Wagner Company developed the following standard costs for its product for 2011:

Direct Materials - 4 pounds at $4.50 per pound

Direct Labor - 2 hours at $10.50 per hour

Based on their flexible budget, budgeted Manufacturing Overhead costs are $80,000 of fixed costs plus variable costs of $4 per direct labor hour. Normal capacity is set at 20,000 units of product OR 40,000 DIRECT LABOR HOURS. (20,000 units x 2 labor hours per unit).

Actual costs for 2011 were as follows:

a. 19,000 units of product were actually produced

b. Direct labor costs were $362,700 for 37,200 direct labor hours actually worked.

c. Actual direct materials purchased and used during the yeear cost $361,900 for 77,000 pounds.

d. Total actual manufcaturing overhead costs were $227,000.

Compute the following yearly variances for Wagner company for 2011 and indicate whether the variance is favorable (F) or unfavorable (U):

1. Direct Materials Price Variance

2. Compute the Direct Materials Quantity Variance

3. Compute the total Direct Materials Variance.

4. Compute the Direct Labor Price Variance

5. Compute the Direct Labor Quantity Variance

6. Compute the total Direct Labor Variance

7. Compute the Variable Overhead Controllable Variance

8. Compute the Fixed Overhead Volume Variance

9. Compute the total Manufacturing Overhead Variance

10. Compute the total cost variance and indicate if favorable or unfavorable.

Understanding Relationships, Cash Budget, Pro Forma Balance Sheet

Ryan Richards, controller for Grange Retailers, has assembled the following data to assist in the preparation of a cash budget for the third quarter of the year:

1. Sales:

   May (actual)	$100,000
   June (actual)	120,000
   July (estimated)	90,000
   August (estimated)	100,000
   September (estimated)	135,000
   October (estimated)	110,000

2. Each month, 30% of sales are for cash and 70% are on credit. The collection pattern for credit sales is 20% in the month of sale, 50% in the following month, and 30% in the second month following the sale.
3. Each month, the ending inventory exactly equals 50% of the cost of next month's sales. The markup on goods is 25% of cost.
4. Inventory purchases are paid for in the month following the purchase.
5. Recurring monthly expenses are as follows:
   

   Salaries and wages	$10,000
   Depreciation on plant and equipment	4,000
   Utilities	1,000
   Other	1,700

6. Property taxes of $15,000 are due and payable on July 15.
7. Advertising fees of $6,000 must be paid on August 20.
8. A lease on a new storage facility is scheduled to begin on September 2. Monthly payments are $5,000.
9. The company has a policy to maintain a minimum cash balance of $10,000. If necessary, it will borrow to meet its short-term needs. All borrowing is done at the beginning of the month. All payments on principal and interest are made at the end of a month. The annual interest rate is 9%. The company must borrow in multiples of $1,000.
10. A partially completed balance sheet as of June 30 follows. (Note: Accounts payable is for inventory purchases only.)

    Cash	$     ?
    Accounts receivable	?
    Inventory	?
    Plant and equipment, net	425,000
    Accounts payable				$     ?
    Common stock				210,000
    Retained earnings				268,750
    Total	$    ?			$    ?

Required:

1. Complete the balance sheet given in Item j.

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1. Use the accounting equation (assets = liabilities and owners' equity).

2. Prepare a cash budget for each month in the third quarter and for the quarter in total (the third quarter begins on July 1). Prepare a supporting schedule of cash collections. If an amount is zero, enter "0" or leave the entry box blank.

3. Prepare a pro forma balance sheet as of September 30.

Cash Budget

Dr. Roger Jones is a successful dentist but is experiencing recurring financial difficulties. For example, Dr. Jones owns his office building, which he leased to the professional corporation that housed his dental practice. (He owns all shares in the corporation.) After the corporation’s failure to pay payroll taxes for the past 6 months, however, the Internal Revenue Service is threatening to impound the business and sell its assets. Also, the corporation has had difficulty paying its suppliers, owing one of them over $200,000 plus interest. In the past, Dr. Jones had borrowed money on the equity in either his personal residence or his office building, but he has grown weary of these recurring problems and has hired a local consultant for advice.

According to the consultant, the financial difficulties facing Dr. Jones have been caused by the absence of proper planning and control. Budgetary control is sorely needed. The following financial information is available for a typical month:

Benefits include Dr. Jones’s share of social security and a health insurance premium for all employees. Although all revenues billed in a month are not collected, the cash flowing into the business is approximately equal to the month’s billings because of collections from prior months. The office is open Monday through Thursday from 9:00 a.m. to 4:00 p.m. and on Friday from 9:00 a.m. to 12:30 p.m. A total of 32 hours are worked each week. Additional hours could be worked, but Dr. Jones is reluctant to do so because of other personal endeavors that he enjoys.

