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 $2.50 to determine the bid price. Since our average cost is only $2.46 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:

Activity Cost Pool	Activity Measure	Total Activity
Removing asbestos	Thousands of square feet	1,000	thousand square  feet
Estimating and job setup	Number of jobs	500	jobs
Working on nonroutine jobs	Number of nonroutine jobs	100	nonroutine jobs
Other (costs of idle capacity and      organization-sustaining costs)	None

Note: The 100 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup.

Costs for the Year
Wages and salaries	$	407,000
Disposal fees		800,000
Equipment depreciation		96,000
On-site supplies		56,000
Office expenses		300,000
Licensing and insurance		490,000
Total cost	$	2,149,000

Distribution of Resource Consumption Across Activities

	Removing Asbestos		Estimating and Job Setup		Working on Nonroutine Jobs		Other		Total
Wages and salaries	50	%	10	%	30	%	10	%	100	%
Disposal fees	70	%	0	%	30	%	0	%	100	%
Equipment depreciation	40	%	5	%	20	%	35	%	100	%
On-site supplies	60	%	25	%	15	%	0	%	100	%
Office expenses	15	%	35	%	20	%	30	%	100	%
Licensing and insurance	25	%	0	%	60	%	15	%	100	%

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. (Round the "Average cost" to 2 decimal places.)

   

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.

          

Complete the problems below on process costing and variance analysis.

Part 1: You must prepare two process costing cost reports – one using the weighted average method and one using the fifo method.  
Morgan Clay Products manufactures clay molded pottery on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Molding Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Data for the Assembly Department for August 2017 are:
Work in process, beginning inventory: 2600 units
Direct materials (100% complete)
Conversion costs (35% complete)

Units started during August 715 units

Work in process, ending inventory: 520 units
Direct materials (100% complete)
Conversion costs (55% complete)

Costs for August:
Standard costs for Assembly:
Direct materials $18 per unit
Conversion costs $35.50 per unit

Work in process, beginning inventory:
Direct materials $12,600
Conversion costs $8250

Part 2A: Variance Problem
Castleton Corporation manufactured 36,000 units during March. The following fixed overhead data relates to March:
Actual Static Budget
Production 36,000 units 34,000 units
Machine-hours 6,960 hours 6,800 hours
Fixed overhead costs for March $164,700 $156,400
Compute the fixed overhead variances.

Part 2B: Variance Problem
Russo Corporation manufactured 21,000 air conditioners during November. The overhead cost-allocation base is $34.50 per machine-hour. The following variable overhead data pertain to November:

Actual Budgeted
Production 21,000 units 23,000 units
Machine-hours 12,700 hours 13,800 hours
Variable overhead cost per machine-hour:
$34.00 $34.50
Compute the variable overhead variances.

1. Discuss the arguments for and against cost allocation

2. What are the differences between revenue and capital expenditures? In your explanation, discuss the accounting procedures for each type of expenditure.

Schrader Cellars uses the FIFO method in its two department process costing system: Fermenting (grape sorting is part of the fermentation process) and Packaging. Direct materials (grapes) are added at the beginning of the fermenting process and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. Data from the month of March for the Fermenting Department are below:

Beginning work in process inventory:

            Units in beginning work in process inventory            3,000 gallons

            Materials costs                                                            $122,000

            Conversion costs                                                         $7,000

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        50%

Units started into production during the month                      5,000 gallons

Materials costs added during the month                                 $250,000

Conversion costs added during the month                             $30,000

Ending work in process inventory:

            Units in ending work in process                                 2,000 gallons

            Percentage complete with respect to materials           100%

            Percentage complete with respect to conversion        75%

REQUIRED:

1. Prepare a FIFO production report for the Fermentation Department for Schrader Cellars for the month ended December 31, 2018.

The difference between the actual variable overhead cost and the standard variable overhead cost for the actual volume of the overhead activity base is known as the

Select one:

A. variable overhead efficiency variance.

B. fixed overhead budget variance.

C. variable overhead spending variance.

D. fixed overhead volume variance.

shareholders contributed 60 grand.
land was purchased for 40 grand
I borrowed 18 grand from a bank
I provided services on credit for 16 grand which should be paid back to me in a year.
I paid 11 grand for operating expenses.
I paid a grand cash dividends to shareholders.

place the appropriate amounts in the corresponding T accounts: cash, accounts receivable, land, notes payable, common stock (shareholders equity), service revenue and operating expenses.

what is the revenue amount on the income statement? what is the operating expenses on the income statement? what is the net income on the income statement?

is there a beginning retained earnings balance?
on the statement of retained earnings, what is the net income, dividends and ending retained earnings?

on the balance sheet : what are the cash assets, account receivable assets and land asset? what is the total in assets? what is the liability amount for notes payable? for equity, what is the amount of common stock? what is the amount of retained earnings? what is the total liability and equity?

Explain the usefulness of a flexible budget in specific business cases. Give a real example of a flexible budget in an organization

Use the following data to prepare a common-size comparative income statement for Old Mill Corporation on December 31, 2016. Round percentages to one-tenth percent.

