Morning Sky, Inc. (MSI), manufactures and sells computer games.
The company has several product lines based on the age range of the
target market. MSI sells both individual games as well as packaged
sets. All games are in CD format, and some utilize accessories such
as steering wheels, electronic tablets, and hand controls. To date,
MSI has developed and manufactured all the CDs itself as well as
the accessories and packaging for all of its products.
The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability.
MSI is considering eliminating a product from its ToddleTown
Tours collection. This collection is aimed at children one to three
years of age and includes “tours” of a hypothetical town. Two
products, The Pet Store Parade and The Grocery Getaway, have
impressive sales. However, sales for the third CD in the
collection, The Post Office Polka, have lagged the others. Several
other CDs are planned for this collection, but none is ready for
production.
MSI’s information related to the ToddleTown Tours collection
follows:
| Segmented Income Statement for MSI’s | ||||||||||||||||||
| ToddleTown Tours Product Lines | ||||||||||||||||||
| Pet Store Parade | Grocery Getaway | Post Office Polka | Total | |||||||||||||||
| Sales revenue | $ | 135,000 | $ | 130,000 | $ | 36,000 | $ | 301,000 | ||||||||||
| Variable costs | 57,000 | 53,000 | 32,000 | 142,000 | ||||||||||||||
| Contribution margin | $ | 78,000 | $ | 77,000 | $ | 4,000 | $ | 159,000 | ||||||||||
| Less: Direct Fixed costs | 8,200 | 8,200 | 3,400 | 19,800 | ||||||||||||||
| Segment margin | $ | 69,800 | $ | 68,800 | $ | 600 | $ | 139,200 | ||||||||||
| Less: Common fixed costs* | 6,750 | 6,500 | 1,800 | 15,050 | ||||||||||||||
| Net operating income (loss) | $ | 63,050 | $ | 62,300 | $ | (1,200 | ) | $ | 124,150 | |||||||||
*Allocated based on total sales dollars.
MSI has determined that elimination of the Post Office Polka (POP)
program would not impact sales of the other two items. The
remaining fixed overhead currently allocated to the POP product
would be redistributed to the remaining two products.
Required:
1. Calculate the incremental effect on profit if the POP
product is eliminated.
| Effect On Profit |
2. Should MSI drop the POP product?
| Yes | |
| No |
3-a. Calculate the incremental effect on profit if
the POP product is eliminated. Suppose that $1,200 of the common
fixed costs could be avoided if the POP product line were
eliminated.
| Effect On Profit |
3-b. Should MSI drop the POP product?
| Yes | |
| No |
In: Accounting
Morning Sky, Inc. (MSI), manufactures and sells computer games.
The company has several product lines based on the age range of the
target market. MSI sells both individual games as well as packaged
sets. All games are in CD format, and some utilize accessories such
as steering wheels, electronic tablets, and hand controls. To date,
MSI has developed and manufactured all the CDs itself as well as
the accessories and packaging for all of its products.
The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability.
MSI’s educational products are currently sold without any
supplemental materials. The company is considering the inclusion of
instructional materials such as an overhead slide presentation,
potential test questions, and classroom bulletin board materials
for teachers. A summary of the expected costs and revenues for
MSI’s two options follows:
| CD Only | CD with Instructional Materials | ||||||||
| Estimated demand | 43,000 | units | 43,000 | units | |||||
| Estimated sales price | $ | 27.00 | $ | 54.00 | |||||
| Estimated cost per unit | |||||||||
| Direct materials | $ | 2.50 | $ | 2.75 | |||||
| Direct labor | 3.00 | 6.00 | |||||||
| Variable manufacturing overhead | 3.00 | 6.25 | |||||||
| Fixed manufacturing overhead | 3.00 | 3.00 | |||||||
| Unit manufacturing cost | $ | 11.50 | $ | 18.00 | |||||
| Additional development cost | $ | 125,000 | |||||||
Required:
1. Based on the given data, Compute the increase or
decrease in profit that would result if instructional materials
were added to the CDs.
| CD only | CD with Instructions Materials | Incremental | |
| Sales Revenue | |||
| Variable Costs | |||
| Contribution Margin | |||
| Additional Development Costs | |||
| Differential Profit (Loss) |
2. Should MSI add the instructional materials or
sell the CDs without them?
