McQueen is an engineering company that specializes in providing engineering facilities to businesses that cannot justify operating their own facilities in house. McQueen employs a number of engineers who are skilled in different engineering techniques that enable McQueen to provide a full range of engineering facilities to its customers. Most of the work undertaken by McQueen is unique to each of its customers, often requiring the manufacture of spare parts for its customers’ equipment, or the building of new equipment from customer drawings. As a result most of McQueen’s work is short-term, with some jobs being completed within hours while others may take a few days. To date, McQueen has adopted a cost plus approach to setting its prices. This is based upon an absorption costing system that uses machine hours as the basis of absorbing overhead costs into individual job costs. The Managing Director is concerned that, over recent months, McQueen has been unsuccessful when quoting for work with the consequence that there has been an increase in the level of unused capacity. It has been suggested that McQueen should adopt an alternative approach to its pricing based on marginal costing since “any price that exceeds variable costs is better than no work”.

With reference to the above scenario:

a) Briefly explain absorption and marginal cost approaches to pricing.

b) Discuss the validity of the comment “any price that exceeds variable costs is better

Brevall Industries makes corn oil and corn meal from harvested corn in a joint process. The corn oil can be further processed into margarine, and the corn meal can be further processed into corn muffin mix. The joint cost incurred to process the corn to the split-off point is $140,000. Information on the quantities, value, and further processing costs for the joint products appear below:

Brevall allocates the joint cost to the products based on the relative sales value at split-off point. How much joint cost should be assigned to the corn oil?

Please answer all parts. Please! No need to show working.

At Allen Company manufacturing overhead is estimated at 150% of direct labor hours. Overhead was estimated to be $575,000 and direct labor hours were estimated to be 360,000.

Actual direct labor hours and actual direct labor costs for the year amounted to 400,000 hours and $700,000.

In addition, Allen Company incurred the following actual costs during the year:

• Administrative expenses, $100,000
• Depreciation expense on fixed assets, $500,000 (80% of the depreciation expense was related to manufacturing activities)
• Indirect material costs, $25,000
• Indirect labor costs, $45,000
• Utility expense on the manufacturing facility, $125,000
• Insurance expense on the manufacturing facility, $35,000
• Marketing expenses, $75,000

• Sales & promotion expenses, $25,000

Allen Company had the following inventory balances at the beginning and end of the year:

During the year, the company purchased $150,000 of raw materials and generated sales of $2,500,000.

1. What amount of raw materials were used during the period?
2. What is the amount of prime costs?
3. What is the predetermined manufacturing overhead rate?
4. What amount is applied to manufacturing overhead?
5. What is the amount of Manufacturing Costs added for the period?
6. What is the Cost of Goods Manufactured?
7. At the end of year, was manufacturing overhead over- or under-applied?
8. Refer to the previous question. By what amount was manufacturing overhead over- or under-applied?
9. What is Cost of Goods Sold, after adjusting for any under-or over-applied overhead?
10. What is Gross Profit?
11. What are total Selling, General & Administrative Expenses?
12. What is Net Income or Loss?

you are a business owner, who bought 100 cars from Honda Finance (cars that had been returned after the leases ended.) The cost was $500,000, to be paid in 30 days. When the cars arrived, some were in better condition than others. You sold 25 right away, for $10,000 each. Just to be safe, you sent the payments directly to Honda, even though the whole sum was not yet due. The remaining cars were a hard sell but sold for $7500 each, and at the end of the month, you were left with 50 cars and the payment to Honda was due, as well as your rent, salaries, overhead, etc. In desperation, you sell the remaining 50 cars to another lot at a price of $4000 each. The price discount was based upon the purchaser's agreement to pay in cash upon delivery. When the driver returns after delivering the cars, instead of cash he hands you a check from the other dealer........

1. If the check clears, how much did you profit or loss in the transaction?

2. What action would you take now if the purchaser of the cars refused to pay with cash or a certified check, the regular check is the only payment available? What risks have you taken and what can the ramifications be?

