Make-or-Buy Decision: Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $28 each. Zion uses 12,500 units of Component K2 each year. The cost per unit of this component is as follows:

Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that component were no longer produced.

Required:

1. CONCEPTUAL CONNECTION: If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease?

Which alternative is better?
Purchase the component from Bryce

2. CONCEPTUAL CONNECTION: Briefly explain how increasing or decreasing the 75% figure affects Zion’s final decision to make or purchase the component.

As the percentage of avoidable fixed cost increases (above 75%), total relevant costs of making the component increase, causing the “purchase” decision to be more  financially appealing (compared to the “make” option) than it was when the percentage was 75%. In other words, as the percentage increases, difference between the “purchase” and “make” options increases resulting in the “purchase” decision being even more  attractive. Alternatively, as the percentage of avoidable fixed costs decreases, the “make” option eventually is equally  costly and as equally appealing financially as the “purchase” option. Finally, as the percentage of avoidable fixed cost decreases low enough and the total relevant costs of making the component decrease, the “make”  option becomes the more financially appealing option

3. CONCEPTUAL CONNECTION: By how much would the per-unit relevant fixed cost have to decrease before Zion would be indifferent (i.e., incur the same cost) between “making” versus “purchasing” the component? If necessary, round your answer to two decimal places.

%

Required:  Prepare a combined Governmental Funds Balance Sheet/Statement of Net Position in the format presented in Illustration 9-1 from your textbook.

Additional information:

• Capital assets net of accumulated depreciation amounted to $475,000 at year-end.
• The liability for long-term compensated absences is estimated to be $73,000 at year-end.
• Long-term notes payable amounted to $423,000 at year-end.

1. Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:

   		Estimated Fixed Cost			Estimated Variable Cost (per unit sold)
   Production costs:
   	Direct materials				$26
   	Direct labor				17
   	Factory overhead	$114,300			13
   Selling expenses:
   	Sales salaries and commissions	23,700			6
   	Advertising	8,000
   	Travel	1,800
   	Miscellaneous selling expense	2,000			5
   Administrative expenses:
   	Office and officers' salaries	23,200
   	Supplies	2,900			2
   	Miscellaneous administrative expense	2,660			3
   	Total	$178,560			$72

   It is expected that 5,580 units will be sold at a price of $144 a unit. Maximum sales within the relevant range are 7,000 units.

   Required:

   1. Prepare an estimated income statement for 20Y7.

   Belmain Co.
   Estimated Income Statement
   For the Year Ended December 31, 20Y7
   			$
   Cost of goods sold:
   		$
   Cost of goods sold
   Gross profit			$
   Expenses:
   Selling expenses:
   	$
   Total selling expenses		$
   Administrative expenses:
   	$
   Total administrative expenses
   Total expenses
   Income from operations			$

   2. What is the expected contribution margin ratio? Round to the nearest whole percent.
   %

   3. Determine the break-even sales in units and dollars.

   Units	units
   Dollars	units

   4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
   $

   5. What is the expected margin of safety in dollars and as a percentage of sales?

   Dollars:	$
   Percentage: (Round to the nearest whole percent.)		%

   6. Determine the operating leverage. Round to one decimal place.

Lorge Corporation has collected the following information after its first year of sales. Sales were $2,875,000 on 115,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $1,655,900; direct labor $250,000; administrative expenses $270,000 (20% variable and 80% fixed); and manufacturing overhead $343,000 (70% variable and 30% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year.

(a)

Compute (1) the contribution margin for the current year and the projected year, and (2) the fixed costs for the current year. (Assume that fixed costs will remain the same in the projected year.)

Compute the break-even point in units and sales dollars for the first year.

Break-even point units
Break-even point $
   

The company has a target net income of $ 318,060 . What is the required sales in dollars for the company to meet its target?

Sales dollars required for target net income $

If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio?

Margin of safety ratio %

The company is considering a purchase of equipment that would reduce its direct labor costs by $ 106,704 and would change its manufacturing overhead costs to 30% variable and 70% fixed (assume total manufacturing overhead cost is $ 369,360 , as above). It is also considering switching to a pure commission basis for its sales staff. This would change selling expenses to 90% variable and 10% fixed (assume total selling expense is $ 246,240 , as above). Compute (1) the contribution margin and (2) the contribution margin ratio, and recompute (3) the break-even point in sales dollars. (Round contribution margin ratio to 0 decimal places, e.g. 25% and all other answers to 0 decimal places, e.g. 2,520.)

