1. Analyzing Manufacturing Cost Accounts

   Clapton Company manufactures custom guitars in a wide variety of styles. The following incomplete ledger accounts refer to transactions that are summarized for May:

   Materials
   May 1	Balance	105,600	May 31	Requisitions	(a)
   31	Purchases	500,000

   Work in Process
   May 1	Balance	(b)	May 31	Completed jobs	(f)
   31	Materials	(c)
   31	Direct labor	(d)
   31	Factory overhead applied	(e)

   Finished Goods
   May 1	Balance	0	May 31	Cost of goods sold	(g)
   31	Completed jobs	(f)

   Wages Payable
   			May 31	Wages incurred	396,000

   Factory Overhead
   May 1	Balance	26,400	May 31	Factory overhead applied	(e)
   31	Indirect labor	(h)
   31	Indirect materials	15,400
   31	Other overhead	122,500

   In addition, the following information is available:

   1. Materials and direct labor were applied to the following jobs in May:

      Job No.		Style	Quantity		Direct Materials				Direct Labor
      101		AF1	330			$ 82,500				$ 59,400
      102		AF3	380			105,400				72,600
      103		AF2	500			132,000				110,000
      104		VY1	400			66,000				39,600
      105		VY2	660			118,800				66,000
      106		AF4	330			66,000				30,800
      		Total	2,600			$570,700				$378,400

   2. Factory overhead is applied to each job at a rate of 50% of direct labor cost.
   3. The May 1 Work in Process balance consisted of two jobs, as follows:

      Job No.	Style	Work in Process, May 1
      101	AF1	$26,400
      102	AF3	46,000
      Total		$72,400

   4. Customer jobs completed and units sold in May were as follows:

      Job No.	Style	Completed in May	Units Sold in May
      101	AF1	X	264
      102	AF3	X	360
      103	AF2		0
      104	VY1	X	384
      105	VY2	X	530
      106	AF4		0

   Required:

   1. Determine the missing amounts associated with each letter by completing the table below. If required, round your unit cost to two decimal places. If an answer is zero, enter in "0". Enter amounts as positive numbers.

   Job No.	Style	Quan- tity		May 1 Work in Process		Direct Materials			Direct Labor		Factory Overhead		Total Cost		Unit Cost		Units Sold		Cost of Goods Sold
   No. 101	AF1	330		$		$82,500			$59,400		$		$		$				$
   No. 102	AF3	380				105,400			72,600
   No. 103	AF2	500				132,000			110,000
   No. 104	VY1	400				66,000			39,600
   No. 105	VY2	660				118,800			66,000
   No. 106	AF4	330				66,000			30,800
   Total		2,600		$		$570,700			$378,400		$		$						$

   a. Materials Requisitions $

   b. Work in Process Beginning Balance $

   c. Direct Materials $

   d. Direct Labor $

   e. Factory overhead applied $

   f. Completed jobs $

   g. Cost of goods sold $

   h. Indirect labor $

   2. Determine the May 31 balances for each of the inventory accounts and factory overhead. Enter all amounts as positive numbers.

   Materials	$
   Work in Process	$
   Finished Goods	$
   Factory Overhead	$

Abiy's Apple Pies purchases pies from a supplier, which it then sells to customers. During the year, it had the following information related to its inventory:

Beginning Inventory	120 units, purchased for $3 each.
Sale	90 units, sold for $10 each
Purchase	20 units, purchased for $4 each.
Purchase	15 units, purchased for $5 each.
Sale	25 units, sold for $11 each.

A. Using the information above, complete the following table related to Abiy's Apple Pies. Assume Abiy's uses the periodic inventory method. Round your final answer to the nearest whole number.

	FIFO	LIFO	Average Cost
Cost of Goods Sold
Ending Inventory

B. Using the same information for Abiy's Apple Pies, complete the following table. Assume Abiy uses the perpetual inventory method.

	FIFO	LIFO
Cost of Goods Sold
Ending Inventory
Gross Profit

Going Concern

Facts:

• A Chicago area company (“Company”) has been manufacturing metal gas tanks for passenger automobiles since 1918. The Company has always been a privately held family run business.

• The Company has been profitable for much of its history; retained earnings at the end of 20X1 was $20 million.

• Recently mandated EPA mpg requirements have caused automobile manufacturers to move to utilizing plastic gas tanks – which are much lighter than metal. This change in materials helped automobile manufacturers reduce auto weights and meet the increased mpg requirements.

