/or 2) Percentage-of-Receivables Approach:

True

False

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 a master budget for the upcoming second quarter. 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—$10 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings): January (actual) 20,000 June (budget) 50,000 February (actual) 26,000 July (budget) 30,000 March (actual) 40,000 August (budget) 28,000 April (budget) 65,000 September (budget) 25,000 May (budget) 100,000 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 $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. 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: Variable: Sales commissions 4 % of sales Fixed: Advertising $ 200,000 Rent $ 18,000 Salaries $ 106,000 Utilities $ 7,000 Insurance $ 3,000 Depreciation $ 14,000 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $16,000 in new equipment during May and $40,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,000 each quarter, payable in the first month of the following quarter. The company’s balance sheet as of March 31 is given below: Assets Cash $ 74,000 Accounts receivable ($26,000 February sales; $320,000 March sales) 346,000 Inventory 104,000 Prepaid insurance 21,000 Property and equipment (net) 950,000 Total assets $ 1,495,000 Liabilities and Stockholders’ Equity Accounts payable $ 100,000 Dividends payable 15,000 Common stock 800,000 Retained earnings 580,000 Total liabilities and stockholders’ equity $ 1,495,000 The company maintains a minimum cash balance of $50,000. 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 $50,000 in cash.

Required:

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

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

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

    c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total.

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

(I already answered the first required questions 1A-D, just need Required 2-4)

2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000.

3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.

4. A budgeted balance sheet as of June 30.

1. Cost Classification: The Lee’s have provided you with the following costs and relevant information that are assumed for year 20XY.

A. Classify each of the costs (a. through j.) below under C. as a variable cost or a fixed cost.

B. Explain the importance of distinguishing between variable and fixed costs.

C. Prepare a budgeted income statement, assuming 600 units to be produced and sold, a per unit selling price of $85, an income tax rate of 28% and the following information.

1. Cost of goods sold of $35 per unit
2. Labor = $400/month
   • One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month.
3. Advertising fees = $3,000
4. Bank fees = $200
5. Phone/internet = $150 per month
6. Shipping = $3 per unit
7. Utilities = $100 per month
8. Office Supplies = $900
1. Conference Exhibitor Fee = $3000
10. Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1200

2. Budget Preparation: The Lees believe that production and sales could double after being on Shark Tank which is scheduled in December of 20XY. They want to be prepared for this. Based on the budgeted income statement calculated above for 20XY, create a new budgeted income for 20XZ assuming that the production and sales is double the level of 20XY.

Selected transactions completed by Canyon Ferry Boating Corporation during the current fiscal year are as follows:

Journalize the transactions. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. Enter the October 31 and December 31 transactions as two separate journal entries on each date.

1.. advantage and disadvantages of the partnership and sole proprietorship? just the point no need explanation

1. A restaurant purchased kitchen equipment on Jan 1, 2016 for $40,000. It is estimated that the equipment will have a $4,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31,

$3,000

$3,300

$3,600

$4,000

2. Two methods of writing-off accounts receivable are the

allowance method and the accrual method

allowance method and the net realizable method

direct write-off method and the accrual method

direct write-off method and the allowance method

3. An aging of a company’s accounts receivable indicates that $8,000 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $2,000 credit balance, the adjustment to record bad debts for the period will require a

Debit to Provision for Doubtful Accounts for $8,000

Debit to Allowance for Doubtful Accounts for $8,000

Credit to Provision for Doubtful Accounts for $6,000

Credit to Allowance for Doubtful Accounts for $6,000

4. Allowance for Doubtful Accounts

is offset against current liabilities

increases the cash realizable value of accounts receivable

appears on the balance sheet

is offset against accumulated depreciation

Describe in detail the audit process required in performing an audit from beginning to end. Identify how you would address auditing standards in your work.

1. On March 1, 20x7, E and F formed a partnership with each contributing the following assets:

The building is subject to a mortgage loan of P80,000, which is to be assumed by the partnership. The partnershipagreement provides that E and F share profits and losses at 30% and 70% respectively. Assuming that thepartners agreed to bring their respective capital in proportion to their P & L ratios, and using F capital as the base.

Compute the capital account balance of F on March 1, 20x7.

Select one:

a. P350,000

b. P510,000

c. P460,000

d. P430,000

2.