| Sell the CDs without Instructional Materials | |
| Add the Instructional Materials |
3-a. Suppose that the higher price of the CDs with
instructional materials is expected to reduce demand to 20,000
units. Complete the table given below based on Requirement 1 and 2
data.
| CD only | CD with Instructions Materials | Incremental | |
| Sales Revenue | |||
| Variable Costs | |||
| Contribution Margin | |||
| Additional Development Costs | |||
| Differential Profit (Loss) |
3-b. Should MSI add the instructional materials or
sell the CDs without them?
| Sell the CDs without Instructional Materials | |
| Add the Instructional Materials |
In: Accounting
Morning Sky, Inc. (MSI), manufactures and sells computer games.
The company has several product lines based on the age range of the
target market. MSI sells both individual games as well as packaged
sets. All games are in CD format, and some utilize accessories such
as steering wheels, electronic tablets, and hand controls. To date,
MSI has developed and manufactured all the CDs itself as well as
the accessories and packaging for all of its products.
The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability.
MSI is considering outsourcing the production of the handheld
control module used with some of its products. The company has
received a bid from Monte Legend Co. (MLC) to produce 25,000 units
of the module per year for $22.00 each. The following information
pertains to MSI’s production of the control
modules:
| Direct materials | $ | 13 |
| Direct labor | 6 | |
| Variable manufacturing overhead | 2 | |
| Fixed manufacturing overhead | 8 | |
| Total cost per unit | $ | 29 |
MSI has determined that it could eliminate all variable costs if
the control modules were produced externally, but none of the fixed
overhead is avoidable. At this time, MSI has no specific use in
mind for the space that is currently dedicated to the control
module production.
Required:
1. Compute the difference in cost between making and
buying the control module.
Difference in Cost:
2. Should MSI buy the modules from MLC or continue
to make them?
| Buy | |
| Make |
3-a. Suppose that the MSI space currently used for
the modules could be utilized by a new product line that would
generate $41,000 in annual profit. Recompute the difference in cost
between making and buying under this scenario.
Difference in Cost:
3-b. Does this change your recommendation to
MSI?
| Yes | |
| No |
In: Accounting
“I’m not sure we should lay out $360,000 for that automated welding machine,” said Jim Alder, president of the Superior Equipment Company. “That’s a lot of money, and it would cost us $96,000 for software and installation, and another $62,400 per year just to maintain the thing. In addition, the manufacturer admits it would cost $59,000 more at the end of three years to replace worn-out parts.”
“I admit it’s a lot of money,” said Franci Rogers, the controller. “But you know the turnover problem we’ve had with the welding crew. This machine would replace six welders at a cost savings of $126,000 per year. And we would save another $8,700 per year in reduced material waste. When you figure that the automated welder would last for six years, I’m sure the return would be greater than our 17% required rate of return.”
“I’m still not convinced,” countered Mr. Alder. “We can only get $23,000 scrap value out of our old welding equipment if we sell it now, and in six years the new machine will only be worth $42,000 for parts. But have your people work up the figures and we’ll talk about them at the executive committee meeting tomorrow.”
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.
Required:
1. Compute the annual net cost savings promised by the automated welding machine.
2a. Using the data from (1) above and other data from the problem, compute the automated welding machine’s net present value.
2b. Would you recommend purchasing the automated welding machine?
3. Assume that management can identify several intangible benefits associated with the automated welding machine, including greater flexibility in shifting from one type of product to another, improved quality of output, and faster delivery as a result of reduced throughput time. What minimum dollar value per year would management have to attach to these intangible benefits in order to make the new welding machine an acceptable investment?
In: Accounting
Jeremy and Alyssa Johnson have been married for five years and do not have any children. Jeremy was married previously and has one child from the prior marriage. He is self-employed and operates his own computer repair store. For the first two months of this year, Alyssa worked for Office Depot as an employee. In March, Alyssa accepted a new job with Super Toys, Inc. (ST) where she worked for the remainder of the year. This year the Johnsons received $274,000 of gross income.
a. Expenses associated with Jeremy’s store include $44,750 in salary (and employment taxes) to employees, $50,700 of supplies, and $19,900 in rent and other administrative expenses.
b. As a salesperson, Alyssa incurred $2,190 in travel expenses related to her employment that were not reimbursed by her employer.
c. The Johnsons own a piece of raw land held as an investment. They paid $690 of real property taxes on the property and they incurred $295 of expenses in travel costs to see the property and to evaluate other similar potential investment properties.
d. The Johnsons own a rental home. They incurred $8,690 of expenses associated with the property.
e. Jeremy paid $4,690 for health insurance coverage for himself (not through an exchange). Alyssa was covered by health plans provided by her employer, but Jeremy is not eligible for the plan until next year.
f. Jeremy paid $2,690 in self-employment taxes ($1,345 represents the employer portion of the self-employment taxes).
g. Jeremy paid $5,380 in alimony and $3,285 in child support from his prior marriage (divorced 2010).
h. The Johnsons donated $2,190 to their favorite charity.
Determine the Johnson"s AGI given the above information
In: Accounting
Flow of Costs and Income Statement
Ginocera Inc. is a designer, manufacturer, and distributor of custom gourment kitchen knives. A new kitchen knife series called the Kitchen Ninja was released for production in early 20Y8. In January, the company spent $600,000 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent an additional $1,400,000 promoting the product through these infomercials, and $800,000 in legal costs. The knives were ready for manufacture on January 1, 20Y8.
Ginocera uses a job order cost system to accumulate costs associated with the Kitchen Ninja Knife. The unit direct materials cost for the knife is:
| Hardened steel blanks (used for knife shaft and blade) | $4.00 |
| Wood (for handle) | 1.50 |
| Packaging | 0.50 |
The production process is straightforward. First, the hardened steel blanks, which are purchased directly from a raw material supplier, are stamped into a single piece of metal that includes both the blade and the shaft. The stamping machine requires one hour per 250 knives.
After the knife shafts are stamped, they are brought to an assembly area where an employee attaches the handle to the shaft and packs the knife into a decorative box. The direct labor cost is $0.50 per unit.
The knives are sold to stores. Each store is given promotional materials, such as posters and aisle displays. Promotional materials cost $60 per store. In addition, shipping costs average $0.20 per knife.
Total completed production was 1,200,000 units during the year. Other information is as follows:
| Number of customers (stores) | 60,000 |
| Number of knives sold | 1,120,000 |
| Wholesale price (to store) per knife | $16 |
Factory overhead cost is applied to jobs at the rate of $800 per stamping machine hour after the knife blanks are stamped. There were an additional 25,000 stamped knives, handles, and cases in process and waiting to be assembled on December 31, 20Y8.
In your computations, if required, round interim per unit costs to two decimal places.
Required:
1. Prepare an annual income statement for the Kitchen Ninja knife series.
| Ginocera Inc. | |||
| Income Statement | |||
| For the Year Ended December 31, 20Y8 | |||
| $ | |||
| $ | |||
| Selling and administrative expenses: | |||
| Selling expenses: | |||
| $ | |||
| Total selling expenses | $ | ||
| Administrative expenses: | |||
| Total selling and administrative expenses | |||
| $ | |||
2. Determine the balances in the work in process and finished goods inventories for the Kitchen Ninja knife series on December 31, 20Y8.
| Finished Goods | $ |
| Work in Process | $ |
In: Accounting
Activity-Based Budget
Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,300 for the Sleepeze, 12,510 for the Plushette, and 5,080 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:
Suppose that Gene is considering three sales scenarios as follows:
| Pessimistic | Expected | Optimistic | ||||||
| Price | Quantity | Price | Quantity | Price | Quantity | |||
| Sleepeze | $179 | 12,440 | $199 | 15,300 | $199 | 17,600 | ||
| Plushette | 290 | 10,380 | 338 | 12,510 | 347 | 14,380 | ||
| Ultima | 890 | 1,980 | 990 | 5,080 | 1,210 | 5,080 | ||
Suppose Gene determines that next year's Sales Division activities include the following:
Research—researching current and future conditions in the industry
Shipping—arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors
Jobbers—coordinating the efforts of the independent jobbers who sell the mattresses
Basic ads—placing print and television ads for the Sleepeze and Plushette lines
Ultima ads—choosing and working with the advertising agency on the Ultima account
Office management—operating the Sales Division office
The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table:
Gene |
Research Assistant |
Administrative Assistant |
||||
| Research | - | 70 | % | - | ||
| Shipping | 25 | % | - | 20 | % | |
| Jobbers | 20 | 10 | 20 | |||
| Basic ads | - | 20 | 40 | |||
| Ultima ads | 35 | - | 5 | |||
| Office management | 20 | - | 15 | |||
Additional information is as follows:
Required:
1. Prepare an activity-based budget for next year by activity. Use the expected level of sales activity. If required, round answers to the nearest dollar.
| Olympus, Inc. | |||
| Activity-Based Budget | |||
| For Next Year | |||
| Research: | |||
| $ | |||
| $ | |||
| Shipping: | |||
| $ | |||
| Jobbers: | |||
| $ | |||
| Basic ads: | |||
| $ | |||
| Ultima ads: | |||
| $ | |||
| Office management: | |||
| $ | |||
| Total | $ | ||
2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses.
In: Accounting
Bergamo Bay's computer system generated the following trial
balance on December 31, 2017. The company’s manager knows something
is wrong with the trial balance because it does not show any
balance for Work in Process Inventory but does show a balance for
the Factory Overhead account. In addition, the accrued factory
payroll (Factory Payroll Payable) has not been recorded.
| Debit | Credit | |||||
| Cash | $ | 56,000 | ||||
| Accounts receivable | 35,000 | |||||
| Raw materials inventory | 22,500 | |||||
| Work in process inventory | 0 | |||||
| Finished goods inventory | 9,000 | |||||
| Prepaid rent | 3,000 | |||||
| Accounts payable | $ | 10,000 | ||||
| Notes payable | 13,000 | |||||
| Common stock | 30,000 | |||||
| Retained earnings | 77,000 | |||||
| Sales | 177,500 | |||||
| Cost of goods sold | 110,000 | |||||
| Factory overhead | 28,000 | |||||
| Operating expenses | 44,000 | |||||
| Totals | $ | 307,500 | $ | 307,500 | ||
After examining various files, the manager identifies the following
six source documents that need to be processed to bring the
accounting records up to date.
| Materials requisition 21-3010: | $ | 4,200 | direct materials to Job 402 | |
| Materials requisition 21-3011: | $ | 7,500 | direct materials to Job 404 | |
| Materials requisition 21-3012: | $ | 1,700 | indirect materials | |
| Labor time ticket 6052: | $ | 3,000 | direct labor to Job 402 | |
| Labor time ticket 6053: | $ | 10,000 | direct labor to Job 404 | |
| Labor time ticket 6054: | $ | 2,000 | indirect labor | |
Jobs 402 and 404 are the only units in process at year-end. The
predetermined overhead rate is 100% of direct labor cost
Prepare an income statement for 2017 and a balance sheet as of December 31, 2017.
In: Accounting
Cost allocation is often the centerpiece of conflict that is resolved in court cases. The litigation usually involves the dispute over how costs are allocated to a product or product line that is of interest to the plaintiff. This is particularly an issue when a company produces some products or services for a price-competitive market while other products or services are produced for a governmental unit on a cost-plus or reimbursement basis.
Nursing Care Inc., or NCI, operates both a small nursing home and retirement home. There is a single kitchen used to provide meals to both the nursing home and retirement home, meaning labor costs and utilities costs of the kitchen are shared by the two homes. There is also a centralized cleaning department that provides the cleaning services for both homes as well as the kitchen. The nursing home serves only indigent patients who are on Medicaid. The state Department of Health and Family Services (DHFS) reimburses NCI at Medicaid-approved cost reimbursement rates. The Medicaid reimbursement rates are based on cost information supplied by NCI. The relevant cost and allocation data for the most recent year appear in the following table.
| Annual Operating Cost | |||||||||||||||||||
| Cleaning department | $ | 135,000 | |||||||||||||||||
| Central kitchen | $ | 187,500 | |||||||||||||||||
| Allocation Base | Kitchen | Nursing Home | Retirement Home | ||||||||||||||||
| Square feet of space | 1,000 | 2,000 | 3,000 | ||||||||||||||||
| Number of residents | — | 6 | 4 | ||||||||||||||||
Required:
1. Management of NCI currently allocates the kitchen and cleaning department costs based on the number of residents in each home. Determine the amount of service department costs assigned to each of the homes using this allocation base. (Round percentages to two decimal places in your calculations.)
