How is a DFD different from a flowchart?

wanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $108,000. The machine’s estimated useful life at the time of the purchase was five years, and its residual value was $8,000. The company reports on a calendar year basis. Required:

a-1. Prepare a complete depreciation schedule, beginning with the current year, using the straight-line method. (Assume that the half-year convention is used)

a-2. Prepare a complete depreciation schedule, beginning with the current year, using the 200 percent declining-balance method. (Assume that the half-year convention is used).

a-3. Prepare a complete depreciation schedule, beginning with the current year, using the 150 percent declining-balance, switching to straight-line when that maximizes the expense. (Assume that the half-year convention is used).

b. Which of the three methods computed in part a is most common for financial reporting purposes?

c. Assume that Swanson & Hiller sells the machine on December 31 of the fourth year for $29,000 cash. Compute the resulting gain or loss from this sale under each of the depreciation methods used in part a.

It purchases cocoa beans and processes them into two intermediate​ products: chocolate-powder liquor base and​ milk-chocolate liquor base. These two intermediate products become separately identifiable at a single splitoff point. Every 900 pounds of cocoa beans yields 30 gallons of​ chocolate-powder liquor base and 120 gallons of​ milk-chocolate liquor base. The​ chocolate-powder liquor base is further processed into chocolate powder. Every 30 gallons of​ chocolate-powder liquor base yield 670 pounds of chocolate powder. The​ milk-chocolate liquor base is further processed into milk chocolate. Every 120 gallons of​ milk-chocolate liquor base yield 1,090 pounds of milk chocolate.

Cocoa beans​ processed, 19,800 pounds times

Costs of processing cocoa beans to splitoff point​ (including purchase of​ beans), $ 68,000

	Production		Sales		Selling Price		Separable Processing Costs
Chocolate powder	14,740	pounds	6,700	pounds	$12	per pound	$8,975
Milk chocolate	23,980	pounds	14,500	pounds	$10	per pound	$91,095

Creme de Cacao Edibles Factory fully processes both of its intermediate products into chocolate powder or milk chocolate. There is an active market for these intermediate products. In August 2017​, Creme de Cacao Edibles Factory could have sold the​ chocolate-powder liquor base for $ 24 a gallon and the​ milk-chocolate liquor base for $ 9 a gallon.

Requirement 1. Calculate how the joint costs of

$ 68000 would be allocated between chocolate powder and milk chocolate under the different methods.

a. Sales value at splitoff method. Begin by entering the appropriate amounts to allocate the joint costs. ​(Round the weighting amounts to four decimal​ places.)

	Sales value of total		Joint costs
	production at splitoff	Weighting	allocated
Chocolate powder
Milk chocolate
Total

b. Allocate the joint costs using the physical measure method. Begin by entering the appropriate amounts to allocate the joint costs. ​(Round the weighting amounts to four decimal​ places.)

	Physical measure of		Joint costs
	total production	Weighting	allocated
Chocolate powder
Milk chocolate
Total

c. Allocate the joint costs using the net realizable value method. Begin by entering the appropriate amounts to allocate the joint costs. ​(Round the weighting amounts to four decimal places. Round the joint costs allocated to the nearest whole​ dollar.)

	Net realizable		Joint costs
	value	Weighting	allocated
Chocolate powder
Milk chocolate
Total

d. Constant​ gross-margin percentage NRV method. Begin by entering the appropriate amounts to allocate the joint costs. ​(Round the percentage to four decimal​ places, X.XXXX%.)

The overall gross-margin percentage for all joint products together is

%.

Now determine the formula to compute the joint costs​ allocated, then enter the appropriate amounts. ​(Round your answers to the nearest whole​ dollar.)

Total production costs

-

Separable processing costs

=

Joint costs allocated

Chocolate powder

-

=

Milk chocolate

-

=

Requirement 2. What are the​ gross-margin percentages of chocolate powder and milk chocolate under each of the methods in requirement​ 1? ​(Use parentheses or a minus sign when entering negative amounts. Round the percentages to the nearest hundredth​ percent, X.XX%.)

	Chocolate powder		Milk chocolate
a. Sales value at splitoff		%		%

b. Physical-measure

%

%

c. NRV

%

%

d. Constant gross-margin percentage NRV

%

%

Requirement 3. Could

Cocoa Nibs

Edibles Factory have increased its operating income by a change in its decision to fully process both of its intermediate​ products? Show your computations. ​(Use parentheses or a minus sign when entering decreasing​ amounts.)

Begin by determining the formula to compute the​ increase/(decrease) in operating​ income, then enter the appropriate amounts.

