Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is shown below:

Exercise 8-12

Beech’s managers have made the following additional assumptions and estimates:

1. Estimated sales for July, August, September, and October will be $250,000, $270,000, $260,000, and $280,000, respectively.

2. All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.

3. Each month’s ending inventory must equal 30% of the cost of next month’s sales. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.

4. Monthly selling and administrative expenses are always $46,000. Each month $5,000 of this total amount is depreciation expense and the remaining $41,000 relates to expenses that are paid in the month they are incurred.

5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required:

1. Prepare a schedule of expected cash collections for July, August, and September.

2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

2-b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September.

3. Prepare an income statement for the quarter ended September 30.

4. Prepare a balance sheet as of September 30.

Compute the component percentages for Rhodes income statement below. (Enter your answer as a percentage rounded to 2 decimal place (i.e. 0.1234 should be entered as 12.34). Enter all answers as positive values.) Compute the component percentages for Rhodes income statement below. (Enter your answer as a percentage rounded to 2 decimal place (i.e. 0.1234 should be entered as 12.34). Enter all answers as positive values.)

ohnson Corporation began 2018 with inventory of 10,000 units of its only product. The units cost $8 each. The company uses a periodic inventory system and the LIFO cost method. The following transactions occurred during 2018:

1. Purchased 50,000 additional units at a cost of $10 per unit. Terms of the purchases were 2/10, n/30, and 100% of the purchases were paid for within the 10-day discount period. The company uses the gross method to record purchase discounts. The merchandise was purchased f.o.b. shipping point and freight charges of $0.50 per unit were paid by Johnson.
2. b. 1,000 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.50 per unit it had paid on the original purchase. The units were defective and were returned two days after they were received.
3. Sales for the year totaled 45,000 units at $18 per unit.
4. On December 28, 2018, Johnson purchased 5,000 additional units at $10 each. The goods were shipped f.o.b. destination and arrived at Johnson's warehouse on January 4, 2019.
5. 14,000 units were on hand at the end of 2018.

Requirements

1. Complete the below table to determine the ending inventory and cost of goods sold for 2018.
2. Assuming that operating expenses other than those indicated in the above transactions amounted to $150,000, determine income before income taxes for 2018.

Explain the basic ideas underlying process costing and how they differ from job costing. Demonstrate how the presence of beginning inventories affects the computation of unit costs under the first in, first out method.

Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company’s estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: “My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $4.20 to determine the bid price. Since our average cost is only $2.90 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart.”

To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow:

Required:

1. Perform the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system.

a. A routine 1,000-square-foot asbestos removal job.

b. A routine 2,000-square-foot asbestos removal job.

c. A nonroutine 2,000-square-foot asbestos removal job.

Case Study Harwood Medical Instruments PLC Harwood Medical Instruments PLC (HMI), based just outside of Birmingham, England, manufactured specialty medical instruments and sold them in market niches that were becoming increasingly competitive and price sensitive because of pressures to reduce health care costs. HMI was organized into nine decisions each run by a general manager. Over the years, HMI had grown both organically and by acquisition. Six of the divisions had been acquired by HMI within the past decade. All of HMI’s divisions sold medical products to hospitals, laboratories, and/or doctors, so the need for product quality and reliability was high. The divisions varied significantly, however, in terms of the degree to which their success depended on, for example, development of new products, efficiency of production, and/or customer service. Bonuses for division general managers were paid semi-annually. Up to the year 2009, these bonuses were calculated as 1% of division operating profits. HMI’s managing director, Andy Guthrie, had concerns though that the operating profit measure was too narrowly focused. He had been reading articles about performance measurement and decided to a “more balanced” scorecard. In November 2009, just before introducing a new bonus plan, Mr. Guthrie explained to his chief financial officer that he was willing to pay out higher bonuses than had been paid historically if improved performance warranted doing so. The new plan provided a base bonus for division general managers of 1% of division operating profits for the half-year period. This base bonus was adjusted as follows: • Increased by £5,000 if over 99% of deliveries were on time; by £2,000 if 95-99% of deliveries were on time; or by zero is less than 95% of deliveries were on time. • Increased by £5,000 if sales returns were less than or equal to1% of sales, or decreased by 50% of the excess of sales returns over 1% of sales. • Increased by £1,000 for every patent application filed with the UK Intellectual Property Office. • Reduced by the excess of scrap and rework costs over 1% of operating profit. • Reduced by £5,000 if average customer satisfaction ratings were below 90%. If the bonus calculation resulted in a negative amount for a particular period, the manager received no bonus. Negative amounts were not carried forward to the next period. Exhibit 1 shows results for two representative HMI divisions for the year 2010, the first year under the new bonus plan. The Surgical Instruments Division (SID), one of HMI’s original businesses, sold a variety of surgical instruments, including scissors, scapels, retractors, and clamps. The markets for these products were mature, so growth was relatively slow. Not much innovation was needed, but controlling costs was critical. The Ultrasound Diagnostic Equipment Division (Ultrasound), which was acquired in 2007, sold and serviced ultrasound probes, transducers, and diagnostic imaging systems. The ultrasound market promised excellent growth and profits if the division could keep its sophisticated products on the cutting edge technologically and control both product development and product costs effectively. In 2009, the total annual bonuses for the year earned by the managers of SID and Ultrasound were approximately £85,000 and £74,000, respectively. Exhibit 1 Harwood Medical Instruments PLC Operating results for the surgical Instruments and Ultrasound Diagnostic Equipment Divisions, 2010 (£ in 000s) Surgical Instruments Division Ultrasound Diagnostic Equipment Division 1st half of 2010 2nd half of 2010 1st half of 2010 2nd half of 2010 Sales £42,000 £44,000 £28,600 £29,000 Operating profit £4,620 £4,400 £3,420 £4,060 On-time deliveries 95.4% 97.3% 98.2% 94.6% Sales returns £450 £420 £291 £289 Patent applications filed 0 1 4 8 Scrap and rework costs £51.1 £45.0 £39.7 £28.2 Customer satisfaction (average) 78% 89% 81% 91% Assignment Questions 1. What was the purpose of the change? 2. Calculate the bonus earned by each manager for each 6-month period and for the year 2010. 3. Evaluate the new plan. Is there any evidence that it produced the desired effects? What changes to the new plan would you suggest, if any? 4. Analyze the recommendation for a “more balanced” scorecard in performance measurement. What system would you recommend and what are its potential benefits and challenges in measuring performance?