2. DHFS auditors believe the step method of allocation should be used by first assigning cleaning costs based on square feet and then kitchen costs based on number of residents. Determine the amount of service department costs assigned to each of the homes using this allocation method. (Do not round percentage answers.)
In: Accounting
The Decision to Lease or Buy at Warf Computers Warf Computers has decided to proceed with the manufacture and distribution of the virtual keyboard (VK) the company has developed. To undertake this venture, the company needs to obtain equipment for the production of the microphone for the keyboard. Because of the required sensitivity of the microphone and its small size, the company needs specialized equipment for production. Nick Warf, the company president, has found a vendor for the equipment. Clapton Acoustical Equipment has offered to sell Warf Computers the necessary equipment at a price of $7.1 million. Because of the rapid development of new technology, the equipment falls in class 45 with a CCA rate of 45 percent. At the end of four years, the market value of the equipment is expected to be $860,000. Alternatively, the company can lease the equipment from Hendrix Leasing. The lease contract calls for four annual payments of $1.86 million due at the beginning of the year. Additionally, Warf Computers must make a security deposit of $440,000 that will be returned when the lease expires. Warf Computers can issue bonds with a yield of 11 percent, and the company has a marginal tax rate of 35 percent.
Questions
1) Should Warf buy or lease the equipment?
2) Nick mentions to James Hendrix, the president of Hendrix Leasing, that although the company will need the equipment for four years, he would like a lease contract for two years instead. At the end of the two years, the lease could be renewed. Nick would also like to eliminate the security deposit, but he would be willing to increase the lease payments to $3.0 million for each of the two years. When the lease is renewed in two years, Hendrix would consider the increased lease payments in the first two years when calculating the terms of the renewal. The equipment is expected to have a market value of $2.1 million in two years. What is the NAL of the lease contract under these terms? Why might Nick prefer this lease? What are the potential ethical issues concerning the new lease terms?
In: Accounting
The following information is available for United Corporation on December 31 for the year just ended.
Prepare the required adjusting entries at December 31, 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'.
In: Accounting
On April 1, 2018 Hippocrates Consulting began operations with the following beginning balances entered on April 1st as seen in the T-accounts below. First show each of the transactions described below as a journal entry including the date and then post each of the entries to the T-accounts below. After you have completed all of the entries as well as the adjusting entries prepare an Income Statement, Statement of Retained Earnings, and Balance Sheet for the month of April, 2018. Make sure that your statements presented in good form (points will be deducted if they are not in good form).
April 1: Paid three months’ rent on a lease rental contract, $4,800
2: Paid a six-month insurance premium for $1,800
4: Received cash from clients as an advance payment for services to be
provided and recorded as unearned fees, $5,000
5: Purchased additional office equipment on account from Office Station Co.,
$2,000.
6: Received cash from clients on account, $1,800.
10: Paid cash for a newspaper advertisement, $120
12: Paid Office Station Co. for part of the debt incurred on April 5, $1200.
12: Recorded services provided on account for the period April 1-12, $4,200.
14. Paid part-time receptionist for two weeks’ salary, $750.
17: Recorded cash from cash clients for fees earned during the period April
1-16, $6,250.
18: Paid cash for supplies, $800.
20: Recorded services provided on account for the period April 13-20, $2,100.
24: Recorded cash from cash clients for fees earned the period April
17-24, $3,850.
26: Received cash from clients on account, $5,600.
27: Paid part-time receptionist for two weeks’ salary, $750.
29: Paid telephone bill for April, $130.
30: Paid electricity bill for April, $200.
30: Recorded cash from cash clients for fees earned for the period April 25-30,
$3,050.
30: Recorded services provided on account for the remainder of April, $1,500.