					Increase/(decrease)
	Incremental revenue	-	Separable processing costs	=	in operating income

Chocolate powder

-

=

Milk chocolate

-

=

Cocoa Nibs

Edibles Factory could increase operating income if​ chocolate-powder liquor base is

further processed into chocolate powder

and if​ milk-chocolate liquor base is

further processed into milk chocolate.

Use the following information to prepare a cash budget for December.

1. The cash balance on December 1 is $53,400.

2. Actual sales for October and November and expected sales for December are as follows:

	October		November		December
Cash sales	$	77,000	$	81,200	$	87,800
Sales on account	$	435,000	$	538,000	$	644,000

Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible.

3. Purchases of inventory will total $341,000 for December. Thirty percent of a month’s inventory purchases are paid during the month of purchase. The accounts payable remaining from November’s inventory purchases total $165,000, all of which will be paid in December.

4. Selling and administrative expenses are budgeted at $516,000 for December. Of this amount, $94,900 is for depreciation.

5. A new web server for the Marketing Department costing $121,500 will be purchased for cash during December, and dividends totaling $13,000 will be paid during the month.

6. The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company’s bank to increase its cash balance as needed.

Required:

Calculate the expected cash collections for December.

Calculate the expected cash disbursements for merchandise purchases for December.

Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month.

Burns Company reported $664.480 million in net income in 2021. On January 1, 2021, the company had 398 million shares of common stock outstanding. On March 1, 2021, 22.8 million new shares of common stock were sold for cash. On June 1, 2021, the company's common stock split 2 for 1. On July 1, 2021, 6.8 million shares were reacquired as treasury stock.

Required: Compute Burns' basic earnings per share for the year ended December 31, 2021. (Round your answer to 2 decimal places.)

Sally Smith is a new client for 2015. As you requested, she provided you with copies of her prior year tax return, prepared by another tax professional, and all of her current documentation. As you reviewed her prior year's data you realized that the return included an error. What is your responsibility to Sally and the IRS? Please explain

Case A	Case B	Case C
Beginning inventory, raw material		96,000	7,000
Ending inventory, raw material	198,000		33,000
Purchases of raw material	290,000	273,000
Direct material used	230,000	321,000
Direct labor		390,000	71,500
Manufacturing overhead	590,000		98,000
Total manufacturing costs	1,130,000	1,125,000	217,000
Beginning inventory, work in process	88,000	78,000
Ending inventory, work in process		123,000	4,300
Cost of goods manufactured	1,086,000		220,000
Beginning inventory, finished goods	190,000	138,000
Cost of goods available for sale			235,000
Ending inventory, finished goods			21,500
Cost of goods sold	1,180,000	1,062,000
Sales			420,000
Gross margin	528,000	528,000
Selling and administrative expenses		261,000
Income before taxes	390,000		63,000
Income tax expense	98,000	159,000
Net income			36,500

You prepared the tax return of Pete Kazda. After you delivered the tax return, Mr. Kazda refused to pay his bill for professional services rendered. He also requests that you return all of the documents he provided to you in preparation of the return. You do not want to return his documentation until he has paid his bill. What do you do?

Ester Arthur has been caught filing tax returns with fake social security numbers and depositing the refunds in her own account. What disciplinary actions may the IRS impose?

During the month, the following transactions occurred for Trevor’s Supply Company.   The company uses the perpetual inventory method.

Dec. 1	Accepted a 4-month, 6% note from a customer in settlement of $12,400 account.
3	Wrote off as uncollectible specific accounts totaling $680.
8	Purchased $17,200 of inventory on account, terms 2/10, n/30.
11	Sold $25,000 of inventory that cost $17,500, terms 1/15, n/45.
12	Paid $13,750 for employee salaries.
15	Customers returned $8,000 of inventory sold on December 11th that cost $5,200.
17	Collected the balance due from the December 11th sale.
18	Paid the balance due on the December 8th purchase.
24	Received $370 on an account previously written off.
27	Purchased advertising supplies for $1,300 on account.
31	Paid freight on inventory sold, $3,218.

Instructions

(a)     Journalize the transactions using the accounts listed in part b.  Round all amounts to the nearest dollar.

(b)     Post to the T accounts.  Beginning balances are already shown.

(c)     Journalize the following adjustments:

1.	Interest accrual for the note.
2.	Bad debts are expected to be 20% of the ending accounts receivable.
3.	A count of advertising supplies at month end, reveals that $560 remains unused.
4.	The income tax rate is 30% based on $9,645 taxable income.

(d)     Post adjusting entries to the T accounts.

(e)     Prepare a trial balance.

(f)      Prepare the financial statements for the year ending December 31. The income statement should be formatted as a Multiple Step Income Statement as detailed in Chapter 5.

