Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets

The budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July 2016 is summarized as follows:

a. Estimated sales for July by sales territory:

b. Estimated inventories at July 1:

c. Desired inventories at July 31:

d. Direct materials used in production:

e. Anticipated purchase price for direct materials:

f. Direct labor requirements:

Required:

1. Prepare a sales budget for July.

2. Prepare a production budget for July.

3. Prepare a direct materials purchases budget for July.

4. Prepare a direct labor cost budget for July.

The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2021 and 2020:

On October 15, 2021, Jackson entered into a tentative agreement to sell the assets of one of its divisions. The division qualifies as a component of an entity as defined by GAAP. The division was sold on December 31, 2021, for $5,270,000. Book value of the division’s assets was $4,580,000. The division’s contribution to Jackson’s operating income before-tax for each year was as follows:

Assume an income tax rate of 25%.

Required: (In each case, net any gain or loss on sale of division with annual income or loss from the division and show the tax effect on a separate line.)
1. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
2. Assume that by December 31, 2021, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $5,270,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
3. Assume that by December 31, 2021, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $3,990,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.

Assume that by December 31, 2021, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $3,990,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)

Problem 2-1A Production costs computed and recorded; reports prepared LO C2, P1, P2, P3, P4

[The following information applies to the questions displayed below.]

Marcelino Co.'s March 31 inventory of raw materials is $86,000. Raw materials purchases in April are $500,000, and factory payroll cost in April is $384,000. Overhead costs incurred in April are: indirect materials, $54,000; indirect labor, $23,000; factory rent, $38,000; factory utilities, $23,000; and factory equipment depreciation, $61,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $645,000 cash in April. Costs of the three jobs worked on in April follow.

Required:
1. Determine the total of each production cost incurred for April (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from March 31).

1. Sales-Related Transactions, Including the Use of Credit Cards

   Journalize the entries for the following transactions:

   a. Sold merchandise for cash, $116,300. The The cost that is reported as an expense when merchandise is sold.cost of the merchandise sold was $72,000. (Record the sale first.)

   	Accounts Receivable Cash Credit Card Expense Sales Sales Discounts
   	Accounts Receivable Cash Cost of Merchandise Sold Sales Sales Discounts
   	Accounts Receivable Cost of Merchandise Sold Cash Merchandise Inventory Sales
   	Accounts Receivable Cash Cost of Merchandise Sold Merchandise Inventory Sales Discounts

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   b. Sold merchandise on account, $755,000. The cost of the merchandise sold was $400,000. (Record the sale first.)

   	Accounts Receivable Accounts Payable Merchandise Inventory Sales Sales Discounts
   	Accounts Receivable Cash Cost of Merchandise Sold Sales Sales Discounts
   	Accounts Payable Cash Cost of Merchandise Sold Sales Merchandise Inventory
   	Accounts Receivable Cash Cost of Merchandise Sold Sales Discounts Merchandise Inventory

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   c. Sold merchandise to customers who used MasterCard and VISA, $1,950,000. The cost of the merchandise sold was $1,250,000. (Record the sale first.)

   	Accounts Receivable Accounts Payable Cash Credit Card Expense Sales
   	Accounts Payable Cash Credit Card Expense Sales Sales Discounts
   	Accounts Payable Accounts Receivable Cost of Merchandise Sold Credit Card Expense Merchandise Inventory
   	Accounts Receivable Cash Cost of Merchandise Sold Credit Card Expense Merchandise Inventory

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   d. Sold merchandise to customers who used American Express, $330,000. The cost of the merchandise sold was $230,000. (Record the sale first.)

   	Accounts Receivable Cash Credit Card Expense Merchandise Inventory Sales
   	Accounts Receivable Cash Cost of Merchandise Sold Sales Sales Discounts
   	Accounts Receivable Cost of Merchandise Sold Credit Card Expense Merchandise Inventory Sales
   	Cash Cost of Merchandise Sold Credit Card Expense Merchandise Inventory Sales Returns and Allowances

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   e. Paid $81,500 to National Clearing House Credit Co. for service fees for processing MasterCard, VISA, and American Express sales.

   	Accounts Receivable Cash Cost of Merchandise Sold Credit Card Expense Merchandise Inventory
   	Accounts Receivable Cash Cost of Merchandise Sold Credit Card Expense Merchandise Inventory

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Three grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.50 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3.

Budgeted production in bottles

Musk oil has become so popular as a perfume ingredient that it has become necessary to carry large inventories as a precaution against all stock-outs. For this reason the inventory of musk oil at the end of the quarter must be equal to 20% of the following quarter's production needs. Some 36,000 grams of musk oil will be on hand to start the first quarter of year 2.

Required:

prepare a direct materials budget for musk oil, by quarter and in total, for year 2.

Assume you are trying to explain the different methods to value inventory to a family member that is self-employed and knows nothing about accounting.

Her comment to you is: "The cost of inventory can only be one number. How can you suggest it can be one of 4 different numbers. Sounds like you are cooking the books to me."

Please explain Why in accounting, there are different methods to value inventory.

King City Specialty Bikes (KCSB) produces high-end bicycles. Costs to manufacture and market the bicycles at last year's volume level of 1,950 bicycles per month are shown in the following table:

KCSB expects to produce and sell 2,350 bicycles per month in the coming year. The bicycles sell for $560 each.

KCSB receives a proposal from an outside contractor who, for $150 per bicycle, will assemble 700 bicycles per month and ship them directly to KCSB's customers as orders are received from KCSB's sales force. KCSB would provide the materials for each bicycle, but the outside contractor would assemble, box, and ship the bicycles. The variable manufacturing costs would be reduced by 40% for the 700 bicycles assembled by the outside contractor, and variable nonmanufacturing costs for the 700 bicycles would be cut by 55%.

KCSB's marketing manager thinks that it could sell 70 specialty racing bicycles per month for $6,000 each, and its production manager thinks that it could use the idle resources to produce each of these bicycles for variable manufacturing costs of $4,900 per bicycle and variable nonmanufacturing costs of $300 per bicycle.

If KCSB accepts the proposal, it would be able to save $20,280 of fixed manufacturing costs; fixed nonmanufacturing costs would be unchanged.

REQUIRED [Note: Round unit cost computations to the nearest cent]

What is the difference in KCSB's monthly costs between accepting the proposal and rejecting the proposal?   (Note: If the costs of accepting the proposal are less than the costs of rejecting it, enter the difference as a positive number; if the accept costs are more than the reject costs, enter the difference as a negative number.)

The financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2017. Fortunately, the controller had kept certain statistical data related to the income statement as follows.

From the foregoing information prepare an income statement for the year 2017 in single-step form. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Question 3 Your audit firm is the auditor of Speighstown Garden Centre, which operates a large centre that sells plants, garden furniture (e.g. outdoor benches) and garden equipment (e.g. lawn mowers). The inventory system is up-to-date; the records are well maintained and the year end quantities are used to determine the inventory value. The inventory count instructions are shown below: (1) The inventory count will supervised by the Financial Controller and will take place on 31 August 2012. The count will begin at 7am. The centre will be closed on the day of the count, but if any of the large customers like hotels require a rush order, they will be accommodated. One member of the Accounts Department will be assigned to each area along with a member of the garden staff. There will be computer produced sheets showing the quantities of each item from the system. The Financial Controller will distribute and collect back the forms at the end of the count. Where the amount observed is different to the amount on the sheet, it will be crossed out and the new amount written in pencil. (111) The Financial Controller will then carry out test counts on five items in each area that has been counted. Where an error is found, the area will be re-counted. (iv) The quantity for any inventory that looks damaged or unsaleable should be crossed out and allotted a quantity of zero. Once all the sheets have been collected and test counts completed, the Financial Controller will manually update the computerised system to reflect the counted quantities. After the system has been updated, the count sheets are discarded. Required: Identify and explain FIVE deficiencies in the inventory counting system that can be highlighted in the instructions from Speighstown Garden Centre. For each deficiency suggest how it could be overcome.

JOHNSTON ENTERPRISES          
BALANCE SHEET          
   31-Dec-17       31-Dec-16
Current Assets:          
Cash   $140,000        $120,000
Accounts Receivable   200,000       300,000
Inventory   400,000       300,000
Total Current Assets   740,000       720,000
Property, Plant, and Equipment   1,241,000       1,122,000
Less: Accumulated Depreciation   -476,000       -442,000
Total Assets   1,505,000       1,400,000
          
Current Liabilities:            
Accounts Payable   $201,000        $130,000
Notes Payable   40,000       60,000
Income Taxes Payable   90,000       70,000
Total Current Liabilities   331,000       260,000
Bonds Payable   300,000       400,000
Total Liabilities   631,000       660,000
          
Stockholders' Equity          
Common Stock   500,000       400,000
Retained Earnings   374,000       340,000
Total Stockholders' Equity   874,000       740,000
Total Liabilities & Stockholders' Equity   1,505,000       1,400,000
          
INCOME STATEMENT          
Sales Revenue   $1,580,000        $1,500,000
Less Cost of Goods Sold   770,000       740,000
Gross Profit Expenses:   810,000       760,000
          
Depreciation Expense   153,000       136,000
Salaries and Wages Expense   350,000       340,000
Interest Expense   41,000       31,000
Loss on Sale of Equipment   12,000       0
Income Before Taxes   254,000       253,000
Less Income Tax Expense   90,000       100,000
Net Income   164,000       153,000
ADDITIONAL INFORMATION          
During the year, Johnston sold equipment. The book value of the equipment          
was comprised of the following amounts:          
Original Cost:   153,000      
Accumulated Deprecation:   119,000      
          
During the year Johnston purchased new equipment as follows:          
Cost of new equipment:   272,000      
          
Dividends were paid during the year.          

Prepare a statement of cash flows for the year ending December 31, 2017. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Weirick, Inc., manufactures and sells two products: Product T8 and Product P4. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity

  Expected Activity

Activity Cost Pools   Activity Measures Estimated Estimated Cost Product T8   Product P4 Total  

Labor-related   DLHs $127,500 3,600   1,800 5,400

Production orders Orders 60,110 700 400 1,1004

Order size MHs 940,160   4,000 3,100    7,100 Total: $ 1,127,770

The total overhead applied to Product P4 under activity-based costing is closest to

A) $880,050

B) 410,502

C) 474,860

D) 1,000,270

Security Technology Inc. (STI) is a manufacturer of an electronic control system used in the manufacture of certain special-duty auto transmissions used primarily for police and military applications. The part sells for $57 per unit and had sales of 24,100 units in the current year, 2018. STI has no inventory on hand at the beginning of 2018 and is projecting sales of 26,300 units in 2019. STI is planning the same production level for 2019 as in 2018, 25,200 units. The variable manufacturing costs for STI are $18, and the variable selling costs are only $0.70 per unit. The fixed manufacturing costs are $201,600 per year, and the fixed selling costs are $520 per year. Required: 1. Prepare an income statement for each year using full costing. 2. Prepare an income statement for each year using variable costing. 3. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable costing methods.

describe managerial accounting and the role of managerial accounting in business.