Sequential (Step) Method of Support Department Cost Allocation

Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.

Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of square footage. Now assume that Valron Company uses the sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost.

Required:

1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the sequential method. If an amount is zero, enter "0". Use the rounded values for subsequent calculations.

2. Using the sequential method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. If an amount is zero, enter"0". Round your answers to the nearest dollar.

Static and Flexible Budgets
Graham Corporation used the following data to evaluate its current operating system. The company sells items for $10 each and used a budgeted selling price of $10 per unit.

a. Prepare the actual income statement, flexible budget, and static budget.

Do not use negative signs with any of your answers below.

For questions b., c., and d., do not use negative signs with your answers. Select either U for Unfavorable or F for Favorable using the drop down box next to each of your variance answers.

b. What is the static-budget variance of revenues?

$Answer AnswerFU

c. What is the flexible budget variance for variable costs?

$Answer AnswerFU

d. What is the flexible budget variance for fixed costs?

$Answer AnswerFU

Physical Units Method

Alomar Company manufactures four products from a joint production process: barlon, selene, plicene, and corsol. The joint costs for one batch are as follows:

At the split-off point, a batch yields 1,872 barlon, 2,753 selene, 2,643 plicene, and 3,744 corsol. All products are sold at the split-off point: barlon sells for $15 per unit, selene sells for $18 per unit, plicene sells for $27 per unit, and corsol sells for $32 per unit.

Required:

1. Allocate the joint costs using the physical units method. If required, round your percentage allocation to four decimal places and round allocated costs to the nearest dollar. Note: The total of the allocated cost does not equal to the one provided in the question data due to rounding error.

2. Suppose that the products are weighted as shown below:

Allocate the joint costs using the weighted average method. If required, round your percentage allocation to four decimal places and round allocated costs to the nearest dollar.

The following information is available for Weber Inc. on September 30 for the year just ended.

1. Of the consulting fees Weber Inc. received in advance, $800 has been earned.
2. Equipment purchased in a previous year for $18,500 will be sold after five years for $2,500.
3. Interest of $1,140 has accrued on a bank loan and is unrecorded.
4. Property taxes of $600 have accrued but are unrecorded.
5. Buildings purchased in a previous year for $68,750 will be sold after ten years for $9,250.
6. A review of the $12,500 unadjusted balance in the prepaid rent account shows a remaining balance of $9,000 at the end of the year.
7. A review of the $4,400 unadjusted balance in the supplies account shows a balance on hand at the end of the year of $4,100.
8. Weber Inc. purchased furniture in a previous year for $14,000 and expects to sell this furniture for $500 after ten years.
9. $3,000 of advertising Weber Inc. placed in the local newspaper is unrecorded and unpaid.
10. $1,000 of the television advertising paid for in advance has been used.

Prepare the required adjusting entries at September 30, 2014.
Enter the transaction letter as the description when entering the transactions in the journal. Dates must be entered in the format dd/mmm (i.e., January 15 would be 15/Jan). For each journal entry, indicate how each account affects the balance sheet (Assets, Liabilities, Equity). Use + for increase and - for decrease. For example, if an account decreases equity, choose '-Equity'.

Gretchen wants to take the next six years off work to travel around the world. She estimates her annual cash needs at $29,000 (if she needs more, she will work odd jobs). Gretchen believes she can invest her savings at 10% until she depletes her funds.

Requirements:

1. How much money does Gretchen need now to fund her travels?

2. After speaking with a number of banks, Gretchen learns she will only be able to invest her funds at 6%. How much does she need now to fund her travels?

Research the three types of bankruptcy and answer the following questions: Who may file Chapter 7 bankruptcy? What are some of the reasons that people file bankruptcy? How does bankruptcy affect interest rates on loans? Credit cards? Then research, identify, and summarize a specific Chapter 7 bankruptcy case or issue. Incorporate the legal terminology from your textbook where appropriate, in both your original post and in your responses to your classmates. Use academic or legitimate news sources, such as The New York Times, the Los Angeles Times, the Washington Post, CNN, MSNBC, Fox News, etc.

Please select and define two ratios that measure liquidity and solvency. Please also include the formula for those ratios.

The Pritzker Music Pavilion in downtown Chicago is a technologically sophisticated and uniquely designed performing arts venue that hosts live concerts attended by over half a million patrons a year. A group of local organizers, led by a prominent local businesswoman, would like to use the pavilion for a concert to benefit Ceres, a non-profit, national network of investors and environmental organizations working with companies and investors to address sustainability challenges such as global climate change. If the pavilion management agrees to host the concert, the organizers will donate all profits to Ceres (or absorb any losses).

