Backus, Inc., makes and sells many consumer products. The firm’s average contribution margin ratio is 25%. Management is considering adding a new product that will require an additional $11,000 per month of fixed expenses and will have variable expenses of $5.5 per unit.
Required:
a. Calculate the selling price that will be required for the new product if it is to have a contribution margin ratio equal to 25%. (Round your answer to 2 decimal places.)
b. Calculate the number of units of the new product that would have to be sold if the new product is to increase the firm's monthly operating income by $10,000. (Do not round intermediate calculations.)
In: Accounting
Andretti Company has a single product called a Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $46 per unit. The company’s unit costs at this level of activity are given below:
| Direct materials | $ | 8.50 | |
| Direct labor | 10.00 | ||
| Variable manufacturing overhead | 3.30 | ||
| Fixed manufacturing overhead | 6.00 | ($516,000 total) | |
| Variable selling expenses | 4.70 | ||
| Fixed selling expenses | 5.50 | ($473,000 total) | |
| Total cost per unit | $ | 38.00 | |
A number of questions relating to the production and sale of Daks follow. Each question is independent.
Required:
1-a. Assume that Andretti Company has sufficient capacity to produce 116,100 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 35% above the present 86,000 units each year if it were willing to increase the fixed selling expenses by $150,000. Calculate the incremental net operating income. (Round your answers to the nearest whole number.)
1-b. Would the increased fixed selling expenses be justified?
| No | |
| Yes |
2. Assume again that Andretti Company has sufficient capacity to produce 116,100 Daks each year. A customer in a foreign market wants to purchase 30,100 Daks. Import duties on the Daks would be $2.70 per unit, and costs for permits and licenses would be $21,070. The only selling costs that would be associated with the order would be $1.50 per unit shipping cost. Compute the per unit break-even price on this order. (Round your answers to 2 decimal places.)
3. The company has 500 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price? (Round your answer to 2 decimal places.)
4. Due to a strike in its supplier’s plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20%. What would be the impact on profits of closing the plant for the two-month period? (Any losses should be indicated by a minus sign. Round all calculations (intermediate and final) to whole numbers. Round unit calculations to whole numbers.)
5. An outside manufacturer has offered to produce Daks and ship them directly to Andretti’s customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. Compute the unit cost that can be avoided if purchased from the outside manufacturer. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
In: Accounting
We have learned about Standard costs and associated variances in this chapter. Can a favorable variance be a bad thing? Describe a realistic scenario where a favorable variance could be detrimental(have unwanted consequences elsewhere in the business).
In: Accounting
Forte Inc. produces and sells theater set designs and costumes. The company began operations on January 1, Year 1. The following transactions relate to securities acquired by Forte Inc., which has a fiscal year ending on December 31:
|
Year 1 |
||
| Jan. | 22 | Purchased 23,600 shares of Sankal Inc. as an available-for-sale security at $18 per share, including the brokerage commission. |
| Mar. | 8 | Received a cash dividend of $0.21 per share on Sankal Inc. stock. |
| Sep. | 8 | A cash dividend of $0.24 per share was received on the Sankal stock. |
| Oct. | 17 | Sold 4,700 shares of Sankal Inc. stock at $15 per share less a brokerage commission of $60. |
| Dec. | 31 | Sankal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $26 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment. |
Record these transactions on page 11:
|
Year 2 |
||
| Jan. | 10 | Purchased an influential interest in Imboden Inc. for $1,287,000 by purchasing 165,000 shares directly from the estate of the founder of Imboden Inc. There are 500,000 shares of Imboden Inc. stock outstanding. |
| Mar. | 10 | Received a cash dividend of $0.29 per share on Sankal Inc. stock. |
| Sep. | 12 | Received a cash dividend of $0.24 per share plus an extra dividend of $0.06 per share on Sankal Inc. stock. |
| Dec. | 31 | Received $56,400 of cash dividends on Imboden Inc. stock. Imboden Inc. reported net income of $489,800 in Year 2. Forte Inc. uses the equity method of accounting for its investment in Imboden Inc. |
| Dec. | 31 | Sankal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $21 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the decrease in fair value from $26 to $21 per share. |
| Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1. | Journalize the entries to record these transactions. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prepare the investment-related asset and stockholders’ equity balance sheet presentation for Forte Inc. on December 31, Year 2, assuming the Retained Earnings balance on December 31, Year 2, is $376,000. Refer to the Chart of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. “Less” or “Plus” will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forte Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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In: Accounting
n January 1, 2020, Crane Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement.