Dr. Jones has noted that the two dental assistants and receptionist are not fully utilized. He estimates that they are busy about 65 to 70% of the time. His wife spends about 5 hours each week on a monthly newsletter that is sent to all patients. She also maintains a birthday list and sends cards to patients on their birthdays.

Dr. Jones recently attended an informational seminar designed to teach dentists how to increase their revenues. An idea from that seminar persuaded him to invest in promotion and public relations (the newsletter and the birthday list).

Required:

1. Prepare a monthly cash budget for Dr. Jones. Enter amounts as positive numbers unless there is a deficiency.

Feedback

Calculate monthly cash collections and cash available by multiplying average fees by quantity for each type if service shown in the revenue data. Next enter cash disbursements and total cash needs. Subtract cash needs from available cash to show either excess cash or a deficiency in cash.

2a. Dr. Jones must either increase revenues or cut costs or a combination of the two.

Consider this recommendation:

Extend office hours so that a total of 40 hours are worked each week. This could increase revenues by as much as $5,340. Dr. Jones would need to inform his assistants and receptionist of the increased time and indicate that each will receive a 25% increase in salary for the additional time. Benefits (primarily FICA and unemployment insurance benefits) would also increase. Other expenses that will likely increase with an increase in sales are dental supplies, lab fees, and utilities (representing about 31% of sales). The remaining expenses are fixed.

Prepare a cash budget that reflects this recommendation. Round intermediate calculations to the nearest dollar. Enter amounts as positive numbers unless there is a deficiency.

Feedback

Start with the cash budget prepared in Requirement 1 and incorporate the changes needed assuming an increased work week increases revenue.

Allocate the increase to dental supplies, lab fees, and utilities by using the proportion of each:

Increase dental supplies, lab fees, and utilities = 31% x Increase in sales (Round to the nearest dollar.)

Increase dental supplies = (Dental supplies / Dental supplies, lab fees, and utilities) x Increase dental supplies, lab fees, and utilities

2b. Consider this recommendation:

Cut one dental assistant, eliminate the salary to Mrs. Jones and the activities she does, and cut Dr. Jones’s salary back by $1,000 per month. Do not round intermediate calculations for the benefits savings. Enter amounts as positive numbers unless there is a deficiency.

Prepare a cash budget that reflects this recommendation.

Feedback

Start with the cash budget prepared in Requirement 1 and incorporate the cost savings to salaries and benefits. Remember that Dr. and Mrs. Jones are owners and benefits do not apply to their salaries which are owner withdrawals.

2c. A third possibility is to increase the fees charged for the various dental services.

What amount of increase in revenues is needed to cover the deficiency from Requirement 1?  $

[The following information applies to the questions displayed below.]

Morganton Company makes one product and it provided the following information to help prepare the master budget:

a) The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 9,200, 23,000, 25,000, and 26,000 units, respectively. All sales are on credit.

b) Thirty percent of credit sales are collected in the month of the sale and 70% in the following month.

c) The ending finished goods inventory equals 20% of the following month’s unit sales.

d) The ending raw materials inventory equals 10% of the following month’s raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.50 per pound.

e) Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.

f) The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor-hours.

g) The variable selling and administrative expense per unit sold are $1.80. The fixed selling and administrative expense per month are $62,000.

Required:

13. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $8 per direct labor-hour, what are the estimated cost of goods sold and gross margin for July?

14. What are the estimated total selling and administrative expense for July?

Item6

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Item6

Item 6

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 20% each of the last three years. He has computed the cost and revenue estimates for each product as follows:

The company’s discount rate is 14%.

Required:

1. Calculate the payback period for each product.

2. Calculate the net present value for each product.

3. Calculate the internal rate of return for each product.

4. Calculate the project profitability index for each product.

5. Calculate the simple rate of return for each product.

6a. For each measure, identify whether Product A or Product B is preferred.

6b. Based on the simple rate of return, Lou Barlow would likely:

Business Description

A friend, Jay Green, is considering opening a cupcake store to sell gourmet cupcakes. Jay has asked you to help with formulating the projected numbers for the business and help analyze if the company will be successful. Using the skills you have developed in ACCT 551 Accounting for Managers, you will analyze the business to determine if you will recommend to Jay whether or not to enter into the business venture. Jay plans to launch the business on January 1, 2020. Following is the cost information provided by Jay:

Cost information:

• Jay plans to hire a baker that will charge $12 per dozen cupcakes.
• Jay has found a location near downtown that may be rented for $1,200 per month.
• Utilities are estimated to be $150 per month.
• Fixtures for the business will cost $8,400 (depreciation will be $1,200 per year for 7 years)
• Jay plans to open the store 7 days per week from 10:00 AM until 6:00 PM. Sales people will be paid $10.00 per hour.
• Business insurance will be purchased at a cost of $720 per year.
• Advertising costs are expected to be $2,400 per year.

