David Davis operates a kiosk in downtown Chicago, at which he sells one style of baseball hat. He buys the hats from a supplier for $36 and sells them for $42. David’s current breakeven point is 33,600 hats per year.

(a1)

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Calculate contribution margin per unit.

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(a2)

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What is David’s current level of fixed costs? (Use the rounded contribution margin per unit calculated in the previous part.)

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(b)

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Assume that David’s fixed costs, variable costs, and sales price were the same last year, when he made $47,040 in net income. How many hats did David sell last year, assuming a 30% income tax rate? (Use the rounded contribution margin per unit calculated in the previous part.)

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(c)

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What was David’s margin of safety last year?

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(d)

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If David wants to earn $84,672 in net income, how many hats must he sell, assuming a 30% tax rate? (Use the rounded contribution margin per unit calculated in the previous part.)

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(e)

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How many hats must David sell to break even if his supplier raises the price of the hats to $37 per hat? (Use the rounded contribution margin per unit for computation.)

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(g)

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.

David has decided to increase his sales price to $43 to offset the supplier’s price increase. He believes that the increase will result in a 5% reduction from last year’s sales volume. What is David’s expected net income, assuming a 30% tax rate?

Smart Company prepared its annual financial statements dated December 31. The company reported its inventory using the FIFO inventory costing method and failed to evaluate its net realizable value at December 31. The preliminary income statement follows: Sales Revenue $ 302,000 Cost of Goods Sold Beginning Inventory $ 41,000 Purchases 204,000 Goods Available for Sale 245,000 Ending Inventory 95,400 Cost of Goods Sold 149,600 Gross Profit 152,400 Operating Expenses 72,000 Income from Operations 80,400 Income Tax Expense (30%) 24,120 Net Income $ 56,280 Assume you have been asked to restate the financial statements to incorporate LCM/NRV. You have developed the following data relating to the ending inventory: Item Quantity Purchase Cost Net Realizable Value per Unit Per Unit Total A 3,000 $ 5 $ 15,000 $ 6 B 2,000 8 16,000 6 C 8,100 4 32,400 6 D 3,200 10 32,000 7 $ 95,400 TIP: Inventory write-downs do not affect the cost of goods available for sale. Instead, the effect of the write-down is to reduce ending inventory, which increases Cost of Goods Sold and then affects other amounts in the income statement.

During 2020, Juan Gonzalez, president of Acme Inc. was paid a semimonthly salary of $6,100. Computer the amount of FICA taxes that should be withheld from him.

A. 9th paycheck
B. 22nd paycheck
C. 24th paycheck
D. If Juan's year to date earnings as of his 24th paycheck are $146,400 and his year-end bonus is $100,00, how much is the additional HI tax withheld?

1. Pinter Company had the following environmental activities and product information:

   1. Environmental activity costs

   Activity	Costs
   Design products (to reduce pollution)	$ 118,800
   Test for contamination	211,200
   Treat toxic waste	660,000
   Operate pollution control equipment	528,000

   2. Driver data

   	Solvent X	Solvent Y
   Design hours	2,600	4,000
   Testing hours	4,700	12,900
   Pounds of waste	500	21,500
   Machine hours	2,600	85,400

   3. Other production data

   	Solvent X	Solvent Y
   Nonenvironmental production costs	$3,080,000	$6,028,000
   Units produced	440,000	440,000

   Required:

   1. Calculate the activity rates that will be used to assign environmental costs to products.

   Design products	$	per design hour
   Testing	$	per test hour
   Treating waste	$	per pound of waste
   Operating equipment	$	per machine hour

   2. Determine the unit environmental and unit costs of each product using ABC. If required, round your answers to the nearest cent.

   Activities	Solvent X	Solvent Y
   Unit environmental cost	$	$
   Unit cost	$	$

   3. What if the design costs increased to $208,800 and the cost of toxic waste decreased to $330,000? Assume that Solvent Y uses 8,000 out of 16,000 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 6,270 of 6,600 pounds of toxic waste. What is the new environmental cost for Solvent Y? If required, round your intermediate calculations and answer to the nearest cent.
   $ per unit

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,060 hours each month to produce 2,120 sets of covers. The standard costs associated with this level of production are:

During August, the factory worked only 500 direct labor-hours and produced 2,200 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 2.5 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) Skip to question [The following information applies to the questions displayed below.]

John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions, and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2020 AMT exemption for reference. The Fergusons reported making the following payments during the year: State income taxes of $4,400. Federal tax withholding of $21,000. Alimony payments to John's former wife of $10,000 (divorced on 12/31/2014). Child support payments for John's child with his former wife of $4,100. $12,200 of real property taxes. Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer. $3,600 to Kid Care day care center for Samantha's care while John and Sandy worked. $14,000 interest on their home mortgage ($400,000 acquisition debt). $3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car. $15,000 cash charitable contributions to qualified charities. Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000.