Based on the following revenue and cost information, the organizers would like answers to several questions.

There are three sources of revenue for the concert:

1. Tickets will be sold for $16.00 each.
2. A large multinational corporation headquartered in Chicago will donate $2.00 per ticket sold.
3. Each concert attendee is expected to spend an average of $19.00 for parking, food, and merchandise.

On the expense side, there are also three components:

1. A popular national group has agreed to perform at the concert. Normally, the group demands a significant fixed fee to perform, but to reduce the risk for the organizers, the group has agreed to perform for $5.50 per ticket sold.
2. The organizers will pay several companies to operate the parking, food, and merchandise concessions. They will pay $23,000 plus 13% of all parking, food, and merchandise revenue.
3. The organizers will pay the pavilion $90,000 plus $6.00 per ticket sold to cover its operating expenses (production, maintenance, advertising, etc.).

REQUIRED [ROUND YOUR CM ANSWER TO THE NEAREST CENT; ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST DOLLAR.]

Part A (8 tries; 8 points)
1. What is the estimated contribution margin per ticket sold for the benefit concert?    

2. What are the estimated total fixed costs for the benefit concert?    

Part B (8 tries; 8 points)
3. What is the estimated profit from the benefit concert if 9,000 tickets are sold?    

4. How many tickets must be sold in order for concert profit to be $90,000?    

5. Assuming a tax rate of 31% on profits from the concert, what must dollar ticket sales be in order for after-tax concert profits to be $90,000?    

Part C (4 tries; 4 points)
6. Assume that the organizers can negotiate the fixed portion of the pavilion's operating expenses. If the organizers expect to sell 9,000 tickets, how much operating fixed costs can they afford to pay and still earn a profit of $90,000 (ignore taxes)?   

Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below:

Med Max gathered the data below for two of the many hospitals that it serves—City General and County General:

Required:

1. Compute the activity rate for each activity cost pool.

2. Compute the total activity costs that would be assigned to City General and County General.

The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows:

Additional data obtained from the income statement and from an examination of the accounts in the ledger for 20Y8 are as follows:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.

Robinson Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 (taxed at 34%). During the year, Robinson reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. During the year, Congress reduced the corporate tax rate to 21%. Robinson's deferred income tax expense or benefit for the current year would be:

Angel Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, tax depreciation exceeded book depreciation by $100,000. Finally, Angel subtracted a dividends received deduction of $25,000 in computing its current year taxable income. Angel's hypothetical tax expense in its reconciliation of its income tax expense is:

=

$189,000.

$194,250.

$210,000.

$204,750.

What is the type of assertion and evidence type?

Foot several accounts in the A/R subsidiary ledger and agree the total from the subsidiary ledger to the general ledger.

Select a sample of shipping documents representing credit sales during the year and trace them into the sales journal and A/R subsidiary ledger.

Select a sample of credit sales transactions during the last week of 2017 from the sales journal and vouch to related shipping documents and invoices noting whether they are recorded in correct period.

Discuss with the client personnel their method for computing allowance for doubtful accounts to determine reasonableness. Discuss the collectability of any large accounts 90 day past due.

Fatima Hopkins, the CEO of Central Adventures, is having difficulties with all three of her top management level employees. With one manager making questionable decisions, another threatening to leave, and the third likely ‘in the red’, Fatima is hoping there is a simple answer to all her difficulties. She is asking you (her accountant) for some advice on how to proceed.

Central Adventures owns and operates three amusement parks in Michigan: Funland, Waterworld, and Treetops. Central Adventures has a decentralized organizational structure, where each park is run as an investment center. Park managers meet with the CEO at least once annually to review their performance, where each park manager’s performance is measured by their park’s return on investment (ROI). The park manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the cost of capital.

