Questions
Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a...

Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi-purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours × (54,000 + 10,200)]. Estimated annual manufacturing overhead is $ 1,590,008. Thus, the predetermined overhead rate is $ 16.51 or ($ 1,590,008 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models.

The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.

Estimated Use of
Drivers by Product

Activity Cost Pools

Cost Drivers

Estimated Overhead

Estimated Use of
Cost Drivers

Home

Commercial

Receiving Pounds

$ 90,450

335,000

215,000

120,000

Forming Machine hours

155,050

35,000

27,000

8,000

Assembling Number of parts

412,300

217,000

165,000

52,000

Testing Number of tests

46,920

25,500

15,500

10,000

Painting Gallons

57,838

5,258

3,680

1,578

Packing and shipping Pounds

827,450

335,000

215,000

120,000

$ 1,590,008

(a)

Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, e.g. 12.50.)

Home Model

Commercial Model

Total unit cost

$ enter a dollar amount rounded to 2 decimal places

$ enter a dollar amount rounded to 2 decimal places

2.)Under ABC, complete the schedule showing the computations of the activity-based overhead rates (per cost driver). (Round your answers to 2 decimal places, e.g. 2.25.)

3.)Complete the schedule assigning each activity's overhead cost pool to each product based on the use of cost drivers. (Use rates from part b above and round cost assigned to 0 decimal places, e.g. 12,250. Round overhead per unit to 2 decimal places, e.g. 2.25. Note that due to rounding your total cost assigned will be slightly different than calculated above.)
Cost Driver Home Model
Commercial Model
Cost Assigned

4.) Compute the total cost per unit for each product under ABC. (Round your answers to 2 decimal places, e.g. 12.25.)
Home Model $
Commercial Model $

5.)Classify each of the activities as a value-added activity or a non-value-added activity.
Activity
Receiving value-addednon-value-added
Forming non-value-addedvalue-added
Assembling value-addednon-value-added
Testing value-addednon-value-added
Painting non-value-addedvalue-added
Packing and shipping value-addednon-value-added

In: Accounting

Whirly corporation most recent income statement is shown below: Total Per Unit Sales (7,600 units) 243,200...

Whirly corporation most recent income statement is shown below:

Total Per Unit

Sales (7,600 units) 243,200 32.00

Variable Expenses 144,400 19.00

Contribution Margin 98,800

Fixed Expenses 55,300

Net Operating Income 43,500

Required:

Prepare a new contribution format income statement under each of the following conditions (consider each case independently):

1. The sales volume increases by 60 units

2. The Sales Volume decreases by 60 units

3. The Sales Volume is 6,600

In: Accounting

The following selected data were taken from the accounting records of Metcalf Manufacturing. The company uses...

The following selected data were taken from the accounting records of Metcalf Manufacturing. The company uses direct-labor hours as its cost driver for overhead costs.

Month Direct-Labor
Hours
Manufacturing
Overhead
January 31,000 $ 695,000
February 33,000 734,000
March 43,000 893,000
April 34,000 752,750
May 38,000 796,500
June 36,000 793,500

March’s costs consisted of machine supplies ($219,300), depreciation ($29,500), and plant maintenance ($644,200). These costs exhibit the following respective behavior: variable, fixed, and semivariable.

The manufacturing overhead figures presented in the preceding table do not include Metcalf’s supervisory labor cost, which is step-fixed in nature. For volume levels of less than 15,000 hours, supervisory labor amounts to $74,500. The cost is $149,000 from 15,000–29,999 hours and $223,500 when activity reaches 30,000 hours or more.

Required:

1. Determine the machine supplies cost and depreciation for January.

2. Using the high-low method, analyze Metcalf’s plant maintenance cost and calculate the monthly fixed portion and the variable cost per direct-labor hour.

3. Assume that present cost behavior patterns continue into the latter half of the year. Estimate the total amount of manufacturing overhead the company can expect in November if 29,300 direct-labor hours are worked.

In: Accounting

Moravia Company processes and packages cream cheese. The following data have been compiled for the month...

Moravia Company processes and packages cream cheese. The following data have been compiled for the month of April. Conversion activity occurs uniformly throughout the production process.