Question a.

Jagan has income from employment of $25,000 during the year. As well, he has a capital gain on Listed Personal Property of $8,000 on the sale of a stamp collection, and a capital gain from the sale of some shares of $6,000. Last year, he had a capital loss on Listed Personal Property of $10,000 that he was unable to use and carried forward to the current year. What is his net income for tax purposes for the year, assuming that this accounts for all of his income for the year?

Question b.

Carrie Weems is a full-time teacher in Waterloo, Ontario, who spends all of her weekends and holidays operating a farm she purchased this year. She is confident that within two years her farm will be making a profit. In the current year, the farm had a loss of $18,000 and her employment income from teaching was $85,000.

In the current year, she can deduct a maximum of $9,000 of the farm loss against all her other income.

Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $12 each. The first stage in the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system.

A hastily prepared report for the Mixing Department for April appears below:

Management would like some additional information about Cooperative San José’s operations.

Required:

1. What were the Mixing Department's equivalent units of production for materials and conversion for April?

2. What were the Mixing Department's cost per equivalent unit for materials and conversion for April? The beginning inventory consisted of the following costs: materials, $23,460; and conversion cost, $12,305. The costs added during the month consisted of: materials, $83,164; and conversion cost, $46,648.

3. How many of the units transferred out of the Mixing Department in April were started and completed during that month?

4. The manager of the Mixing Department stated, “Materials prices jumped from about $1.80 per unit in March to $2.30 per unit in April, but due to good cost control I was able to hold our materials cost to less than $2.30 per unit for the month.” Should this manager be rewarded for good cost control?

Question a.

Nisha Patel has a full time job as a nurse in her local hospital. In her spare time she has a goat farming operation. The goat farm began in 2016, and resulted in a loss of $10,000. She deducted the maximum allowable amount of the loss against her 2016 income. In 2017, most of the problems had been worked out, and Nisha had a profit from the farm operation of $5,000, as well as employment income of $100,000. Determine Ms. Patel's taxable income for 2017.

Question b.

Which of the following statements about Allowable Business Investment Losses is correct?

Question c.

When an individual makes a gift of publicly traded securities to a registered charity, any capital gain that results from the disposition is deemed to be nil.

On August 1, 2019, United Corporation issued $9.50 million of 6% bonds at 104. The bonds mature in 20 years. Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $45, one share of United $5 par common stock. World Company purchased 20% of the bond issue. On August 1, 2019, the market value per share for United stock was $51 and the market value of each warrant was $7. In March 2025, when United common stock had a market price of $65 per share and the unamortized premium balance was $250,000, World exercised the warrants it held.

Required:

1. Prepare the journal entries on August 1, 2019, to record (A) the issuance of the bonds by United and (B) the investment by World.

2. Prepare the journal entries for both companies in March 2025 to record the exercise of the warrants.

Your friend Harold is trying to decide whether to buy or lease his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $31,500, and Harold expects to spend about $1,000 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $12,500. Alternatively, Harold could lease the same vehicle for five years at a cost of $4,095 per year, including maintenance. Assume a discount rate of 11 percent.    

Required:
1. Calculate the net present value of Harold’s options. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your final answers to 2 decimal places. Do not round intermediate calculations.)

             

2. Advise Harold about which option he should choose.

    

On January 1, 2018, Johns Shop leased a truck from Madix Motors for a six-year period. The useful life of the truck is 9 yrs. Annual lease payments are $10,000 due on December 31 of each year, calculated by the lessor using a 5% discount rate Assume that at the end of the second year, January 1, 2020, John's and Madix Motors had agreed to extend the lease term by three years. The relevant interest rate at that time was 6%. The truck price was $70,000

Prepare the journal entry, if any, at the end of the second year for the lessee to account for the modification.

Prepare the journal entry, if any, at the end of the second year for the lessor to account for the modification.