30. A dividend of $6,000 was declared and paid.
The following are adjusting entries to be recorded on April 30th:
Accounts
Cash Receivable Supplies Prepaid Rent
--------------------- ------------------- -------------- ---------------
$13,100 $3,000 $1,400
Office Accumulated
Prepaid Insurance Equipment Depreciation
-------------------------- ------------------- -------------------
$12,500
Unearned
Accounts Payable Salaries Payable Fees Common Stock
----------------------- --------------------- ---------------- --------------------
$30,000
Retained Earnings Fees Earned Salary Expense Rent Expense
------------------------ ----------------- ---------------------- ------------------
Depreciation Miscellaneous
Supplies Expense Expense Insurance Expense Expense
----------------------- --------------------- ------------------------- -----------------
In: Accounting
Capital Allowance
Stephen Marsh operates a successful paint distributor business. The accounts for his business in 2017 showed a profit of $5,450,000 after charging:
At year-end December 2016, Stephen Marsh's business assets consist of:
a) Equipment at cost $200,000 (WDV $132,500; A.A. 11.25% SL)
b) Furniture and fixtures at cost of $480,000 (WDV $192,000; A.A. 11.25% SL)
c) A pickup truck purchased in 2014 for $500,000; (WDV $312,500; A.A. 12.5% SL)
d) A non-residential building, acquired in 2010 for $5 million (WDV 3.5 m; A.A 2.5%)
e) There were no acquisitions or disposals of assets in 2017
The Commissioner has determined that the salaries paid to Audrey and Paul are commensurate with their respective responsibilities.
(i) Prepare a summary of Stephen's capital allowances for year-end 2017
(ii) Advise Stephen of his income tax liability for the year of assessment 2017 (1 mark)
(iii) Audrey's only income is her salary from the shop. What is her tax liability for 2013?
PLEASE NOTE THAT TAX RATE IS 25%
In: Accounting
Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:
| Fixed Cost per Month |
Cost per Car Washed |
||||||
| Cleaning supplies | $ | 0.70 | |||||
| Electricity | $ | 1,400 | $ | 0.06 | |||
| Maintenance | $ | 0.25 | |||||
| Wages and salaries | $ | 4,500 | $ | 0.40 | |||
| Depreciation | $ | 8,400 | |||||
| Rent | $ | 2,000 | |||||
| Administrative expenses | $ | 1,800 | $ | 0.04 | |||
For example, electricity costs are $1,400 per month plus $0.06 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.10 per car washed.
The actual operating results for August are as follows:
| Lavage Rapide | ||
| Income Statement | ||
| For the Month Ended August 31 | ||
| Actual cars washed | 8,300 | |
| Revenue | $ | 52,120 |
| Expenses: | ||
| Cleaning supplies | 6,240 | |
| Electricity | 1,862 | |
| Maintenance | 2,290 | |
| Wages and salaries | 8,140 | |
| Depreciation | 8,400 | |
| Rent | 2,200 | |
| Administrative expenses | 2,028 | |
| Total expense | 31,160 | |
| Net operating income | $ | 20,960 |
Required:
Calculate the company's revenue and spending variances for August. (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.)
In: Accounting
Exercise 5.12 (Algorithmic) Predetermined Overhead Rate, Application of Overhead to Jobs, Job Cost On April 1, Sangvikar Company had the following balances in its inventory accounts: Materials Inventory $12,820 Work-in-Process Inventory 21,380 Finished Goods Inventory 8,710 Work-in-process inventory is made up of three jobs with the following costs: Job 114 Job 115 Job 116 Direct materials $2,436 $2,695 $5,058 Direct labor 1,780 1,420 4,020 Applied overhead 979 781 2,211 During April, Sangvikar experienced the transactions listed below. Materials purchased on account, $29,300. Materials requisitioned: Job 114, $16,720; Job 115, $11,750; and Job 116, $5,280. Job tickets were collected and summarized: Job 114, 130 hours at $12 per hour; Job 115, 230 hours at $15 per hour; and Job 116, 90 hours at $19 per hour. Overhead is applied on the basis of direct labor cost. Actual overhead was $4,590. Job 115 was completed and transferred to the finished goods warehouse. Job 115 was shipped, and the customer was billed for 125 percent of the cost. Required: 1. Calculate the predetermined overhead rate based on direct labor cost. 55 % of direct labor cost 2. Calculate the ending balance for each job as of April 30. When required, round your answers to the nearest dollar. Use your rounded answers in subsequent computations, if necessary. Ending Balance Job 114 $ Job 115 $ Job 116 $ 3. Calculate the ending balance of Work in Process as of April 30. When required, round your answer to the nearest dollar. $ 4. Calculate the cost of goods sold for April. When required, round your answer to the nearest dollar. $ 5. Assuming that Sangvikar prices its jobs at cost plus 25 percent, calculate the price of the one job that was sold during April. Round to the nearest dollar. $
In: Accounting