Work in process, April 1—12,000 units:
Direct material: 100% complete, cost of $ 16,000
Conversion: 20% complete, cost of 3,900
Balance in work in process, April 1 $ 19,900
Units started during April 120,000
Units completed during April and transferred out to finished-goods inventory 97,000
Work in process, April 30:
Direct material: 100% complete
Conversion: 25% complete
Costs incurred during April:
Direct material $ 300,800
Conversion costs:
Direct labor $ 47,000
Applied manufacturing overhead 97,150
Total conversion costs $ 144,150


Prepare schedules to accomplish each of the following process-costing steps for the month of April. Use the weighted-average method of process costing.

Required:

1. Analysis of physical flow of units.

2. Calculation of equivalent units.

3. Computation of unit costs. (Round "Cost per Equivalent Unit" to 2 decimal places.)

4. Analysis of total costs. (Round "Cost per Equivalent Unit" to 2 decimal places.)

In: Accounting

ABC Incorporated began operations on Jan 1st, 2012 with an initial issuance of 10,000 shares,( each...

ABC Incorporated began operations on Jan 1st, 2012 with an initial issuance of 10,000 shares,( each with par value $0.10), for $5 per share

  1. On Jan 1st, 2012, the company purchased a two-year fire insurance policy worth $10,000 and had paid it with cash.
  2. Company purchased equipment worth $100,000 on Jan 1st by signing a one-year Notes Payable. Interest rate on the loan was 8% and the interest and the entire principal will be paid on Jan 1st 2013. The depreciation on equipment for the year 2012 was $20,000
  3. On February 1st, 2012 the company entered into a contract to provide consulting services. It received an advance of $120,000. The company performs 5% of the work for which it was contracted, every month.
  4. On November 15th, 2012, the company bought a piece of land for $200,000 by taking a 30-year mortgage loan.
  5. On Dec 1st, the company makes a mortgage payment $2,000 which was composed of $1,500 principal payment and $500 interest expense.
  6. In 2012, the company purchased (in cash) and used up office supplies worth $20,000.
  7. Company purchased Investments worth $20,000 on Apr 1st 2012. The company receives 10% interest on its Investments annually on June 30th
  8. On Feb 15th, 2012, the company bought toys inventory worth $90,000 on credit from its suppliers.
  9. On March 20th, 2012, the company sold toys for $180,000. The company received 50% cash and the rest remained on account. The cost of these toys sold was $40,000
  10. The company’s franchisees owe ABC’s $800 in royalties for sales the franchisees made in the last week of December 2012.
  11. Utilities expenses for the year 2012 were $10,000 and were paid in cash.
  12. Wages accrued in the last week of 2012 were $2,000 and will be paid in the first week of 2013.
  13. On December 15th, 2012, the company declared cash dividends of $20,000 which will be paid sometime in 2013.

Prepare the journal entries (both regular and adjusting), trial balance, Income Statement, Statement of Retained Earnings and Balance Sheet for the year ending December 31st 2012. Also create a T-Account for Cash.

In: Accounting

Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States...

Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019:

Lionel Corporation
Budgeted Income Statement
For the Year Ending June 30, 2019
($000 omitted)
Sales $ 30,200
Cost of goods sold
Variable $ 13,590
Fixed 3,624 17,214
Gross profit $ 12,986
Selling and administrative costs
Commissions $ 5,436
Fixed advertising cost 906
Fixed administrative cost 2,416 8,758
Operating income $ 4,228
Fixed interest cost 755
Income before income taxes $ 3,473
Income taxes (30%) 1,042
Net income $ 2,431

Since the completion of the income statement, Lionel has learned that its sales agents are requiring a 5% increase in their commission rate (to 23%) for the upcoming year. As a result, Lionel’s president has decided to investigate the possibility of hiring its own sales staff in place of the network of sales agents and has asked Alan Chen, Lionel’s controller, to gather information on the costs associated with this change.

Alan estimates that Lionel must hire eight salespeople to cover the current market area, at an average annual payroll cost for each employee of $80,000, including fringe benefits expense. Travel and entertainment expenses is expected to total $770,000 for the year, and the annual cost of hiring a sales manager and sales secretary will be $235,000. In addition to their salaries, the eight salespeople will each earn commissions at the rate of 10% of sales. The president believes that Lionel also should increase its advertising budget by $670,000 if the eight salespeople are hired.

