Special-Order Decision

Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $9.00. The new customer is geographically separated from Smooth Move's other customers, and existing sales will not be affected. Smooth Move normally produces 95,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $15 per unit. Unit cost information is as follows:

If Smooth Move accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity.

Required:

1. What are the alternatives for Smooth Move?
Accept or reject the special order

2. CONCEPTUAL CONNECTION: Should Smooth Move accept the special order?
Yes

By how much will profit increase or decrease if the order is accepted?
Increase  $

3. CONCEPTUAL CONNECTION: Briefly explain the significance of the statement in the exercise that “existing sales will not be affected” (by the special sale).

It indicates that there will be no product-line cannibalization; in other words, there is sufficient excess capacity such that the acceptance of the special sales will not decrease Smooth Move’s regular sales.

Hipster Company applies overhead based on direct labor hours. At the beginning of the year January 1, Hipster estimates Overhead cost to be $450,000 and Direct Labor hours to be 90,000. During January, Jones has 6,700 actual direct labor hours.

31. Refer to Figure 5-1

What is the predetermined overhead rate?

32. Refer to Figure 5-1. What is the amount of overhead applied for January?

33. Refer to Figure 5-1. If the actual overhead for January is $41,000, what is the overhead variance and is it overapplied or underapplied?

pictou pallets manufatures shipping pallets at two plants and distributes them to three strategically located warehouses.

Plant 1 is capable of producing 8000 pallets per year and plant 2 is capable of producing 5000 pallets per year.

Warehouse A requires 4500 pallets, warehouse b requires 3000 pallets, and warehouse c requires 4000 pallets per year.

the cost of shipping one pallet from each plant to each warehouse are listed below:

(eg. the cost of shipping from plant 1 to warehouse A is $1.10 per pallet)

a) find the optimal shipping schedule to minimize shipping costs.

B) would the shipping schedule change if the cost of shipping from plant 1 to warehouse A increased by $0.30 to $1.40? explain

C) how much would the shipping charges change if plant 2's capacity were decreased by 100 pallets?

d) would the same hold for another decrease of 100 pallets?

E) the optimal shipping schedule has no pallets shipped from plant 1 to warehouse b. What change in shipping cost along this route would make such shipments worthwhile.

Please solve in Excel

Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

Compute the cost assigned to ending inventory using LIFO.

Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below:

From past experience, the company has learned that 30% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $410,000, and March sales totaled $440,000.

Required:

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2. What is the accounts receivable balance on June 30th?

he direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours:

The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $6.00 per direct labor-hour and its total fixed manufacturing overhead is $80,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $20,000 per quarter.

Required:

1. Prepare the company’s manufacturing overhead budget for the upcoming fiscal year.

2. Compute the company’s predetermined overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year.

VanderMeer Inc. reported the following information for the month of February:

During February, VanderMeer sold 136 units. The company uses a periodic inventory system.

Required:

What is the value of ending inventory and cost of goods sold for February under the following assumptions.

The Two Dollar Store has a cost of equity of 10.9 percent, the YTM on the company's bonds is 5.6 percent, and the tax rate is 40 percent. If the company's debt–equity ratio is .45, what is the weighted average cost of capital?

a-8.56%

b- 9.13%

c- 5.70%

d- 8.21%

e- 7.53% (NOT CORRECT)

Dyrdek Enterprises has equity with a market value of $12.7 million and the market value of debt is $4.50 million. The company is evaluating a new project that has more risk than the firm. As a result, the company will apply a risk adjustment factor of 2.2 percent. The new project will cost $2.58 million today and provide annual cash flows of $671,000 for the next 6 years. The company's cost of equity is 11.83 percent and the pretax cost of debt is 5.07 percent. The tax rate is 35 percent. What is the project's NPV?

a- $192,088 .(NOT CORRECT)

b- $377,207

c- $579,510

d- $194,678

e- $158,451

Amanda Ltd is a manufacturing company operating in Parramatta, Sydney. The company has been successful since its inception in the early 1990 and has even won twice the “Best Corporate Citizen Award” presented by the City of Parramatta Council. The company has recently been facing multiple problems including declining profit, loss of inventory (through theft or spoilage) in the warehouse, and declining reputation from its stakeholders. Coincidently, all these problems started when the head of Accounting Department, Sofia Bryant, voluntarily retired from her position recently. Her retirement was provoked by a sarcastic comment made by the Sales Manager during board meeting, that “Amanda Ltd can cut down its cost by shutting down Accounting Department. After all we will even be better off without this department”.

Part A

1. Evaluate the statement, “Accounting is the Language of Business”.

2. Discuss how Accounting and Governance helped Amanda Ltd in winning the Best Corporate Citizen Award.

Part B

3. a. Why some firms might prefer a perpetual inventory system to a period inventory system?

b. Explain how using perpetual inventory system could help Amanda Ltd to minimise the loss of inventory.

4. How would the application of the principle of segregation of duties could prevent the loss of inventory at Amanda LTD?

The controller of Dash Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

The company expects to sell about 15% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent $6,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in July, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 75% are expected to be paid in the month in which they are incurred and the balance in the following month.

Current assets as of March 1 include cash of $44,000, marketable securities of $62,000, and accounts receivable of $128,600 ($101,000 from February sales and $27,600 from January sales). Sales on account for January and February were $92,000 and $101,000, respectively. Current liabilities as of March 1 include a $58,000, 12%, 90-day note payable due May 20 and $6,000 of accounts payable incurred in February for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $3,500 in dividends will be received in March. An estimated income tax payment of $16,000 will be made in April. Dash Shoes' regular quarterly dividend of $6,000 is expected to be declared in April and paid in May. Management desires to maintain a minimum cash balance of $34,000.

Required:

1. Prepare a monthly cash budget and supporting schedules for March, April, and May. Input all amounts as positive values except overall cash decrease and deficiency which should be indicated with a minus sign. Assume 360 days per year for interest calculations.

The following information is available concerning the inventory of Carter Inc.:

During the year, Carter sold 994 units. It uses a periodic inventory system.

Required:

1. Calculate ending inventory and cost of goods sold for each of the following three methods:

In your calculations round average unit cost to the nearest cent, and round all other calculations and your final answers to the nearest dollar.

2. Assume an estimated tax rate of 30%. How much more or less (indicate which) will Carter pay in taxes by using FIFO instead of LIFO?

On January 1, a company issues bonds with a par value of $500,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 12%. Calculate the sale price and record the journal entry for this sale. Using the straight-line method, calculate the amount of interest expense for the first semiannual interest period and record the journal entry.

2. Write the General Ledger and Reporting General Controls used in companies to overcome the threats.

Swifty Company uses a perpetual inventory system. Its beginning inventory consists of 58 units that cost $39 each. During June, (1) the company purchased 173 units at $39 each on account, (2) returned 7 units for credit, and (3) sold 144 units at $58 each.

Journalize the June transactions. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Trident Repairs & Service, an electronics repair store, prepared the following unadjusted trial balance at the end of its first year of operations:

Trident Repairs & Service

UNADJUSTED TRIAL BALANCE

November 30, 20Y3

For preparing the adjusting entries, the following data were assembled:

1. Journalize the adjusting entries necessary on November 30, 20Y3. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

2. Determine the revenues, expenses, and net income of Trident Repairs & Service before the adjusting entries.

3. Determine the revenues, expenses, and net income of Trident Repairs & Service after the adjusting entries.

4. Determine the effect of the adjusting entries on Retained Earnings.

The Retained Earnings account increases by $ _____________