Case Study Harwood Medical Instruments PLC Harwood Medical Instruments PLC (HMI), based just outside of Birmingham, England, manufactured specialty medical instruments and sold them in market niches that were becoming increasingly competitive and price sensitive because of pressures to reduce health care costs. HMI was organized into nine decisions each run by a general manager. Over the years, HMI had grown both organically and by acquisition. Six of the divisions had been acquired by HMI within the past decade. All of HMI’s divisions sold medical products to hospitals, laboratories, and/or doctors, so the need for product quality and reliability was high. The divisions varied significantly, however, in terms of the degree to which their success depended on, for example, development of new products, efficiency of production, and/or customer service. Bonuses for division general managers were paid semi-annually. Up to the year 2009, these bonuses were calculated as 1% of division operating profits. HMI’s managing director, Andy Guthrie, had concerns though that the operating profit measure was too narrowly focused. He had been reading articles about performance measurement and decided to a “more balanced” scorecard. In November 2009, just before introducing a new bonus plan, Mr. Guthrie explained to his chief financial officer that he was willing to pay out higher bonuses than had been paid historically if improved performance warranted doing so. The new plan provided a base bonus for division general managers of 1% of division operating profits for the half-year period. This base bonus was adjusted as follows: • Increased by £5,000 if over 99% of deliveries were on time; by £2,000 if 95-99% of deliveries were on time; or by zero is less than 95% of deliveries were on time. • Increased by £5,000 if sales returns were less than or equal to1% of sales, or decreased by 50% of the excess of sales returns over 1% of sales. • Increased by £1,000 for every patent application filed with the UK Intellectual Property Office. • Reduced by the excess of scrap and rework costs over 1% of operating profit. • Reduced by £5,000 if average customer satisfaction ratings were below 90%. If the bonus calculation resulted in a negative amount for a particular period, the manager received no bonus. Negative amounts were not carried forward to the next period. Exhibit 1 shows results for two representative HMI divisions for the year 2010, the first year under the new bonus plan. The Surgical Instruments Division (SID), one of HMI’s original businesses, sold a variety of surgical instruments, including scissors, scapels, retractors, and clamps. The markets for these products were mature, so growth was relatively slow. Not much innovation was needed, but controlling costs was critical. The Ultrasound Diagnostic Equipment Division (Ultrasound), which was acquired in 2007, sold and serviced ultrasound probes, transducers, and diagnostic imaging systems. The ultrasound market promised excellent growth and profits if the division could keep its sophisticated products on the cutting edge technologically and control both product development and product costs effectively. In 2009, the total annual bonuses for the year earned by the managers of SID and Ultrasound were approximately £85,000 and £74,000, respectively. Exhibit 1 Harwood Medical Instruments PLC Operating results for the surgical Instruments and Ultrasound Diagnostic Equipment Divisions, 2010 (£ in 000s) Surgical Instruments Division Ultrasound Diagnostic Equipment Division 1st half of 2010 2nd half of 2010 1st half of 2010 2nd half of 2010 Sales £42,000 £44,000 £28,600 £29,000 Operating profit £4,620 £4,400 £3,420 £4,060 On-time deliveries 95.4% 97.3% 98.2% 94.6% Sales returns £450 £420 £291 £289 Patent applications filed 0 1 4 8 Scrap and rework costs £51.1 £45.0 £39.7 £28.2 Customer satisfaction (average) 78% 89% 81% 91% Assignment Questions 1. What was the purpose of the change? 2. Calculate the bonus earned by each manager for each 6-month period and for the year 2010. 3. Evaluate the new plan. Is there any evidence that it produced the desired effects? What changes to the new plan would you suggest, if any? 4. Analyze the recommendation for a “more balanced” scorecard in performance measurement. What system would you recommend and what are its potential benefits and challenges in measuring performance?

