Review Case 7-2 Portofino Company. Address the three questions at the end of the case. Summarize your findings in a 3-5-page paper. Be sure to properly cite your resources using APA style.

Portofino Company made purchases on account from three foreign suppliers on December 15, 2012, with payment made on January 15, 2013. Information related to these purchases is as follows:

Portofino Company’s fiscal year ends December 31.

Required:

1. Use historical exchange rate information available on the Internet at www.oanda.com to find interbank exchange rates between the U.S. dollar and each foreign currency for the period December 15, 2012, to January 15, 2013.
2. Determine the foreign exchange gains and losses that Portofino would have recognized in net income in 2012 and 2013, and the overall foreign exchange gain or loss for each transaction. Determine for which transaction it would have been most important for Portofino to hedge its foreign exchange risk.
3. Portofino could have acquired a one-month call option on December 15, 2012, to hedge the foreign exchange risk associated with each of the three import purchases. In each case, the option would have had an exercise price equal to the spot rate at December 15, 2012, and would have cost $200. Determine for which hedges, if any, Portofino would have recognized a net gain on the foreign currency option.

The Clarks made quarterly Federal income tax payments of $2,400 on each of the following dates: April 17, 2017; June 15, 2017; September 15, 2017; and January 16, 2018. Last year’s Federal income tax return reflected an overpayment of $800, which the Clarks chose to apply to their 2017 income tax liability. The trustee of Andy’s retirement plan also withheld $6,500 of tax with respect to his retirement withdrawals for the year. Neither Andy nor Sarah holds any foreign financial accounts. Relevant Social Security numbers are noted below:

Name Social Security Number Birth Date

Andrew S. Clark 123-45-6785 09/15/1946

Sarah K. Clark 123-45-6786 12/03/1951

Gabrielle Sparks 123-45-6784 10/19/1984

Malone Sparks 123-45-6787 06/25/2011

Macie Sparks 123-45-6788 06/25/2011

Requiremnts: Make necessary assumptions for information not given in the problem but needed to complete the return. • The Clarks are employing the same tax return preparer who completed their tax return for the prior year. • The taxpayers have substantiation (e.g., records, receipts) to support all transactions for the year. • If a refund is due, the Clarks want it applied to next year’s tax liability. • The Clarks do not want to contribute to the Presidential Election Campaign Fund.

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 4,100 labor-hours in March; however, it actually worked 3,900 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.

At the end of 2018, the management of XX Corp., a merchandising company, prepared the attached balance sheet. To prepare a master budget for January, February, and March of 2019, management gathers the following information.

1. XX Corp.'s single product is purchased for $33 per unit and resold for $60 per unit. The inventory level of on December 31, 2018 is 2,000 units. Management's desired level of ending inventory for 2019, is is 20% of the next month's expected sales (in units). Expected sales are: January, 6,000 units; February, 9,000 units; March, 12,000 units; and April, 10,000 units. check figure: Total Budgeted Sales Revenue for Quarter = $1,620,000; total budgeted purchases for Quarter = $891,000

2. Cash sales and credit sales represent 30% and 70%, respectively, of total sales. Of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the $500,000 accounts receivable balance at December 31, 2018, $255,000 is collected in January 2019 and the remaining $245,000 is collected in February 2019.
3. All merchandise purchases are made on account. Merchandise purchases are paid for as follows: 40% in the first month after the month of purchase and 60% in the second month after the month of purchase. For the $347,000 accounts payable balance at December 31, 2018, $138,000 is paid in January 2019 and the remaining $208,200 is paid in February 2019.
4. Sales commissions equal to 20% of sales revenue are paid each month. Sales salaries (excluding commissions) are $960,000 per year.
5. General and administrative salaries are $480,000 per year. Maintenance expense equals $3,000 per month and is paid in cash. Depreciation expense is $67,500 for the year.

6. XX Corp. has a working arrangement with its bank to obtain additional loans as needed. The borrowing can only be done in increments of $1,000. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. Eso has agreed to maintain a minimum ending cash balance of $45,000 in each month. The tax payable on the balance sheet is due March 13, 2019.