Requirements:

Using separate tabs in a spreadsheet, provide your answers for the following.

1. Develop the annual cost formula in Y = a + bX format, i.e. Total Costs = Fixed Costs + (Variable Cost per Unit times number of units) (10 points).
2. You want to help Jay set a selling price for the cupcakes. Research who the competition is and at what price they are selling gourmet cupcakes (this will provide a base for a target price). Provide the detailed information for at least 3 competitors. Based on the projection of selling 24,000 cupcakes and an expectation of a 15% profit, what is the maximum cost allowable for all expenses? (10 points).
3. Develop a price using cost-based pricing assuming that Jay expects to sell 24,000 cupcakes the first year with a 15% profit (10 points).
4. If the selling price is $3.50 per cupcake, what is the contribution margin per cupcake and contribution margin ratio (10 points).
5. At a selling price of $3.50 per cupcake, how many cupcakes need to be sold in order to break-even? What is the break-even in sales dollars? (10 points).
6. Based on a selling price of $3.50 prepare a cost/volume/profit graph (Hint: this is explained in Module 16) (20 points).
7. Based on the expected production of 24,000 cupcakes, calculate an overhead rate per cupcake (10 points).
8. Prepare a cash budget for the company’s first year of operations based on sales of 24,000 cupcakes at a price of $3.50 per cupcake. Assume all sales are cash sales and that all costs and expenses are paid in cash. Rent, insurance, and advertising costs will be paid on a monthly basis. A minimum cash balance of $2,500 should be maintained (20 points).
9. Prepare the company’s forecasted income statement for the year ended on 12/31/2020 based on the sale of 24,000 cupcakes at $3.50 per cupcake (15 points).
10. Prepare a forecasted balance sheet as of December 31, 2020 based on the sale of 24,000 cupcakes at $3.50 per cupcake (15 points).
11. Prepare a forecasted statement of cash flows for the year ended December 31, 2020 based on the sale of 24,000 cupcakes at $3.50 per cupcake (15 points).
12. Describe a minimum of three variances that Jay could analyze to monitor the business (minimum 200 words). (15 points)
13. Provide and explain at least 1 financial metric and 3 nonfinancial metrics that Jay could utilize to monitor the business using a balanced scorecard approach. (15 points)
14. For capital investments, which capital budgeting model would you recommend to Jay? Why? (minimum 200 words) (10 points)

What is your recommendation to Jay regarding this business venture? Provide an explanation incorporating the results of the calculations performed (200-300 words) (15 points).

Jones Company has implemented a standard cost system for the company. The company has budgeted $63,000 for fixed mfg. overhead costs and plans on producing 4,500 units in the next year.   Some of the standard costs are given below:                                                                                               

                                                                                                           Standard

                                                                                                            Cost per

                                                                                                                Unit

                               Direct material, 4 lbs./unit X $2.60/lb. =       $10.40

                                Direct labor, 2 hours/unit X $9/hour     =         18.00

                                Fixed Mfg. overhead = 14.00

During the year, the company produced 4,800 units and incurred the following costs:

                                                Materials purchased and used in production 20,000 lbs. at $2.50/lb          $ 50,000

                                                Direct labor cost incurred, 10,000 hours at $8.60/hour                                 $ 86,000

                                                Fixed Mfg. Overhead cost incurred                                                                    $ 64,800

a) Prepare a comparison between budget & actual results in the following form:

                                                                                                   Flexible                     Actual

                                                                         Budgeted         Budget                     Results

Production Costs:                                         Cost/Unit       (           u)                   (            u)         Variances

            Direct Material

            Direct labor

            Fixed Mfg. Overhead

b) Part a) is done to judge the performance of the plant manager controlling production costs. How did he

      do?

c) Analyze material, labor & overhead variances for price & quantity factors to get a more complete story

     about what is going on in the plant.

d) Discuss the results that you got in part c) and are there any concerns?

Having a accounting system in place to generate reliable accounting information is imperative for any business. It allows the owner, and investors to know if the company is making profit, how much they are making, and what they need to do to increase the profit. Having the accounting information allows them to see where they are spending their money, and if they need to increase, or decrease spending in a certain category. It also shows them how much revenue they are making, and if they need to increase, or decrease the amount they are charging for their services, or products. Having accurate accounting records helps the owners to attract stockholders, and investors. This accuracy will help them retrieve loans from the bank to expand their business, or make improvements. The banks want to see if the company will be able to pay back the loans. Some of the things they will look at is, debt to income ratio, assets, and if the company is making a profit. Investors will want to know that the company will continuously be making a profit. The accounting records can be used as a guide to improve any business. Without these accurate records, owners will not know the financial status of their company.