Required

1. Determine Lionel’s breakeven point (operating profit = 0) in sales dollars for the fiscal year ending June 30, 2019, if the company hires its own sales force and increases its advertising costs. Prove this by constructing a contribution income statement.

2. If Lionel continues to sell through its network of sales agents and pays the higher commission rate, determine the estimated volume in sales dollars that would be required to generate the operating profit as projected in the budgeted income statement.

Breakeven point (in sales dollars): _____________

Contribution Income Statement

Sales ___________

- Variable costs:

Sales commissions _____________

Cost of goods sold ___________=

Contribution margin: ____________

Fixed costs:

Exisiting:____________

+Incremental: ___________=____________

Operating income; _______________________

In: Accounting

Great Lakes Distributors buys 100,000 bushels of soybean futures at $9.95 per bushel, to cover a...

Great Lakes Distributors buys 100,000 bushels of soybean futures at $9.95 per bushel, to cover a commitment to deliver 100,000 bushels of soybeans to a customer in 60 days at a price of $10.25 per bushel. No margin deposit is required. Spot and futures prices for soybeans are equal and fluctuate between $9.50 and $10.40 per bushel. On the day of delivery to the customer, Great Lakes closes its futures position and buys soybeans in the spot market to fulfill its agreement with the customer.

a. Calculate the cost per bushel to Great Lakes if the spot price at the time of purchase is $9.50. Calculate the cost per bushel if the spot price is $10.40.

b. Prepare the entries Great Lakes makes to record the above events if the spot price is $10.20 per bushel on the day the futures contract is closed, Great Lakes buys the soybeans on the spot market, and delivers them to the customer. The futures position qualifies as a fair value hedge of the firm commitment to sell soybeans to the customer. Great Lakes records income effects of these transactions in cost of goods sold.

In: Accounting

In thinking about overcoming the negative publicity and securities fraud fines related to revenue fraud, some...

  1. In thinking about overcoming the negative publicity and securities fraud fines related to revenue fraud, some companies succeed and move on, while others fail following the fraud. What forces might influence corporate “survivability” in the face of financial reporting fraud related to revenue?

In: Accounting

Do the pluses of using credit cards out-weigh the minuses?

Do the pluses of using credit cards out-weigh the minuses?

In: Accounting

Mauro Products distributes a single product, a woven basket whose selling price is $15 and whose...

Mauro Products distributes a single product, a woven basket whose selling price is $15 and whose variable expense is $12 per unit. The company's monthly fixed expense is $4,200.

Required:

  1. Solve for the company's break-even point in unit sales using the equation method.
  2. Solve for the company's break-even point in sales dollars using the equation method and the CM ratio.
  3. Solve for the company's break-even point in unit sales using the formula method.
  4. Solve for the company's break-even point in sales dollars using the formula method and the CM ratio.

In: Accounting

Whitelands, Inc. had $100 of cash and shareholders’ equity as the result of its initial sale...

Whitelands, Inc. had $100 of cash and shareholders’ equity as the result of its initial sale of stock on January 1, 2012. During its first month of operations, Whitelands had the following operating transactions: Date Transaction 1/1 Paid $24 cash in advance to rent a store for one year 1/1 Purchased 2 units of inventory on credit costing $4 each 1/3 Purchased 3 units of inventory on credit costing $5 each 1/10 Purchased 4 units of inventory on credit costing $6 each 1/21 Paid for the January 1 inventory purchase 1/23 Paid for the January 3 inventory purchase 1/30 Sold 7 units of inventory at $10 each on credit 1/30 Matched the inventory cost to January 30 sales on a FIFO basis 1/31 Estimated that 10% of credit sales will not be realized in cash 1/31 Adjusted the prepaid rent account Required: 1. Record the journal entries for the above transactions. 2. Present Whitelands’ income statement for January 2014. 3. Report Whitelands’ balance sheet on January 31, 2014. 4. Close the revenue and expense accounts to retained earnings.  

In: Accounting

The following expenditures are related to land, land improvements and buildings, which were acquired on November...

The following expenditures are related to land, land improvements and buildings, which were acquired on November 1, 2015.

Cost of real estate acquired for a new manufacturing plant S365,000 (the land is appraised for $262,800 and the building for $102,200)

Real estate taxes paid by the purchaser......$20,000

Cost of removing a barn..... $8,500

Architect's fees for updating the building..... $6750

Attorneys fees for closing the sale..... $12500

Grading land.... $3500

paving parking lot......$7000

Planting trees and shrubs.......$9250

Cost of repairs to building due to storm during construction..... $1300

lights placed on driveway .... $750

fee to real estate broker..... $2500

a) determine the cost of the land, the building and the improvements (round to nearest dollar)

b)prepare journal entries on Dec. 31, 2015 for depreciation assuming the building will have a useful life of 20 years and no residual value. Use double declining balance method and the half-year convention. Depreciate the land improvements using straight line method, a 5 year life, to the nearest month with zero residual value (to the nearest dollar).

In: Accounting

Why do businesses use budgets? What information can you learn from a business about its priorities...

  1. Why do businesses use budgets?
  2. What information can you learn from a business about its priorities from reading its budget?
  3. What would you change about the budgeting process if you could change one thing?

In: Accounting

April 1 Nozomi invested $37,000 cash and computer equipment worth $25,000 in the company in exchange...

April 1 Nozomi invested $37,000 cash and computer equipment worth $25,000 in the company in exchange for common stock.
2 The company rented furnished office space by paying $2,000 cash for the first month’s (April) rent.
3 The company purchased $1,300 of office supplies for cash.
10 The company paid $2,500 cash for the premium on a 12-month insurance policy. Coverage begins on April 11.
14 The company paid $1,800 cash for two weeks' salaries earned by employees.
24 The company collected $13,500 cash for commissions earned.
28 The company paid $1,800 cash for two weeks' salaries earned by employees.
29 The company paid $450 cash for minor repairs to the company's computer.
30 The company paid $1,450 cash for this month's telephone bill.
30 The company paid $1,700 cash in dividends.

The company's chart of accounts follows:

101 Cash 405 Commissions Earned
106 Accounts Receivable 612 Depreciation Expense—Computer Equip.
124 Office Supplies 622 Salaries Expense
128 Prepaid Insurance 637 Insurance Expense
167 Computer Equipment 640 Rent Expense
168 Accumulated Depreciation—Computer Equip. 650 Office Supplies Expense
209 Salaries Payable 684 Repairs Expense
307 Common Stock 688 Telephone Expense
318 Retained Earnings 901 Income Summary
319 Dividends

Use the following information:

  1. Prepaid insurance of $139 has expired this month.
  2. At the end of the month, $600 of office supplies are still available.
  3. This month’s depreciation on the computer equipment is $500.
  4. Employees earned $320 of unpaid and unrecorded salaries as of month-end.
  5. The company earned $2,200 of commissions that are not yet billed at month-end.

Required:
1. & 2. Prepare journal entries to record the transactions for April and post them to the ledger accounts in Requirement 6b. The company records prepaid and unearned items in balance sheet accounts.
3. Using account balances from Requirement 6b, prepare an unadjusted trial balance as of April 30.
4. Journalize the adjusting entries for the month and prepare the adjusted trial balance.
5a. Prepare the income statement for the month of April 30.
5b. Prepare the statement of retained earnings for the month of April 30.
5c. Prepare the balance sheet at April 30.
6a. Prepare journal entries to close the temporary accounts and then post to Requirement 6b.
6b. Post the journal entries to the ledger.
7. Prepare a post-closing trial balance.

In: Accounting

Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as...

Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:

Sales $ 1,618,000
Variable expenses 546,900
Contribution margin 1,071,100
Fixed expenses 1,178,000
Net operating income (loss) $ (106,900)

In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:

Division

East Central West
Sales $ 418,000 $ 700,000 $ 500,000
Variable expenses as a percentage of sales 55 % 21 % 34 %
Traceable fixed expenses $ 257,000 $ 333,000 $ 210,000

Required:

1. Prepare a contribution format income statement segmented by divisions.

2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $24,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented?

2-b. Would you recommend the increased advertising?

1.

Division
Total Company East Central West
Sales
Variable expenses
Contribution loss 0 0 0 0
Fixed manufacturing overhead
0 $0 $0 $0
$0

2.

The Marketing Department has proposed increasing the West Division's monthly advertising by $24,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? (Do not round intermediate calculations.)

Net operating income will by

3.

Would you recommend the increased advertising?

Yes
No

In: Accounting