Required budgets you must complete:

1. Monthly sales budgets (showing both budgeted unit sales and dollar sales).

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 21,000 machine-hours and produced 15,000 units. The company had originally planned to work 23,000 machine-hours during March.

Required:

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

Suppose that Disney is considering one more Toy Story movie. The company is not confident in box office sales, but they do believe that the file will create merchandising opportunities (DVDs, toys, clothes,..etc). Their early analysis believes the move will have an NPV of -$43.00 million if you only look at ticket sales in the theater. However, they also believe that the movie will create sales of $80.00 million per year in merchandise. The merchandise sales will decline each year by 21.00% in perpetuity. Let’s assume that after-tax operating margin on these sales is 14.00%, and that Disney has a cost of capital at 8.00%. What is the cash flow created by the merchandise side effect in the first year? (answer in terms of millions, so 1,000,000 would be 1.00)

Let’s value this as a perpetuity. The merchandise sales will continue indefinitely, BUT the sales will decrease each year. What is the net NPV for creating the movie? (answer in terms of millions, so 1,000,000 would be 1.00)

On January 1^st, 2018. After its first year of operation, CC’s president, Allen Hale, is now trying to prepare the company’s master budget for the first two months (January and February) of 2019. Since you are his good friend and an accounting student, Mr. Hale has asked you to prepare the budget.

Based on the budgets from 2018, Mr. Hale has gathered the following information:

• Projected Sales for January 2019             $124,300
• Average Monthly Sales Increase                         3%
• Average Monthly Salary Expenses           $ 36,400
• Average Monthly Rent Expenses             $ 5,200
• Average Monthly Utility Expenses          $   6,400
• Average Monthly Misc. Expense             $   3,200
• Supplies Expense-percent of sales                        3%
• Commission-percent of sales                                6%

Begin your project by carefully reading all instructions given here and reviewing the balance sheets and budget worksheets contained in the Excel workbook.

Fill in the data table in the upper left hand corner of the “Budgets” worksheet (found on the second tab in the Excel workbook) with the values above and other values found in the assumptions given below. Using this information, prepare Chippewa Chocolates’ master budget for the first two months of 2019. All amounts should be rounded to whole dollars as necessary. Apply the following assumptions:

1. Customers typically pay 45% of total sales in cash and the remaining 55% on account. The company expects to collect 100% of the credit sales in the month following the sale.

2. The cost of goods sold is 40% of budgeted sales and the company desires to maintain a minimum ending inventory equal to 25% of the next month’s cost of goods sold. All purchases are made on account.

3. The company pays 80% of inventory purchases in the month of purchase and the remaining 20% in the following month.

4. Depreciation expense on existing equipment is $4,000 each month. In addition, CC will spend $180,000 on January 1 for additional equipment. The equipment is expected to have a $7,200 salvage value and a four-year (48-month) useful life.

5. Salaries, utilities, and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred.

6. The company borrows and repays funds on its credit line in increments of $1,000 on the last day of each month as necessary to maintain its targeted $44,000 cash balance. It pays interest of .3% per month in cash on the last day of the month on cash borrowed in the prior month.

Pearl Manufacturing Company provides glassware machines for major department store retailers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of five years and the new equipment has a value of $239,400 with a five-year life. The expected additional cash inflows are $63,000 per year. What is the payback period for this investment?

• A. 2.5 years
• B. 4.5 years
• C. 3.8 years
• D. 5 years

MULTIPLE CHOICE

____1.    When only one class of stock is issued by a corporation, it should be termed

        A.  Authorized stock

        B.  Treasury stock

        C.  Common stock

        D.  Preferred stock

        E.  None of these

____2.    Which of the following statements is correct?

        A.    A corporation's issued stock may exceed its outstanding stock.

        B.    A corporation's outstanding stock may exceed its authorized stock.

        C.    A corporation's issued stock may exceed its     authorized stock.

        D.    A Corporation's treasury stock may exceed its issued  stock.

        E.    A corporation's treasury stock may exceed its authorized stock.

____3.    Which of the following rights allows a shareholder of a corporation to maintain his or her proportionate interest in the corporation?