• The Company decided not to convert their operation to plastic gas tanks because their expertise was only in manufacturing metal products.

• A few years back, the owners were faced with two options: Liquidate and distribute available assets or move into a different line of business. The Company decided to do the latter. The Company felt it could use its expertise to manufacture metal frames for televisions (like for Toshiba, Panasonic, etc.)

• The Company built a new manufacturing plant in Georgia for manufacturing these metal TV frames; the plant was financed with low interest rate IRBs (Industrial Revenue Bonds).

• The IRBs were for $25 million with a 20-year term. The Company has no other debt.

• Unfortunately, in its first two years of operation of the new metal picture frame plant– 20X2 & 20X3 – the Company lost $11 million and $8 million, respectively. The metal TV frame business is extremely competitive; sales prices of metal TV frames are quite low. The Company was simply unable to produce large quantities of metal frames at a cost which would enable the Company to generate adequate gross profit.

• You are finishing your Audit of 20X3 & discussed the Going Concern issue with the Company’s management, including the family owners. The owners / managers feel they have no choice but to continue producing metal TV frames – due to the 20-year IRB term.

• Management prepares financial projections for the next year which shows the Company breaking even; the projections reflect a significant increase in the gross profit – it is unclear how management will improve their gross profit margin so significantly. Part 1 (Continued)

Required: State whether you believe there is or is not substantial doubt about the Company’s ability to continue as a Going Concern. Provide your supporting arguments, specifically addressing: • Conditions and Events • Management’s Plans

Stating that you believe there is substantial doubt means that your Audit Firm’s Independent Auditor’s Report for the year of 20X3 will include an emphasis of a matter paragraph with the supporting footnote. (There is no need to formally draft the paragraph & supporting footnote.)

Stating that you believe there is not substantial doubt means that your Audit Firm’s Independent Auditor’s Report for the year of 20X3 will not include an emphasis of a matter paragraph but the Audited Financial Statements will include a footnote describing the conditions and events and how management’s plans alleviated the conditions and events. (There is no need to formally draft the footnote.)

METLOCK, INC. Condensed Balance Sheet May 31 ($ in millions)
		2017		2016
Assets
Current Assets		$9,800		$8,760
Property, plant, and equipment (net)		1,970		1,800
Other assets		1,550		1,770
Total assets		$13,320		$12,330
Liabilities and Stockholders' Equity
Current Liabilities		$3,230		$3,320
Long-term liabilities		1,310		1,350
Stockholders’ equity		8,780		7,660
Total liabilities and stockholders' equity		$13,320		$12,330

(a) Prepare a horizontal analysis of the balance sheet data for Metlock, using 2016 as a base. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000), (20%). Round percentages to 1 decimal place, e.g. 12.1%.)

METLOCK, INC. Condensed Balance Sheet May 31 ($ in millions)
		2017		2016		Increase (Decrease)		Percentage Change from 2013
Assets
Current Assets		$9,800		$8,760		$Enter a dollar amount		Enter percentages rounded to 1 decimal place	%
Property, plant, and equipment (net)		1,970		1,800		Enter a dollar amount		Enter percentages rounded to 1 decimal place	%
Other assets		1,550		1,770		Enter a dollar amount		Enter percentages rounded to 1 decimal place	%
Total assets		$13,320		$12,330		$Enter a total amount for this section		Enter percentages rounded to 1 decimal place	%
Liabilities and Stockholders' Equity
Current Liabilities		$3,230		$3,320		$Enter a dollar amount		Enter percentages rounded to 1 decimal place	%
Long-term liabilities		1,310		1,350		Enter a dollar amount		Enter percentages rounded to 1 decimal place	%
Stockholders’ equity		8,780		7,660		Enter a dollar amount		Enter percentages rounded to 1 decimal place	%
Total liabilities and stockholders' equity		$13,320		$12,330		$Enter a total amount for this section		Enter percentages rounded to 1 decimal place	%

(b) Prepare a vertical analysis of the balance sheet data for Metlock for 2017.

METLOCK, INC. Condensed Balance Sheet Choose the accounting period                                                          May 31, 2017For the Year Ended May 31, 2017For the Month Ended May 31, 2017
		$ (in millions)		Percent
Assets
Current Assets		$9,800		Enter percentages	%
Property, plant, and equipment (net)		1,970		Enter percentages	%
Other assets		1,550		Enter percentages	%
Total assets		$13,320		Enter percentages	%
Liabilities and Stockholders' Equity
Current Liabilities		$3,230		Enter percentages	%
Long-term Liabilities		1,310		Enter percentages	%
Stockholders’ equity		8,780		Enter percentages	%
Total liabilities and stockholders' equity		$13,320		Enter percentages	%

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $100,000 are payable at the beginning of each year. Each is a finance lease for the lessee. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

	Situation
	1	2	3	4
Lease term (years)	7	7	8	8
Lessor's and lessee's interest rate	9%	11%	10%	12%
Residual value:
Estimated fair value	0	$50,000	$8,000	$50,000
Guaranteed by lessee	0	0	$8,000	$60,000

Determine the following amounts at the beginning of the lease. (Round your intermediate and final answers to the nearest whole dollar amount.)

	Situation
		1	2	3	4
A.	The Lesser's
	1. Lease payment
	2. Gross investment in the Lease
	3. Net Investment in the Lease
B.	The Lessee's
	1. Lease payment
	2. Gross investment in the Lease
	3. Net investment in the Lease

  

Which of the following cash payments would involve the immediate recording of an expense? Why?

1. Paid vendors for office supplies previously purchased on accohnt

2. Paid an auto dealer for a new company auto

3. Paid the current month's rent

4. Paid salaries for the last half of the current month

2 answers meet this requirement.

Practice questions

(1)        The standard costs of wooden ducks on wheels, for the CURRENT year, for 5 mm board and for cutting are as follows:-

            5 mm board: 0.2 sq. metre at £4.50 per sq. metre.

            Cutters: 1.5 minutes at £7.20 per hour.

In the most recent period, 120 wooden ducks on wheels were produced.

25 sq. metres of 5 mm board were requisitioned from stores at a total cost of £110.

            2.75 hours were recorded for cutters at a total cost of £22.

            Required

(a)        Calculate the material price variance and material usage variance for 5 mm board

(ii)        Calculate the wage rate variance and labour efficiency variance for cutters

           

Suggest possible reasons for the variances calculated.

(2)        Given standard cost per unit:

            Direct materials (4 kg. @ 75p per kg)

            Direct labour (2 hrs @ £1.60 per hr)

            Actual details are:

		£
Output produced (units)	38,000
Direct material purchased	180,000 kg	126,000
issued to production	154,000 kg
Direct labour	78,000 hrs	136,500

            Calculate:         Material and labour variances.

Part A

Tank Corporation manufactures and sells 300,000 electrical meters using a capacity of 110,000 machine hours, enough to make 330,000 units each year, which usually includes 30,000 units that have to be reworked. Contribution margin –CM - per saleable unit is $8. Additional costs per reworked unit are:

      $7

Company engineers have devised a new process that would completely eliminate defects and therefore avoid the need for rework, and would actually increase capacity, however, this will add $315,000 in fixed manufacturing overhead each year.

Required:

1.      Determine the impact of the new process if Tank were to produce the same quantity of units as in the past. Clearly show any cost savings and extra costs.

Part B     

       Assume that Tank has proceeded with the anticipated changes, and is exploring new markets as a result of the engineering changes referred to above aswell as the increase in capacity, and has accepted a proposal to make 20,000 units of a modified version of the meter which will generate $10 of contribution margin per unit.

Required:

2.      Should Tank go ahead with this new job? Explain with proof.

3.      What other nonfinancial and qualitative factors should be considered in making this decision?

Can free cash flow be a negative number? What does a lack of free cash flow indicate for a business? Please indicate why free cash flow may be a better indicator than Cash Flows from Operating Activities of financial strength.

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek Manufacturing Inc. Income Statement
Sales	$	1,703,300
Cost of goods sold		1,222,248
Gross margin		481,052
Selling and administrative expenses		580,000
Net operating loss	$	(98,948	)

Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,700 units of T500 at a price of $39 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

	B300		T500		Total
Direct materials	$	400,100	$	162,700	$	562,800
Direct labor	$	120,000	$	42,900		162,900
Manufacturing overhead						496,548
Cost of goods sold					$	1,222,248

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $54,000 and $103,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

	Manufacturing Overhead			Activity
Activity Cost Pool (and Activity Measure)				B300	T500	Total
Machining (machine-hours)	$	205,288		90,600	62,600	153,200
Setups (setup hours)		129,360		74	220	294
Product-sustaining (number of products)		101,000		1	1	2
Other (organization-sustaining costs)		60,900		NA	NA	NA
Total manufacturing overhead cost	$	496,548

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.)

