You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

During March, the company worked 20,000 machine-hours and produced 14,000 units. The company had originally planned to work 22,000 machine-hours during March.

Required:

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,560 pizzas at an average selling price of $15 per pizza and for 220 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)

Average Rate of Return Method, Net Present Value Method, and Analysis

The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows:

Each project requires an investment of $420,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis.

Required:

1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.

1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value.

2. The warehouse has a smaller  net present value as tracking technology cash flows occur earlier  in time. Thus, if only one of the two projects can be accepted, the tracking technology  would be the more attractive.

Sassafras Yacht Corporation began operations on December 1, 2017. The company uses normal

costing as part of a job-order cost system. During December, the company purchased $75,000 of

direct material, and then used $60,000 of these direct materials to start Job 450. The company

charged total conversion costs of $80,000 (direct labor and overhead) to Job 450 during December.

As of the end of December Job 450 was not complete. There was no underapplied or overapplied

overhead for December.

The company charges overhead to jobs using direct labor HOURS (careful!). The estimated direct

labor hours for 2018 are 25,000 hours and the estimated overhead cost for 2018 is $600,000. During

2018, the following transactions occurred.

1.

There were 5 jobs that had work completed on them in 2018. Some of the data for these jobs

are shown below:

Job 450

Job 500

Job 550

Job 600

Job 650

Direct Material Cost

$8,000

$60,000

$80,000

$20,000

$12,000

Direct Labor

Hours

5,000 hrs.

6,000 hrs.

10,000 hrs. 2,000 hrs.

3,000 hrs.

2.

The Direct Labor Rate for 2018 is $40 per hour.

3.

The company purchased $200,000 of direct materials.

4.

At the end of 2018, the jobs that were not finished were Jobs 600 and 650. Job 450 consisted

of 5,000 units of which 4,200 sold in 2018 at a selling price of $200 each. Job 550 consisted of

15,000 units of which 10,000 sold in 2018 at a selling price of $100 each. Job 500 consisted of

10,000 units, none of which sold at the end of 2018.

5.

Other costs incurred during 2018 include the following:

Advertising Expense

$125,000

Indirect Labor

$275,000

Maintenance- Factory

$ 75,000

Factory Insurance

$ 45,000

Administrative Expense

$450,000

Corporate General Expenses

$150,000

Depreciation- Factory

$60,000

F.G. Warehouse Depreciation

$ 40,000

Utilities- Factory

$110,000

Miscellaneous Overhead

$ 60,000

Selling Expense

$200,000

Indirect Materials

$ 75,000

Your Task:

A.

Prepare, in good form, a Schedule of Cost of Goods Manufactured for 2018.

B.

Add up the total costs of Jobs A, B and C. Does this total equal your Cost of Goods

Manufactured from Part A? Should it?

C.

Compute the underapplied or overapplied overhead for 2018. Is it under or overapplied?

D.

Assume that any underapplied or overapplied overhead is closed totally to Cost of Goods Sold

at the end of 2018. Prepare, in good form, an Income Statement for 2018.

Ecola Company uses a job order costing system. Manufacturing overhead is applied on the basis of direct labor cost. Total manufacturing overhead was estimated to be $142,560 for the year; direct labor was estimated to total $162,000.

The following transactions have occurred during the year.

(a) Calculate the predetermined overhead rate.

(b) Calculate cost of goods manufactured.

(c) Calculate the over- or underapplied overhead. (Input the amount as positive value.)

(d) Calculate adjusted cost of goods sold.

Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 79,000 units for $30 per unit. The variable production costs are $15, and fixed costs amount to $890,000. Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise by 15 percent in the coming year. Of the $15 variable costs, 40 percent are from labor and 20 percent are from materials. Variable overhead costs are expected to increase by 25 percent. Sales prices cannot increase more than 10 percent. It is also expected that fixed costs will rise by 7 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 8 percent during the year. Required: a. Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.)

b. Compute the volume of sales and the dollar sales level necessary to provide the 8 percent increase in profits, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.)

c. If the volume of sales were to remain at 79,000 units, what price increase would be required to attain the 8 percent increase in profits? Calculate the new price. (Round your answer to 2 decimal places.)

Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports are prepared monthly for each department. The planning budget and flexible budget for the Production Department are based on the following formulas, where q is the number of labor-hours worked in a month:

The Production Department planned to work 4,500 labor-hours in March; however, it actually worked 4,300 labor-hours during the month. Its actual costs incurred in March are listed below:

Required:

1. Prepare the Production Department’s planning budget for the month.

2. Prepare the Production Department’s flexible budget for the month.

3. Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances.

Exercise 5-14 Break-Even and Target Profit Analysis [LO5-3, LO5-4, LO5-5, LO5-6]

Required:

Debt Investment Transactions, Available-for-Sale Valuation

Rekya Mart Inc. is a general merchandise retail company that began operations on January 1, Year 1. The following transactions relate to debt investments acquired by Rekya Mart Inc., which has a fiscal year ending on December 31:

Required:

1. Journalize the entries to record these transactions. For a compound transaction, if an amount box does not require an entry, leave it blank.

2. If the bond portfolio is classified as available for sale, what impact would this have on financial statement disclosure?

If the bonds are classified as available-for-sale securities, then the portfolio of bonds would need to be adjusted to fair value . This would be accomplished by using a valuation allowance account and an unrealized gain (loss) account.

love Company is a merchandiser that provided a balance sheet as of September 30 as shown below:

The company is in the process of preparing a budget for October and has assembled the following data:

1. Sales are budgeted at $440,000 for October and $450,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month’s credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October.

2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month’s cost of goods sold.

3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October.

4. Selling and administrative expenses for October are budgeted at $89,400, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,760 for the month.

Required:

1. Using the information provided, calculate or prepare the following:

a. The budgeted cash collections for October.

b. The budgeted merchandise purchases for October.

c. The budgeted cash disbursements for merchandise purchases for October.

d. The budgeted net operating income for October.

e. A budgeted balance sheet at October 31.

2. Assume the following changes to the underlying budgeting assumptions:

(1) 50% of a month’s credit sales are collected in the month the sales are made and the remaining 50% is collected in the following month, (2) the ending merchandise inventory is always 10% of the following month’s cost of goods sold, and (3) 20% of all purchases are paid for in the month of purchase and 80% are paid for in the following month. Using these new assumptions, calculate or prepare the following:

a. The budgeted cash collections for October.

b. The budgeted merchandise purchases for October.

c. The budgeted cash disbursements for merchandise purchases for October.

d. Net operating income for the month of October.

e. A budgeted balance sheet at October 31.

Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales data for portable DVD players are as follows: Apr. 1 Inventory 59 units @ $62 10 Sale 44 units 15 Purchase 33 units @ $66 20 Sale 23 units 24 Sale 11 units 30 Purchase 20 units @ $69 The business maintains a perpetual inventory system, costing by the first-in, first-out method. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. a. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column. Cost of the Merchandise Sold Schedule First-in, First-out Method Portable DVD Players Date Quantity Purchased Purchases Unit Cost Purchases Total Cost Quantity Cost of Merchandise Sold Cost of Merchandise Sold Unit Cost Cost of Merchandise Sold Total Cost Inventory Quantity Inventory Unit Cost Inventory Total Cost Apr. 1 $ $ Apr. 10 $ $ Apr. 15 $ $ Apr. 20 Apr. 24 Apr. 30 Apr. 30 Balances $ $ b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

12.4 Explain how calculating current cash debt coverage for an entity overcomes a disadvantage of the current and quick ratios.

For which of the following taxes is there a ceiling on the amount of employee annual earnings subject to the​ tax?

A.

FICAminus−OASDI

Your answer is not correct.

B.

State unemployment taxes

C.

Federal unemployment taxes

D.

All of these answers are correct.

The correct answer is D

Explain: