Data pertaining to the current position of Lucroy Industries Inc. are as follows:

Required:

1. Compute (a) the working capital, (b) the current ratio, and (c) the quick ratio. Round ratios to one decimal place.

2. Compute the working capital, the current ratio, and the quick ratio after each of the following transactions, and record the results in the appropriate columns. Consider each transaction separately and assume that only that transaction affects the data given. Round ratios to one decimal place.

Exercise 5.8 (Algorithmic) Characteristics of Production Process, Cost Measurement Vince Melders, of EcoScape Company, designs and installs custom lawn and garden irrigation systems for homes and businesses throughout the state. Each job is different, requiring different materials and labor for installing the systems. EcoScape estimated the following for the year: Number of direct labor hours 6,720 Direct labor cost $67,200 Overhead cost $50,400 During the year, the following actual amounts were experienced: Number of direct labor hours 6,045 Direct labor incurred $66,495 Overhead incurred $50,500 Vince Melders, owner of EcoScape, noticed that the watering systems for many houses in a local subdivision had the same layout and required virtually identical amounts of prime cost. Vince met with the subdivision builders and offered to install a basic watering system in each house. The idea was accepted enthusiastically, so Vince created a new company, Irrigation Specialties, to handle the subdivision business. In its first three months in business, Irrigation Specialties experienced the following: June July August Number of systems installed 68 88 108 Direct materials used $21,216 $27,456 $33,696 Direct labor incurred $14,144 $18,304 $22,464 Overhead $12,729.60 $12,812.80 $13,478.40 Required: 1. Should Irrigation Specialties use process costing or job-order costing? 2. If Irrigation Specialties uses an actual costing system, what is the cost of a single system installed in June? In July? In August? Round your answers to the nearest dollar. June $ per system July $ per system August $ per system 3. Now assume that Irrigation Specialties uses a normal costing system. Estimated overhead for the year is $46,800, and estimated production is 520 watering systems. What is the predetermined overhead rate per system? $ per system installed What is the cost of a single system installed in June? In July? In August? June $ per system July $ per system August $ per system

Majer Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6.3 ounces $ 4.00 per ounce $ 25.20 Direct labor 0.3 hours $ 19.00 per hour $ 5.70 Variable overhead 0.3 hours $ 4.00 per hour $ 1.20 The company reported the following results concerning this product in February. Originally budgeted output 5,800 units Actual output 8,600 units Raw materials used in production 30,900 ounces Actual direct labor-hours 1,990 hours Purchases of raw materials 33,300 ounces Actual price of raw materials $ 102.90 per ounce Actual direct labor rate $ 112.40 per hour Actual variable overhead rate $ 4.90 per hour The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead efficiency variance for February is:

Scribners Corporation produces fine papers in three production departments—Pulping, Drying, and Finishing. In the Pulping Department, raw materials such as wood fiber and rag cotton are mechanically and chemically treated to separate their fibers. The result is a thick slurry of fibers. In the Drying Department, the wet fibers transferred from the Pulping Department are laid down on porous webs, pressed to remove excess liquid, and dried in ovens. In the Finishing Department, the dried paper is coated, cut, and spooled onto reels. The company uses the weighted-average method in its process costing system. Data for March for the Drying Department follow:

No materials are added in the Drying Department. Pulping cost represents the costs of the wet fibers transferred in from the Pulping Department. Wet fiber is processed in the Drying Department in batches; each unit in the above table is a batch and one batch of wet fibers produces a set amount of dried paper that is passed on to the Finishing Department.

Required:

1. Compute the Drying Department's equivalent units of production for pulping and conversion in March.

2. Compute the Drying Department's cost per equivalent unit for pulping and conversion in March.

3. Compute the Drying Department's cost of ending work in process inventory for pulping, conversion, and in total for March.

4. Compute the Drying Department's cost of units transferred out to the Finishing Department for pulping, conversion, and in total in March.

5. Prepare a cost reconciliation report for the Drying Department for March.

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:

$3 per unit variable; $254,000 fixed each year. The company’s $38 unit product cost is computed as follows:

Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.

Production and cost data for the first two years of operations are:

Required:

1. Using variable costing, what is the unit product cost for both years?

2. What is the variable costing net operating income in Year 1 and in Year 2?

3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

Advanced Pharmaceuticals, Inc., is a wholesale distributor of prescription drugs to independent retail and hospital-based pharmacies. Management believes that top-notch customer representatives are the key factor in determining whether the company will be successful in the future. Customer representatives serve as the company’s liaison with customers—helping pharmacies monitor their stocks, delivering drugs when customer stocks run low, and providing up-to-date information on drugs from many different companies. Customer representatives must be ultra-reliable and are highly trained. Good customer representatives are hard to come by and are not easily replaced. Customer representatives routinely record the amount of time they spend serving each pharmacy. This time includes travel time to and from the company’s central warehouse as well as time spent replenishing stocks, dealing with complaints, answering questions about drugs, informing pharmacists of the latest developments and newest products, reviewing bills, explaining procedures, and so on. Some pharmacies require more hand-holding and attention than others and consequently they consume more of the representatives’ time. Recently, customer representatives have made more frequent complaints that it is impossible to do their jobs without working well beyond normal working hours. This has led to an alarming increase in the number of customer representatives quitting for jobs in other organizations. As a consequence, management is considering dropping some customers to reduce the workload on customer representatives. Data concerning a representative sample of the company’s customers appears below: Leafcrest Pharmacy Providence Hospital Pharmacy Madison Clinic Pharmacy Jenkins Pharmacy Total revenues $328,860 $3,056,380 $1,487,010 $208,550 Cost of drugs sold $232,470 $2,248,480 $1,133,440 $129,920 Customer service costs $10,710 $76,500 $45,500 $7,980 Customer representative time 255 1,380 630 150 Customer service costs include all of the costs—other than the costs of the drugs themselves—that could be avoided by dropping the customer. These costs include the hourly wages of the customer representatives, their sales commissions, the mileage-related costs of the customer representatives’ company-provided vehicles, and so on. Required: 1. Rank the four customers in terms of their profitability. 2. Customer representatives are currently paid $40 per hour plus a commission of 1% of sales revenues. If these four pharmacies are indeed representative of the company’s customers, could the company afford to pay its customer representatives more in order to retain them? Yes No

What are some of the business benefits and management challenges of client/server networks?

Below are transactions related to Wildhorse Company.

Prepare journal entries on the books of Wildhorse Company to record these transactions

Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows:

Wescott is considering an expansion project in the upcoming year that will cost $7.2 million and return $653,000 per year. The project would be implemented by only one of the three divisions.


Required:
1. Compute the ROI for each division. (Do not round your intermediate calculations. Round your percentage answer to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.))

Division A ___??____%

Division B____???__%

Division C____???___%

2. Compute the residual income for each division. (Loss amounts should be indicated by a minus sign.)
Division A _____??

Division B ______???

Division C______???


3. Rank the divisions according to the ROI and residual income of each.
Division A

Division B

Division C


4-a. Compute the return on investment on the proposed expansion project. (Round your percentage answer to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.))
Return on investment of proposed expansion project ???%

4-b. Is this an acceptable project?

5. Without any additional calculations, state whether the proposed project would increase or decrease each division’s ROI.
Division A: increase or decrease
Division B: increase or decrease
Divsion C: increase or decrease
6. Compute the new ROI and residual income for each division if the project was implemented within that division. (Loss amounts should be entered with a minus sign. Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))

Division A ??% Residual income? (Loss)

Division B ??% Residual income? (Loss)

Division C ??% Residual Income? (Loss)

Post the journal entries to T accounts

Prepare a post-closing trial balance

Northeast Company

January 1, 2017,

Balance Sheet

Cash 20,000

Accounts receivable 110,000

Less: Allowance for doubtful accounts (2,000)

Inventory (500 units @ $20 each) 10,000

Equipment 9,000

Less: Accumulated depreciation (2,000) -----------------

Total assets 145,000

Accounts payable 20,000

Long-term notes payable (5% interest, due in 2019) 100,000

Capital stock 10,000

Retained earnings 15,000 -------------------

145,000

Transactions or events:

The company collected 98,000 of the accounts receivable in cash.

The company wrote off one $1,000 accounts receivable from J. Jones

On Jan. 1, the company bought a car for $30,000 on notes payable at 6%

The company paid 19,000 of its accounts payable in cash

The company bought 900 units of inventory for $21 each in cash

The company bought a 1 year insurance policy for $2400 on October 1

The company paid rent for the months January through December of $18,000

On July 1, the company bought rights to a patent for $20,000 The patent has ten more years of useful life

On Dec 1, the company paid dividends for $1,000 to it’s shareholders.

On Dec. 1, the company bought another 200 units of inventory for $22 on account

On Dec. 15, the company sold 1,300 units for $30 each. 1000 were sold for cash, and 300 on account. [The company accounts for its inventory on the FIFO basis, so the first items bought are assumed to be the first ones sold.]

The company decided to recorded depreciation on the equipment. The equipment is one year old. It had a cost of $9,000, salvage value of $1,000, and an expected useful life of 4 years. Use straight line to depreciate it

The company recorded depreciation on the car, using the straight line method, assuming it had a five year life, and salvage value of $6,000.

The company made the appropriate adjustment to reflect the fact the insurance policy only had nine more months left of effectiveness.

The company accrued the interest that had been built up on the long-term notes. The money had been borrowed on January 1, 2017. No payments of interest or principal were due until some time in 2018.

The company made the appropriate entry to record amortization on the patent on December 31.

On December 31, the company made an adjustment for the rent for December 2017.

The company recorded bad debt expense of 6% of the accounts receivable.

On November 1, 2017, Splish Brothers Inc. had the following account balances. The company uses the perpetual inventory method.

Max has interest income of $5,000 annually from a trust fund set up per his grandfather Ed’s will.

Will Max’s income be taxed? If so, how? Is there a way to shift income from the parents to the child and would it be a good idea in this case? Why or why not