American Movieplex, a large movie theater chain, leases most of its theater facilities. In conjunction with recent operating leases, the company spent $28 million for seat and carpeting. The question being discussed over breakfast on Wednesday morning was the length of the depreciation period for these leasehold improvements. The company controller, Sarah Keene, was surprised by the suggestion of Larry Person, her new assistant. Keene: Why 25 years? We've never depreciated leasehold improvements for such a long period. Person: I noticed that in my review of back records. But during our expansion to the Midwest, we don't need expenses to be any higher than necessary. Keene: But isn't that a pretty rosy estimate of these assets' actual life? Trade publications show an average depreciation period of 12 years. Read through the dilemma.

For the Original Post*, you will be arguing in favor of Larry Person's proposal to increase the depreciation period for leasehold improvements. Remember to use logic and the accounting principles you have learned thus far to develop your argument. You must include at least three points as to why this route is the best route to go (with one of those points being related to the learned accounting principles).

1. Describe a Computer Operations internal control that you would implement to give you comfort that each of the following objectives is being met:

1. Controls provide reasonable assurance that data recorded, processed and reported remain complete, accurate and valid throughout the update and storage process.
2. Controls provide reasonable assurance that authorized programs are executed as planned and deviations from scheduled processing are identified and investigated, including controls over job scheduling, processing, error monitoring and system availability.
3. Controls provide reasonable assurance that any problems and/or incidents are properly responded to, recorded, resolved or investigated for proper resolution.

true or false

1. The main components needed to estimate a​ project’s incremental cash flows are the initial capital​ investment, the change in​ NWC, net income and the​ firm’s market share.

2. Use of a​ firm’sexisting assets in a proposed project would result in an erosion cost.

3. Working capital accounts typically go up at the beginning of a project and are then decreased later.

4. ​ Temple’s payment of​ $1M to an architectural firm for a feasibility study of a new football stadium is an example of a sunk cost.

5. Straight-linedepreciation is higher in the later years of a​ project’slife

6. The market value of a​ long-termasset at any point in time is equal to the​ asset’soriginal cost plus all of the depreciation that has been taken on that asset.

7. Sale of a piece of equipment at a gain reduces the CF from salvage

8. The installation cost is added to the accumulated depreciation of an asset to get the initial capital investment.

9. Cogswell Cola needed to purchase additional inventory of plastic bottles to launch its Pulsar Cola. This decrease in inventory represents a positive cash flow associated with the project.

10. Opportunity costs add to a​ project’scash flows while erosion costs and synergy gains reduce those cash flows.

11. Opportunity costs have no impact on a​ project’sincremental CFs.

12. If the company had a large depreciation expense during the​ period,the income statement could show a loss for the​ period,even though the cash account may have grown during the same period.

Gibson Company has operating assets of $21,000,000. The company’s operating income for the most recent accounting period was $2,730,000. The Dannica Division of Gibson controls $6,830,000 of the company’s assets and earned $1,230,000 of its operating income. Gibson’s desired ROI is 11 percent. Gibson has $1,110,000 of additional funds to invest. The manager of the Dannica division believes that his division could earn $142,000 on the additional funds. The highest investment opportunity to any of the company’s other divisions is 12 percent.

Required

1. Calculate the ROI of Dannica Division.

1. (1) Before investment opportunity.

2. (2) Only on the new investment opportunity.

3. (3) Dannica total ROI if investment opportunity is accepted.

3. Calculate the Dannica Division residual income from the new investment opportunity. If residual income is used as the sole performance measure would the manager of the Dannica Division be likely to accept or reject the additional funding

Calculate the ROI of Dannica Division. (Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45).)
(1) Before investment opportunity.
(2) Only on the new investment opportunity.
(3) Dannica total ROI if investment opportunity is accepted.

(4) Calculate the Dannica Division residual income from the new investment opportunity. If residual income is used as the sole performance measure would the manager of the Dannica Division be likely to accept or reject the additional funding?