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"Creditors and investors depend on financial account information in order to access the financial state of a company. This information is needed in order for external parties to make critical decisions as to their involvement with a company. Through tools such as balance sheets a more detailed report of the companies assets and liabilities can be discovered.

Accounting statements can be considered by past or present or both perspectives. A companies past may not be of interest to external parties if the present financial statements have momentum in a positive direction. On the opposite side of the spectrum there are other situations where the present financial status are showing negative findings but because of the past statements creditors and investors may believe a company can make a come back.

Financial Accounting information can be used to gauge the projected future of a company. Creditors may decide to get out of a deal and cut its loses if a companies future looks as if it may not be able to reach it's projected goals in order to meet creditors and investors expectation. If the companies past trends show a high probability of growth and profit, creditors may want to invest more funds to take advantage of the future growth.

Investors may look at a longer projected time period compared to creditors. Even though investors may be prepared to make longer commitments, the decision is based on calculated past financial records. Often the most important information that is the sum of financial account information is the bottom line question, which is what is the net worth of a company? Even though this is an important question, how a companies value is determined is shown by financial accountant information."

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The following were selected from among the transactions completed by Babcock Company during November of the current year:

Required:

Journalize the transactions.

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Journalize these transactions from the buyer's point of view. Using the perpetual inventory system, purchases of inventory on account are recorded by increasing both the merchandise inventory account and the accounts payable account. Recall that FOB shipping point freight is the buyer's cost, while FOB destination freight is the seller's expense. Often freight must be prepaid for the carrier to deliver.

Nov. 3: Calculate any trade discount before the purchase or sale amount is recorded.

Nov. 5: Using the perpetual inventory system, purchases of inventory on account are recorded by debiting the merchandise inventory account and crediting the accounts payable account. Freight expense added to the invoice increases the cost of the merchandise.

Nov. 6: A return of merchandise that had a trade discount is recorded without the trade discount. Using the perpetual inventory system, any discounts or returns are recorded directly by the buyer who debits Accounts Payable and credits Merchandise Inventory, basically reversing what was done in recording the purchase.

Nov. 13 and 15: Returns are not eligible for discounts. Since the invoice is paid within the discount period, the cash paid on account is the difference between the invoice and the discount.

Journalize these transactions from the seller's point of view. Keep in mind that the sales discounts are given on the outstanding balance of the sale transaction, except for any freight costs.

Nov. 4: Two entries are required for (1) the cash sale and (2) the cost of the merchandise sold and inventory decrease on the seller's records.

Nov. 14: Remember that credit card transactions are recorded as cash sales. Two entries are required: (1) the sale for cash and (2) the cost of the merchandise sold and inventory decrease on the seller's records.

Nov. 23: Since no discount is allowed, no discount is recorded. The cash paid is equal to the receivable on the seller's books.

Nov. 24: Two entries are required for: (1) the sale on account and (2) the cost of the merchandise sold and inventory decrease on the seller's records.

Nov. 28: Record the service fee as an expense.

Nov. 30: Customer Refunds Payable is debited while the credit is to Cash. A second entry increases Merchandise Inventory and credits Estimated Returns Inventory for the return cost.

Problem 8-50 Prepare a Production Cost Report and Adjust Inventory Balances: Weighted-Average Method (LO 8-3, 4) The records of Fremont Corporation’s initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs. Units Unaudited Costs Work-in-process inventory 215,000 $ 818,897 Finished goods inventory 26,000 366,250 As the auditor, you have learned the following information. Ending work-in-process inventory is 40 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 80 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information is also available. Costs Units Direct Materials Direct Labor Beginning inventory (80% complete as to labor) 93,000 $ 435,600 $ 524,000 Units started 590,000 Current costs 1,750,000 2,246,000 Units completed and transferred to finished goods inventory 468,000 Required: a. Prepare a production cost report for Fremont using the weighted-average method. (Hint: You will need to calculate equivalent units for three categories: materials, labor, and overhead.) (Round "Cost per equivalent unit" to 2 decimal places.)

Journal entry worksheet

• Record the difference between the unaudited records and actual ending balances of Work-in-Process Inventory and Finished Goods Inventory.

Note: Enter debits before credits.

c. If the adjustment in requirement (b) is not made, will the company’s income and inventories be overstated or understated?

When considering organisational risk it is important to review the political, economic, social, legal, technological, and policy context. Comment on the influence/ impact each of those factors has on an organisation’s risk profile—the risk scope and context. (500–700 words)

. What was the motivation for FASB's revision of the goodwlll impairment test? A. Congressional mandate B. FASB's simplification initiative C. Concern over the cost and complexity of the current standard D. Both B and C