Fatima’s first difficulty is with the Funland park. Funland is an outdoor theme park, with twelve roller coaster rides and several other attractions. This park has first opened 1965, and most of the rides have been in operation for 20+ years. Attendance at this park has been relatively stable over the past ten years. The park manager of Funland, Janet Lieberman, recently shared with Fatima a proposal to replace one of their older rides with a new roller coaster, a hybrid steel and wood roller coaster with a 90 degree, 200 foot drop and three inversions. The proposal indicated that the ride would cost $8,000,000 with an estimated life of 20 years. In addition, this new style of coaster would require additional maintenance and insurance, costing $125,000 each year. However, it projected that this new attraction would boost attendance, earning the park an additional $1,190,000 per year in revenues. Janet ultimately decided not to invest in this new attraction. Fatima (doing a quick mental calculation) saw that the investment had a payback period of eight years—much shorter than the life of the roller coaster—and is perplexed at Janet’s decision.

The second dilemma concerns the Waterworld park. Waterworld is an indoor water park, operating year-round. Run by park manager David Copperfield, Waterworld was built in 2016 and has increased attendance by 20% every year since. David recently sent you an email complaining that, based on the current bonus payout schedule, Janet Lieberman’s bonus last year was significantly higher than his. He points to the increasing attendance, and says that his park is being punished for having opened so recently (his park assets are much more recent than the roller coasters at Funland). He currently has an employment offer from another company at the same base pay rate, which he says he will accept if his performance is not appropriately acknowledged. Fatima needs to look at the relative performance across parks to determine how to proceed with David.

Central Treetops includes a high ropes course and has a series of ziplines that criss-cross over the Chippewa River. For many years, it was a popular venue for corporate team-building activities, so it is equipped with a main indoor facility with cafeteria and overnight guest rooms. This park has lost popularity in recent years, and has been ‘in the red’ for the past two years. If the park is not profitable this year, you will need to decide whether to close it - permanently. Included in the ‘Fixed COGS’ for Treetops is a $86,000 mortgage payment on the land and buildings for the park, which would still need to be paid by Central Adventures if the park is closed. Incidentally, you recently had a conversation with the regional head of the YMCA, who would like to open a summer camp in the central Michigan region. If you decided to close Treetops, you are fairly certain that you could lease that land to the YMCA for $250,000 annually.

A partial report of this year’s financial results for Central Adventures shows the following:

The ‘Selling and administrative costs’ are all incurred directly by each park, and are determined at the beginning of each year (that is, they do not change with the number of tickets sold). In addition to the information above, there are $2,542,920 in corporate costs, which are currently allocated evenly between the three parks. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Treetops park is closed, the allocated corporate costs would decrease by $12,000. Central Adventures has a cost of capital of 12 percent (and Fatima uses the cost of capital as their required rate of return) and are subject to 18% income taxes.

Fatima needs to evaluate this year’s performance results before she can make any decisions. Is David’s complaint about the performance evaluation metrics valid? Is that also affecting management decisions in the form of Janet’s rejection of the proposed new rollercoaster? And is the company better off without Treetops? She sets off to the company accountant’s office to help get some answers.

a.     Create a segmented income statement for Central Adventures.

b.     Calculate the current annual ROI, residual income and EVA for the three parks.

c.    why it was/was not in Central Adventure’s overall best interest for Funland to reject the new rollercoaster.

d.     is David Copperfield’s (the Waterworld park manager) complaint valid? Explain why it is (or is not valid), and what further information would be necessary.

e.     why should they close/ not close treetops.

f.      what should you recommend she do to improve the evaluation of park manager performance measurement at Central Adventures.

Given only, the following information, answer the questions below. Increases and Decreases represent the change from prior year to current year. (Note to you are not told what the change in cash was for the year.)

Decrease in Accounts Receivable 32,000

Increase in Inventory 5,000

Increase in Property Plant and Equipment 10,000

Increase in Long –Term Investments 50,000

Increase in Long-Term Bonds Payable 120,000

Decrease in Accounts Payable 15,000

Increase in Retained Earnings 127,000

Increase in Common Stock 18,000

Increase in Salaries Payable 12,000

Decrease in Prepaid Expenses 7,000

Increase in Unearned Revenue 11,000

Increase in Accumulated Depreciation 15,000

Decrease in Dividends Payable 3,000

Other Info: Equipment was sold in the current year with original cost of $12,000 and a book value of $8,000 for cash proceeds of $6,000. Assume the increase in Long-Term Investments was the purchase of shares of another company. The company declared a $10,000 cash dividend during the year.

a)What amount would be included on the statement of cash flows under “Cash flows from Operating Activities”? USE THE INDIRECT METHOD TO SOLVE. b)What amount would be included on the statement of cash flows under “Cash flows from Investing Activities”? c)What amount would be included on the statement of cash flows under “Cash flows from Financing Activities”?