	B300 T500 Total % of % of Amount Amount Amount Traditional Cost System % % % % % % Total cost assigned to products $0 $0 $0 Total cost $0 B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: % % % % % % Indirect costs: % % % % % % Total cost assigned to products $0 $0 0 Costs not assigned to products: Total cost $0

​​​​​​​Vibrant Company had $910,000 of sales in each of three consecutive years 2016–2018, and it purchased merchandise costing $505,000 in each of those years. It also maintained a $210,000 physical inventory from the beginning to the end of that three-year period. In accounting for inventory, it made an error at the end of year 2016 that caused its year-end 2016 inventory to appear on its statements as $190,000 rather than the correct $210,000.

1. Determine the correct amount of the company’s gross profit in each of the years 2016–2018.
2. Prepare comparative income statements to show the effect of this error on the company's cost of goods sold and gross profit for each of the years 2016−2018.

Determine the correct amount of the company's gross profit in each of the years 2016−2018.

VIBRANT COMPANY Comparative Income Statements 2016 2017 2018 3-year total Cost of goods sold Cost of goods sold Gross profit

Prepare comparative income statements to show the effect of this error on the company's cost of goods sold and gross profit for each of the years 2016−2018.

VIBRANT COMPANY Comparative Income Statements 2016 2017 2018 3-year total Cost of goods sold Cost of goods sold Gross profit

Laker Company reported the following January purchases and sales data for its only product.
  

Date		Activities	Units Acquired at Cost								Units sold at Retail
Jan.	1	Beginning inventory	165	units	@	$	9.00	=	$	1,485
Jan.	10	Sales										125	units	@	$	18.00
Jan.	20	Purchase	110	units	@	$	8.00	=		880
Jan.	25	Sales										125	units	@	$	18.00
Jan.	30	Purchase	250	units	@	$	7.50	=		1,875
		Totals	525	units					$	4,240		250	units

rev: 09_15_2017_QC_CS-99723

Required:

The Company uses a periodic inventory system. For specific identification, ending inventory consists of 275 units, where 250 are from the January 30 purchase, 5 are from the January 20 purchase, and 20 are from beginning inventory. Determine the cost assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO

Complete this questions by entering your answers in the below tabs.

• Specific Id

• Weighted Average
• FIFO
• LIFO

Determine the cost assigned to ending inventory and to cost of goods sold using specific identification. For specific identification, ending inventory consists of 275 units, where 250 are from the January 30 purchase, 5 are from the January 20 purchase, and 20 are from beginning inventory.

Determine the cost assigned to ending inventory and to cost of goods sold using weighted average.

b) Average Cost	Cost of Goods Available for Sale			Cost of Goods Sold			Ending Inventory
	# of units	Average Cost per unit	Cost of Goods Available for Sale	# of units sold	Average Cost per Unit	Cost of Goods Sold	# of units in ending inventory	Average Cost per unit	Ending Inventory
Beginning inventory
Purchases:
Jan. 20
Jan. 30
Total	0		$0			$0			$0

Statutory employee versus independent contractor versus employee

A University considers its adjunct professors to be employees, and as employees the University withholds employee taxes on earnings. Full-time professors, unlike the adjunct professors, pay into their own retirement system and not social security.

There is a private letter ruling which states online instructors should or could be considered statuary employees. A statuary employee is one that gets no taxes withheld other than social security and still receives a W-2. A statutory employee can then use Schedule C to deduct any expenses. The advantage of being a statutory employee is that the employee can then write off any expenses directly associated with teaching, including the cost of laptops, internet service, software and other expenses. In other words, a statutory employee would not be limited to the Schedule A limitation of deducting expenses that only exceed 7.5% of adjusted gross income.

The University does not make this distinction between statutory employee versus employee.

Share your thoughts on whether the University is treating its adjunct professors correctly. Share your thoughts on whether its adjunct professors (or anyone else that is doing work for the benefit of an organization on a part time basis) would be better off being treated as a statutory employee, employee or independent contractor.

What would the calculations look like for Starbucks 2018 annual report on the listed ratio?

ROE =Net income - preferred dividends/Average common stockholders' equity

My number feels incorrect and i'm trying to see where I went wrong. I used 4518.3(Net income), couldn't find preferred dividends and (1175.8(2018)+5457(2017))/2= 1394.6 (Average common stockholders' equity).

I am questioning if I pulled the correct numbers from the annual report. My ratio was 136%, if that is correct what does it mean being such a high number?