(g)     Ratio analysis

We have all heard the saying "The buck stops here". The Treadway report indirectly states that the "buck" stops with the Board of Directors and Senior Management. In addition, the Sarbanes-Oxley act provides both specific requirements and severe punishments for non-compliance.

For your initial post discuss why the "Tone at the top" of an organization is essential to a successful Enterprise Risk Management program. Please be specific in your post and use detailed examples of the benefits of a strong and focused tone at the top versus a weak tone at the top.

In your subsequent post(s) discuss how risk management can be integrated into a company's culture. Give specific examples. What are some of the barriers?

The Hyatt Company is trying to decide whether it should purchase new equipment and continue to make its subassemblies internally or if production should be discontinued and the subassembly purchased from an outside supplier. Either way production cannot continue using the current equipment.

           

            New equipment for producing the subassemblies can be purchased at a cost of $400,000. The equipment would have a five-year useful life (the company uses straight-line depreciation) and a $50,000 salvage value.

           

            Alternatively, the subassemblies could be purchased from an outside supplier. The supplier has offered to provide the subassemblies for $9 each under a five-year contract.

           

            Hyatt Company's present costs per unit of producing the subassemblies internally (with the old equipment) are given below. The costs are based on a current activity level of 40,000 subassemblies per year:

           

Direct Materials	$ 3.00
Direct Labour	$ 4.20
Variable Overhead	$ 0.60
Fixed Overhead ($0.80 supervision, $0.90 depreciation,
and $2 general company overhead)	$ 3.70
Total Cost per Unit	$11.50

            The new equipment would be more efficient and would reduce direct labour costs and variable overhead costs by 25%. Supervision cost and direct materials cost per unit would not be affected by the new equipment. The company has no other use for the space now being used to produce the subassemblies. The company's total general company overhead would not be affected by this decision. Assume direct labour is a variable cost.

          

            Required:

            Assume that 40,000 subassemblies are needed each year. Prepare an analysis of the two alternatives and make a recommendation to the management of the company of the appropriate course of action.

Problem 6-23 CVP Applications; Contribution Margin Ratio: Degree of Operating Leverage [LO6-1, LO6-3, LO6-4, LO6-5, LO6-8]

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows:

Sales	$	2,080,000
Variable expenses		1,040,000
Contribution margin		1,040,000
Fixed expenses		160,000
Net operating income	$	880,000

Required:

Answer each question independently based on the original data:

1. What is the product's CM ratio?

2. Use the CM ratio to determine the break-even point in dollar sales.

3. If this year's sales increase by $48,000 and fixed expenses do not change, how much will net operating income increase?

4-a. What is the degree of operating leverage based on last year's sales?

4-b. Assume the president expects this year's sales to increase by 11%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year?

5. The sales manager is convinced that a 12% reduction in the selling price, combined with a $61,000 increase in advertising, would increase this year's unit sales by 25%.

a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented?

b. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year?

6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.30 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $880,000 net operating income as last year?

Andretti Company has a single product called a Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $60 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 8.50 Direct labor 10.00 Variable manufacturing overhead 2.50 Fixed manufacturing overhead 5.00 ($430,000 total) Variable selling expenses 1.70 Fixed selling expenses 3.00 ($258,000 total) Total cost per unit $ 30.70 A number of questions relating to the production and sale of Daks follow. Each question is independent. Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 107,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 86,000 units each year if it were willing to increase the fixed selling expenses by $150,000. What is the financial advantage (disadvantage) of investing an additional $150,000 in fixed selling expenses? 1-b. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 107,500 Daks each year. A customer in a foreign market wants to purchase 21,500 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $2.70 per unit and an additional $12,900 for permits and licenses. The only selling costs that would be associated with the order would be $1.70 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 700 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling price? 4. Due to a strike in its supplier’s plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period. a. How much total contribution margin will Andretti forgo if it closes the plant for two months? b. How much total fixed cost will the company avoid if it closes the plant for two months? c. What is the financial advantage (disadvantage) of closing the plant for the two-month period? d. Should Andretti close the plant for two months? 5. An outside manufacturer has offered to produce 86,000 Daks and ship them directly to Andretti’s customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andretti’s avoidable cost per unit that it should compare to the price quoted by the outside manufacturer?

Problem 6-22 CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [LO6-1, LO6-3, LO6-4, LO6-5, LO6-6]

Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below:

  

Sales (13,200 units × $20 per unit)	$	264,000
Variable expenses		158,400
Contribution margin		105,600
Fixed expenses		117,600
Net operating loss	$	(12,000	)

Required:

1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales.

2. The president believes that a $6,900 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $88,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income?

3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?

4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.40 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,200?

5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $52,000 each month.

a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.

b. Assume that the company expects to sell 20,200 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)

c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,200)?