1. Contribution margin
2. Contribution margin ratio %
3. Break-even point

Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below:

The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional information is available for your use:

1. The breakdown of the selling and administrative expenses that are shown above is as follows:

*Allocated on the basis of sales dollars.

*Allocated on the basis of sales dollars.

2. The lease on the building housing the North Store can be broken with no penalty.

3. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed.

4. The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $12,000 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,000 per quarter. All other managers and employees in the North store would be discharged.

5. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person’s salary is $5,300 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete.

6. The company pays employment taxes equal to 15% of their employees' salaries.

7. One-third of the insurance in the North Store is on the store’s fixtures.

8. The “General office salaries” and “General office—other” relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person’s compensation is $6,500 per quarter.

Required:

1. How much employee salaries will the company avoid if it closes the North Store?

2. How much employment taxes will the company avoid if it closes the North Store?

3. What is the financial advantage (disadvantage) of closing the North Store?

4. Assuming that the North Store's floor space can’t be subleased, would you recommend closing the North Store?

5. Assume that the North Store's floor space can’t be subleased. However, let's introduce three more assumptions. First, assume that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store?

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 48,000 Rets per year. Costs associated with this level of production and sales are given below:

The Rets normally sell for $60 each. Fixed manufacturing overhead is $336,000 per year within the range of 41,000 through 48,000 Rets per year.

Required:

1. Assume that due to a recession, Polaski Company expects to sell only 41,000 Rets through regular channels next year. A large retail chain has offered to purchase 7,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain’s name on the 7,000 units. This machine would cost $14,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special order? (Round your intermediate calculations to 2 decimal places.)

2. Refer to the original data. Assume again that Polaski Company expects to sell only 41,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 7,000 Rets. The Army would pay a fixed fee of $1.80 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. What is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

3. Assume the same situation as described in (2) above, except that the company expects to sell 48,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 7,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

MANAGERIAL ACCOUNTING - TRUE OR FALSE STATEMENTS.

(PLEASE SKIP IF YOU ARE NOT ABLE TO ANSWER THEM ALL. THANK YOU!)

1. If volume increases, all costs will increase.

2. The relevant range of activity is the activity level where the firm will earn income.

3. The high-low method is used in classifying a mixed cost into its variable and fixed elements.

4. Contribution margin is the amount of revenues remaining after deducting cost of goods sold.

5. Both variable and fixed costs are included in calculating the contribution margin.

6. The break-even point is where total sales equal total variable costs.

7. If the unit contribution margin is $1 and unit sales are 10,000 units above the break-even volume, then net

          income will be $10,000.

8. The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

9. The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

10. If the activity index decreases, total variable costs will decrease proportionately.
11. A mixed cost has both selling and administrative cost elements.

12. The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

13. Unit contribution margin is the amount that each unit sold contributes towards the recovery of fixed costs and to income.

14. Net income can be increased or decreased by changing the sales mix.

15. If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

16. According to the theory of constraints, a company must identify its constraints and find ways to reduce or

eliminate them.

17. Cost structure refers to the relative proportion of product versus period costs that a company incurs.

18. Variable costing is the approach used for external reporting under generally accepted accounting principles.

19. The difference between absorption costing and variable costing is the treatment of fixed manufacturing

overhead.

20. Manufacturing cost per unit will be higher under variable costing than under absorption costing.

21. When absorption costing is used for external reporting, variable costing can still be used for internal reporting purposes.

22. Sales mix is a measure of the percentage increase in sales from period to period.

23. If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

24. Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.

The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:

*Allocated on the basis of sales dollars.

Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.

Required:

1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

2. Should the production and sale of racing bikes be discontinued?

3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

2. Should the production and sale of racing bikes be discontinued?

Yes or No

3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

Bill has just returned from a duck hunting trip. He brought home eight ducks. Bill’s friend, John, disapproves of duck hunting, and to discourage Bill from further hunting, John presented him with the following cost estimate per duck:

Required:

1. Assuming the duck hunting trip Bill has just completed is typical, what costs are relevant to a decision as to whether Bill should go duck hunting again this season?

2. Suppose Bill gets lucky on his next hunting trip and shoots 10 ducks using the same amount of shotgun shells he used on his previous hunting trip to bag 8 ducks. How much would it have cost him to shoot the last two ducks?

What is GAAP's guidance on reporting results from EPS, DEPS and ADEPS?

Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company’s Grit 337 and its Sparkle silver polish.

Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.60 a pound to make, and it has a selling price of $7.80 a pound. A small portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $5.00 per jar.