On March 1, 20x7, E and F formed a partnership with each contributing the following assets:

The building is subject to a mortgage loan of P80,000, which is to be assumed by the partnership. The partnership agreement provides that E and F share profits and losses at 30% and 70% respectively. Assuming that the partners agreed to bring their respective capital in proportion to their P & L ratios, and using F capital as the base.

How much is the additional cash to be invested by E?

Select one:

a. -0-

b. P200,000

c. P20,000

d. P100,000

3.

SS, TT, UU, and VV, partners to a law firm, shares profits at ratio of 4:3:1:1. On June 30, relevant partners’ accounts follow:

On this day, cash of P60,000 is declared as available for distribution to partnersas profits. Who among the partners will benefit from the P60,000 cash distribution?

Select one:

a. All of the partners

b. TT and VV

c. TT, UU and VV

d. TT only

4.

Brand Constructions began operation in 20x8. Construction activities for the first year is shown below. All contract are with different customers, and any work remaining at December 31, 20x8 is expected to be completed in 20x9. Brand uses the cost-to-cost percentage of completion in accounting for its projects.

Calculate the amount of inventory recognized as a current asset in the 20x8 balance sheet.

Select one:

a. P86,000

b. P-0-

c. P24,000

d. P70,000

5.

Partnership of T, U and V and their profit and loss ratios were as follows:

T decided to retire from the partnership and by mutual agreement, the assets were adjusted to their current fairvalue of P625,000. The partnership paid P200,000 cash for T’s equity in the partnership, exclusive of the loanwhich was repaid in full.

The capital balances of U and V, respectively, after T’s retirement from the partnership was:

Select one:

a. P146,250 and P218,750

b. P147,857 and P217,143

c. P139,286 and P205,714

d. P94,286 and P145,714

6.

On June 1, A and B pooled their assets to form a partnership, with the firm to take over their business assets and assumethe liabilities. Partners’ capitals are to be based on net assets transferred after the following adjustments:

1. B’s inventory is to be increased by P5,000.
2. An allowance for doubtful accounts of P2,800 and P2,500 are to be set up on the books of A and B, respectively.
3. Accounts payable of P7,000 is to be recognized on the books of A.

The individual trial balances on June 1, before adjustments follow:

What is the capital balance of B after adjustments?

Select one:

a. P45,200

b. P35,500

c. P42,000

d. P42,500

What are the features provided after Turkey's customs union? (embodiment)

7.61/ At the beginning of 2013, Gannon Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2013 year-end statement of financial position and $1,000 as sales revenue for 2013. What effect did this accounting for the note have on Gannon's net earnings for 2013, 2014, 2015, and its retained earnings at the end of 2015, respectively? And explain Why?

7.56/ Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because (Explain why choosing?)
a. most short-term receivables are not interest-bearing.
b. the allowance for uncollectible accounts includes a discount element.
c. the amount of the discount is not material.
d. most receivables can be sold to a bank or factor.

In December 2016, Learer Company’s manager estimated next year’s total direct labor cost assuming 40 persons working an average of 2,000 hours each at an average wage rate of $30 per hour. The manager also estimated the following manufacturing overhead costs for 2017.

Indirect labor $ 340,200 Factory supervision 110,000 Rent on factory building 101,000 Factory utilities 107,000 Factory insurance expired 87,000 Depreciation—Factory equipment 473,000 Repairs expense—Factory equipment 79,000 Factory supplies used 87,800 Miscellaneous production costs 55,000 Total estimated overhead costs $ 1,440,000 At the end of 2017, records show the company incurred $1,599,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $623,000; Job 202, $582,000; Job 203, $317,000; Job 204, $735,000; and Job 205, $333,000. In addition, Job 206 is in process at the end of 2017 and had been charged $36,000 for direct labor. No jobs were in process at the end of 2016. The company’s predetermined overhead rate is based on direct labor cost. Required 1-a. Determine the predetermined overhead rate for 2017. 1-b. Determine the total overhead cost applied to each of the six jobs during 2017. 1-c.

Determine the over- or underapplied overhead at year-end 2017. 2. Assuming that any over- or underapplied overhead is not material, prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold at the end of 2017.

I found the discussion of self constructed assets to be interesting. These would be assets that the company itself builds instead of buys. The book talks about the difficulties in establishing the cost of the asset. How much of the company's overhead should be allocated to the project? How should interest incurred during construction be handled? There are a few options/opinions about how to handle overhead, which do you find to be best?