        A.  Preemptive right

        B.  Participation right

        C.  Preferred right

        D.  Cumulative right

        E.  None of these.

____4.    The excess of the sales price of treasury stock over its cost should be credited to:

        A.  Retained Earnings

        B.  Paid-in Capital from Treasury Stock

        C.  Treasury Stock

        D.  Extraordinary Gain

        E.  None of these

____5.    Treasury stock is

      A.    Stock of other corporation owned by a corporation

      B.    A U.S. government security

        C.    A corporation's own stock that has been retired.

        D.    A corporation's own stock that has been reacquired and held for future use.

        E. None of these.

____6.    The balance of the Retained Earnings account represents:

        A.    cash set aside for specific use

        B.    cash available for daily operations

        C.    an excess of revenues over expenses for the current period

        D.    profits of a company since the date of its beginning less any losses, dividends to stockholders and any transfers to Contributed Capital

        E.    None of these

____7.    Each partner in a general partnership is liable

        A.  For his or her share of partnership liabilities

        B.  Jointly for the total debts of the partnership

        C.  Individually for the total debts of the partnership

        D.  For the acts of any other partner acting as a partner

        E.  For all of these

____8.    Which of the following sequences of dividend-related dates is in the correct chronological order (earliest date first)?

        A.    Declaration date, record date, payment date

        B.    Record date, declaration date, payment date

        C.    Declaration date, payment date, record date

        D.    Payment date, declaration date, record date

        E.    None of these

____9. All of the following would appear on a Statement of

      Stockholders Equity except

        A.    net income

        B.    an issuance of common stock

        C.    declaration of cash dividends

        D.    declaration of stock split

        E.    All of these

____10. If no formal agreement exists concerning distribution of

       partnership profits and losses, they are distributed

        A.  Using average capital balances

        B.  Using beginning capital balances

        C.  Based on each partner's seniority

        D.  Equally

        E.  None of these

Flexible Budget for Varying Levels of Activity

Nashler Company has the following budgeted variable costs per unit produced:

Direct materials $7.20
Direct labor 1.54 Variable overhead:
Supplies 0.23
Maintenance 0.19
Power 0.18
Budgeted fixed overhead costs per month include
supervision of $98,000,
depreciation of $76,000,
and other overhead of $245,000.
Required:
1. Prepare a flexible budget for all costs of production for the following levels of production:
160,000 units, 170,000 units, and 175,000 units.
Round your answers to the nearest cent, if required. Nashler Company Flexible Budget Variable cost per unit Range of Production in Units 160,000 Range of Production in Units 170,000 Range of Production in Units 175,000

2 What if Nashler Company’s cost of maintenance rose to $0.22 per unit? How would that affect the unit product costs calculated in Requirement 2? If required, round your answer to the nearest cent.
Increase

• Increase
• Decrease

by $ per unit

3 what is the per-unit total product cost for each of the production levels from Requirement 1? (Round each unit cost to the nearest cent.)

Accounting for Managers

25 most important ratios for analysis Definition of what the ratios are and what they compare, elements of the ratio and where to find those elements, type of ratio is this and what does it tell the user?

The data below represents the amount of grams of carbohydrates in a sample serving of breakfast cereal. 10 18 24 30 19 22 24 20 18 25 20 22 19

what is the variance?

Tustin Corporation has provided the following data for its two most recent years of operation:

The net operating income (loss) under variable costing in Year 1 is closest to:

Multiple Choice

• $480,000

• $139,000

• $420,000

• $159,000

Innovative Components, Inc. reported the following income statement data for 2013-2017.   

What would be an appropriate sales growth rate based on the historical data?

. You are required to allocate the support department cost to operations department by taking any Saudi based operating company