Comprehensive Problem 8-85 Part a a. What is the Fergusons' 2020 federal income taxes payable or refund, including any self-employment tax and AMT, if applicable? (Round your intermediate computations to the nearest whole dollar amount.)

• Choose three non-current assets. Describe at least two options which could be used to allow the business to utilise them. What are the advantages and disadvantages of each option you described?

• Discuss whether businesses should buy their non-current assets outright in

answer each question sperately

The following are transactions of Samantha Payapag Advertising Company for the month of July 2013

Prepare Journal Entries, General Ledger, T- Accounts, Trial Balance, Income Statement, and Balance Sheet

July 3 Samantha Payapag invested 500,000 in the business.

July 5 Bought for cash, advertising supplies costing 80,000. Paid rental of the office, 7,300

July 9 Bought delivery truck from MJ Idos Trading, 350,000 on credit

July 12 Received 43,000 cash as advertising income

July 13 Bought furniture & fixtures, 32,000 in cash

July 17 Took 3,200 cash for personal purposes

July 18 Billed Bernalyn Galvez for the advertising service rendered to promote her product to the market, 10,000

July 23 Paid salaries of the employees, 15,000. Billed Zaldy Co. for the advertising service rendered, 4,000

July 24 Collected 1/2 of the amount Bernalyn Galvez owed to the company

July 26 Purchased another truck amounting to 120,000 from Edwina Motor, Inc. on credit

July 27 Paid MJ Idos Trading 230,000 as partial settlement of the account

July 30 Paid utility expense for the month

AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:

The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,600 plus $35 per job, and the actual mobile lab operating expenses for February were $8,640. The company expected to work 120 jobs in February, but actually worked 124 jobs.

Required:

Prepare a flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February. (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.)

Exercise 6.6. The ledger accounts of I-Cloud Internet Company appear as follows on March 31, 2016:

All accounts have normal balances. Journalize and post the closing entries. Use 4 as the page number for the general journal in journalizing the closing entries. Use account number 399 for the Income Summary Account.

A)McDonald’s offered toys that portrayed the characters in the movie The Incredibles for free with the purchase of a Happy Meal.  The giving away of these toys is an example of the use of what type of promotional tool?

A options:

B)

Which of the following is a commonly used pricing strategy that involves payment to an intermediary for promoting a manufacturer’s products?

B options:

C)

A __________ contains specific goals assigned to a salesperson, sales team, branch sales office, or sales district for a stated time period.

C options:

D)

Jane Caplow owns a picture-framing shop, The Caplow Company.  The average price she receives for a picture she frames for a customer is $120.  This price must cover her average costs for a typical framed picture of $5 for glass, $2 for matting, and $13 for the frame, and $30 for the labor involved.  She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 for her salary.  Caplow is considering buying an automatic mat-cutting machine in order to reduce the number of hours of direct labor required to produce a framed picture.  In considering this purchase, she should recognize this purchase will _____ Caplow's variable cost and _____ Caplow's fixed cost.

D)

E)

Which of the following is a typical example of a fixed cost?

E)

tica Manufacturing (UM) was recently acquired by MegaMachines, Inc. (MM), and organized as a separate division within the company. Most manufacturing plants at MM use an ABC system, but UM has always used a traditional product costing system. Bob Miller, the plant controller at UM, has decided to experiment with ABC and has asked you to help develop a simple ABC system that would help him decide if it was useful. The controller’s staff has identified costs for the first month in the four overhead cost pools along with appropriate cost drivers for each pool:

The company manufactures two basic products with model numbers 308 and 510. The following are data for production for the first month as part of MM:

Required:

a. The current cost accounting system charges overhead to products based on machine-hours. What unit product costs will be reported for the two products if the current cost system continues to be used? (Round intermediate calculations and "Per unit cost" answers to 2 decimal places.)

b. A consulting firm has recommended using an activity-based costing system, with the activities based on the cost pools identified by the cost accountant. What are the cost driver rates for the four cost pools identified by the cost accountant? (Round your answers to 2 decimal places.)

c. What unit product costs will be reported for the two products if the ABC system suggested by the cost accountant’s classification of cost pools is used? (Round intermediate calculations and final answers to 2 decimal places.)

d. If management should decide to implement an activity-based costing system, what benefits should it expect?

Net Present Value Method, Present Value Index, and Analysis for a service company

Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:

Required:

1. Assuming that the desired rate of return is 12%, prepare a net present value analysis for each proposal. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar.

2. Determine a present value index for each proposal. If required, round your answers to two decimal places.

3. The ________________ has the largest present value index. Although _________________ has the largest net present value, it returns less present value per dollar invested than does the _______________________ , as revealed by the present value indexes. The present value index for the ______________ is less than 1, indicating that it does not meet the minimum rate of return standard.

Talk briefly about the sections of statement of cash flows.