	2016	2015
Net sales	$1,151,000	$1,350,000
Expenses:
Cost of goods sold	$980,000	$860,000
Selling and general expenses	290,000	230,000
Interest expense	59,000	59,000
Income tax expense	71,000	53,000
Total expenses	$1,400,000	$1,202,000
Net income	$110,000	$148,000

Exercise 19-19 EPS; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; stock options; convertible bonds [LO19-5,19-6, 19-7, 19-8, 19-9] On December 31, 2017, Berclair Inc. had 480 million shares of common stock and 5 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2018. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2018, was $750 million. The income tax rate is 40%. Also outstanding at December 31 were incentive stock options granted to key executives on September 13, 2013. The options are exercisable as of September 13, 2017, for 30 million common shares at an exercise price of $56 per share. During 2018, the market price of the common shares averaged $70 per share. In 2014, $62.5 million of 8% bonds, convertible into 6 million common shares, were issued at face value. Required: Compute Berclair’s basic and diluted earnings per share for the year ended December 31, 2018(Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

In 2019, Nina contributes 12 percent of her $125,000 annual salary to her 401(k) account. She expects to earn a 5 percent before-tax rate of return. Assuming she leaves this (and any employer contributions) in the account until she retires in 20 years, what is Nina’s after-tax accumulation from her 2019 contributions to her 401(k) account? (Use Table 1, Table 2.) (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Problem 13-55 Part a

a. Assume Nina’s marginal tax rate at retirement is 30 percent.

b. Assume Nina’s marginal tax rate at retirement is 20 percent.

c. Assume Nina’s marginal tax rate at retirement is 40 percent.

Explain in writing the potential benefits and problems of electing to be taxed as a general partnership with respect to a comparison with corporate taxation and organization.

White Diamond Flour Company manufactures flour by a series of three processes, beginning with wheat grain being introduced in the Milling Department. From the Milling Department, the materials pass through the Sifting and Packaging departments, emerging as packaged refined flour.

The balance in the account Work in Process-Sifting Department was as follows on July 1:

Work in Process-Sifting Department
(900 units, 3/5 completed):
Direct materials (900 × $2.05)	$1,845
Conversion (900 × 3/5 × $0.40)	216
	$2,061

The following costs were charged to Work in Process-Sifting Department during July:

Direct materials transferred from Milling Department:
15,700 units at $2.15 a unit	$33,755
Direct labor	4,420
Factory overhead	2,708

During July, 15,500 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,100 units, 4/5 completed.

	Required:
1.	Prepare a cost of production report for the Sifting Department for July. If an amount is zero, enter "0". Round your cost per unit answers to the nearest cent.
2.	Journalize the entries for costs transferred from Milling to Sifting and the costs transferred from Sifting to Packaging. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for spaces or journal explanations. Every line on a journal page is used for debit or credit entries. Do not add explanations or skip a line between journal entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Use the date July 31 for all journal entries.
3.	Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. Round your answers to the nearest cent.
4.	Discuss the uses of the cost of production report and the results of part (3).

WHITE DIAMOND FLOUR COMPANY
Cost of Production Report-Sifting Department
For the Month Ended July 31
UNITS	Whole Units	Equivalent Units
		Direct Materials	Conversion
Units charged to production:
Inventory in process, July 1
Received from Milling Department
Total units accounted for by the Sifting Department
Units to be assigned costs:
Inventory in process, July 1 (3/5 completed)
Started and completed in July
Transferred to Packaging Department in July
Inventory in process, July 31 (4/5 completed)
Total units to be assigned costs

Points:

17 / 18

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Check My Work

1. Calculate equivalent units for direct materials and conversion costs.

COSTS	Costs
	Direct Materials	Conversion	Total
Cost per equivalent unit:
Total costs for July in Sifting Department
Total equivalent units	÷	÷
Cost per equivalent unit
Costs assigned to production:
Inventory in process, July 1
Costs incurred in July
Total costs accounted for by the Sifting Department
Costs allocated to completed and partially completed units:
Inventory in process, July 1-balance
To complete inventory in process, July 1
Cost of completed July 1 work in process
Started and completed in July
Transferred to Packaging Department in July
Inventory in process, July 31
Total costs assigned by the Sifting Department

Prepare statement of profit and loss and statement of financial position

	DR	CR
Prepaid expense	1000
account receivable	2200
office supplies	1800
office equipment	15000
cash	5400
accumulated depreciation-office equipment		4000
account payable		900
interest payable		100
salaries payable		1000
loan		2000
service revenue accrual		5000
share capital		12000
retained earning		4400
dividends paid	2000
service revenue		3000
office supplies expense	600
depreciation expense	2500
rent expense	1900

Selected transactions completed by Primo Discount Corporation during the current fiscal year are as follows:

Jan.	9	Split the common stock 3 for 1 and reduced the par from $75 to $25 per share. After the split, there were 1,092,000 common shares outstanding.
Feb.	28	Purchased 39,500 shares of the corporation’s own common stock at $29, recording the stock at cost.
May	1	Declared semiannual dividends of $0.60 on 74,300 shares of preferred stock and $0.14 on the common stock to stockholders of record on June 1, payable on July 10.
Jul.	10	Paid the cash dividends.
Sep.	7	Sold 28,500 shares of treasury stock at $33, receiving cash.
Oct.	1	Declared semiannual dividends of $0.60 on the preferred stock and $0.14 on the common stock (before the stock dividend). In addition, a 5% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $38.
Dec.	1	Paid the cash dividends and issued the certificates for the common stock dividend.

Human Resource Strategy

Discuss human resource strategies that support a Cost Leadership competitive Strategy. Provide examples to illustrate your answer.