Question 1( 25 marks)
Jeff owns a business which makes and sells a well-known brand of peach brandy (“the Business”). Jeff holds a business name, and a trademark for a logo, associated with the Business’s brand of peach brandy. The Business sources fruit from local producers. The Business is operated on land which is also owned by Jeff.
Jeff decides it is time to sell the Business and is introduced to Tina who is interested in buying the Business. Jeff and Tina enter into negotiations and agree on a deal. Both Jeff and Tina sign the following document which Jeff prepared.
Heads of Agreement between Jeff and Tina
1. Jeff agrees to sell, and Tina agrees to buy, Jeff’s peach brandy business and the land it is on.
2. Purchase Price: $2.5 million.
3. All existing supplier agreements to be transferred to Tina.
4. All fixtures and fittings, as inspected and agreed, are included in sale.
5. All employees to be transferred as per solicitor prepared agreement.
6. Parties to negotiate transfer of trademark and business name at a future date for a separately determined amount.
7. This agreement is subject to the preparation of a formal contract of sale based on these terms acceptable to the duly appointed solicitors for Jeff and Tina.
Jeff arranges for his solicitor to prepare a formal contract for sale and then sends the completed contract to Tina. When Tina receives the contract, she calls Jeff and says:
“Jeff, I have changed my mind. I don’t want to buy your business anymore”.
Jeff replies:
“ You have got to be joking Tina, it is way too late to change your mind, you have already signed the Heads of Agreement. You are legally bound to buy the business. Make this easy and buy it as we agreed for I will have to sue.”
Required:
Part A ( 20 marks)
You are Tina’s solicitor. Using the IRAC legal problem solving process give your conclusion on whether Tina is legally bound to buy the Business as a result of signing the Heads of Agreement.
Subject Code_Assessment Brief #_Assessemnt Type_Module Due Page 4 of 9
Part B ( 5 marks)
What would be your conclusion if Tina had included in the Heads of Agreement a term stating:
This agreement is subject to Tina obtaining suitable finance

5. Describe the relevant statutory, legislative and regulatory requirements for documentation of accounting procedures

12. What are the conditions you will need to identify in relation to your determined accounting tasks?

16. Why is it important to be able to adapt to changes in technology and work organisation in a timely manner?

**24.) Name three field works standards of GAAS

29.) Name three communication Networks

​​​​​​​22.) Name four data process cycle

18. What are the requirements it is essential to ensure that you clarify and comply with Competency? in the context of bookkeeper and accountant.

4. Italiano Manufacturing Company produces one type of pasta. For the coming quarter, it estimates that it will sell 25,000 kg of finished product. It currently has 1,000 kg in stock and expects to increase this to 2,000 kg at the end of the quarter.

The main ingredients to make 1 kilogram of pasta are 900 grams of durum wheat and two eggs. Prices for these items are budgeted at $2,100 per tonne of wheat and $3 per dozen eggs.

The company is holding 2.5 tonnes of wheat but wants to reduce this to 2.2 tonnes by the end of the quarter. It holds no stock of eggs, buying them in as needed.

a) Prepare the production budget for the quarter.

b) Prepare the direct materials budget for the quarter.

Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold.

Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows:

*Primarily depreciation on storage facilities.

As Barbara handed the statement to Karl Vecci, Pittman’s president, she commented, “I went ahead and used the agents’ 15% commission rate in completing these statements, but we’ve just learned that they refuse to handle our products next year unless we increase the commission rate to 20%.”

“That’s the last straw,” Karl replied angrily. “Those agents have been demanding more and more, and this time they’ve gone too far. How can they possibly defend a 20% commission rate?”

“They claim that after paying for advertising, travel, and the other costs of promotion, there’s nothing left over for profit,” replied Barbara.

“I say it’s just plain robbery,” retorted Karl. “And I also say it’s time we dumped those guys and got our own sales force. Can you get your people to work up some cost figures for us to look at?”

“We’ve already worked them up,” said Barbara. “Several companies we know about pay a 7.5% commission to their own salespeople, along with a small salary. Of course, we would have to handle all promotion costs, too. We figure our fixed expenses would increase by $3,525,000 per year, but that would be more than offset by the $4,700,000 (20% × $23,500,000) that we would avoid on agents’ commissions.”

The breakdown of the $3,525,000 cost follows:

“Super,” replied Karl. “And I noticed that the $3,525,000 equals what we’re paying the agents under the old 15% commission rate.”

“It’s even better than that,” explained Barbara. “We can actually save $108,100 a year because that’s what we’re paying our auditors to check out the agents’ reports. So our overall administrative expenses would be less.”

“Pull all of these numbers together and we’ll show them to the executive committee tomorrow,” said Karl. “With the approval of the committee, we can move on the matter immediately.”

3. Determine the dollar sales at which net income would be equal regardless of whether Pittman Company sells through agents (at a 20% commission rate) or employs its own sales force.