This further processing requires one-fourth pound of Grit 337 per jar of silver polish. The additional direct variable costs involved in the processing of a jar of silver polish are:

Overhead costs associated with processing the silver polish are:

The production supervisor has no duties other than to oversee production of the silver polish. The mixing equipment is special-purpose equipment acquired specifically to produce the silver polish. It can produce up to 2,500 jars of polish per month. Its resale value is negligible and it does not wear out through use.

Advertising costs for the silver polish total $2,700 per month. Variable selling costs associated with the silver polish are 5% of sales.

Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder.

Required:

1. How much incremental revenue does the company earn per jar of polish by further processing Grit 337 rather than selling it as a cleaning powder? (Round your answer to 2 decimal places.)

2. How much incremental contribution margin does the company earn per jar of polish by further processing Grit 337 rather than selling it as a cleaning powder? (Round your intermediate calculations and final answer to 2 decimal places.)

3. How many jars of silver polish must be sold each month to exactly offset the avoidable fixed costs incurred to produce and sell the polish? (Round your intermediate calculations to 2 decimal places.)

4. If the company sells 8,700 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling is as a cleaning powder? (Enter any "disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.)

5. If the company sells 11,000 jars of polish, what is the financial advantage (disadvantage) of choosing to further process Grit 337 rather than selling is as a cleaning powder? (Enter any "disadvantages" as a negative value. Round your intermediate calculations to 2 decimal places.)

Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below.

Required:

1. If we assume that the total time available on the plastic injection molding machine is the constraint in the production process, how much contribution margin per minute of the constrained resource is earned by each product?

2. Which product offers the most profitable use of the plastic injection molding machine?

3. If we assume that a severe shortage of plastic pellets has required the company to cut back its production so much that its new constraint has become the total available pounds of plastic pellets, how much contribution margin per pound of the constrained resource is earned by each product?

4. Which product offers the most profitable use of the plastic pellets?

5. Which product has the largest contribution margin per unit?

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 4,800 units of product were as follows: Standard Costs Actual Costs Direct materials 6,200 lb. at $5.00 6,100 lb. at $4.80 Direct labor 1,200 hrs. at $17.70 1,230 hrs. at $18.10 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,250 direct labor hrs.: Variable cost, $3.90 $4,630 variable cost Fixed cost, $6.20 $7,750 fixed cost Each unit requires 0.25 hour of direct labor. Required: a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct materials price variance $ Direct materials quantity variance Total direct materials cost variance $ b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct labor rate variance $ Direct labor time variance Total direct labor cost variance $ c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Variable factory overhead controllable variance $ Fixed factory overhead volume variance Total factory overhead cost variance $

Brown County operates a solid waste landfill for the citizens of the county. The following events occurred during the county’s fiscal year ended September 30.

1. The county paid interest costs of $6,879,000; of this amount, $222,000 was required to be capitalized to construction work in progress. Amortization of bond premiums was $173,400.
2. The county is self-insured through an internal service fund for workers’ compensation, automotive, and general liability insurance. The Solid Waste Enterprise Fund participates in the county-run program, and the amount paid for the year was $1,109,800.
3. The county’s recorded value of investments as of September 30 was $134,586,000. Fair market value was determined to be $138,689,100.
4. The fund bills franchise haulers, and at September 30, the balance in Accounts Receivable was $4,866,100. The Allowance for Uncollectible Accounts showed a balance of $138,900, but an aging of accounts determined that the balance should be $185,500.
5. The county’s landfill has a total space of 55,600 cubic yards (cy). The county has projected that future closure and postclosure care costs will be $60,608,000. The county’s estimate of cubic yards consumed as of September 30 is 13,900 cy. The balance in the liability account for closure and postclosure costs as of September 30 of the previous year was $14,042,300. (Hint: The current liability account balance should be subtracted from the total proportion of landfill cubic yards used to arrive at the current year’s expense.)

Required

a. Prepare general journal entries to record the Solid Waste Disposal Fund’s activities.

Can you please create me an income statement and balance sheet as the example below. Thank you

Think about a business, movie, story, etc. that interests you and put together an Income Statement and Balance sheet for that entity. As an example I used The Three Bears from Goldilocks and .. Since we do not know what business the Bears were in, I'm going with Salmon Farming. If you remember the story, Goldilocks breaks into the bears' home, eats porridge, breaks the chair and sleeps in the beds.

Posts should include at least one revenue, and 2 each of expenses, assets, and liabilities. Don’t worry about dates and amounts unless they are relevant to your entity.