| 1. | The agreement requires equal rental payments of $95,654 beginning on January 1, 2020. | |
| 2. | The lathe’s fair value on January 1, 2020, is $610,000. | |
| 3. | The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $16,000. Crane Corp. depreciates similar equipment using the straight-line method. | |
| 4. | The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor. | |
| 5. | Crane’s incremental borrowing rate is 11% per year. The lessor’s implicit rate is not known by Crane Corp. | |
| 6. | The yearly rental payment includes $2,339.70 of executory costs related to insurance on the lathe. |
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF
1.
Assume that Crane’s fiscal year end is May 31. Prepare the journal
entries on Crane Corp.’s books to reflect the signing of the lease
agreement and to record payments and expenses related to this lease
for the calendar years 2020 and 2021. Crane does not prepare
reversing entries. (Credit account titles are
automatically indented when the amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the amounts. Round answers to 2
decimal places, e.g. 52.75.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
1/1/20 |
Insurance Expenses |
enter a debit amount |
enter a credit amount |
|
Right of asset |
enter a debit amount |
enter a credit amount |
|
|
Prepaid Insurance |
enter a debit amount |
enter a credit amount |
|
|
cash |
enter a debit amount |
enter a credit amount |
|
|
lease liability |
enter a debit amount |
enter a credit amount |
|
|
(To record lease payment.) |
|||
|
5/31/20 |
Depreciation expenses |
enter a debit amount |
enter a credit amount |
|
Accumulated Depreciation- Right Of Asset |
enter a debit amount |
enter a credit amount |
|
|
(To record depreciation expense.) |
|||
|
5/31/20 |
Interest expenses |
enter a debit amount |
enter a credit amount |
|
Lease Liabilty |
enter a debit amount |
enter a credit amount |
|
|
(To record interest.) |
|||
|
12/31/20 |
Insurance Expenses |
enter a debit amount |
enter a credit amount |
| prepaid insurance |
enter a debit amount |
enter a credit amount |
|
|
(To record expired insurance.) |
|||
|
1/1/21 |
Insurance Expenses |
enter a debit amount |
enter a credit amount |
| Interest expenses |
enter a debit amount |
enter a credit amount |
|
| prepaid insurance |
enter a debit amount |
enter a credit amount |
|
|
lease liability |
enter a debit amount |
enter a credit amount |
|
|
cash |
enter a debit amount |
enter a credit amount |
|
|
(To record lease payment.) |
|||
|
5/31/21 |
depreciation expenses |
enter a debit amount |
enter a credit amount |
|
Accumulated Depreciation |
enter a debit amount |
enter a credit amount |
|
|
(To record depreciation expense.) |
|||
|
5/31/21 |
interest expenses |
enter a debit amount |
enter a credit amount |
| lease liability |
enter a debit amount |
enter a credit amount |
|
|
(To record interest.) |
|||
|
12/31/21 |
insurance expenses |
enter a debit amount |
enter a credit amount |
|
prepaid insurance |
enter a debit amount |
enter a credit amount |
|
|
(To record expired insurance.) |
In: Accounting
Budgeting Cash Flow
The following various elements relate to Whitfield, Inc.’s cash
budget for April of the current year. For each item, determine the
amount of cash that Whitfield should receive or pay in April.
a. At $28 each, unit sales are 5,000 and 6,000 for March and April, respectively. Total sales are typically 40% for cash and 60% on credit; 30% of credit sales are collected in the month of sale, with the balance collected in the following month. Uncollectible accounts are negligible.
March sales= Answer
April cash sales= Answer
April credit sales= Answer
Cash collected in April =Answer
b. Merchandise purchases were $45,000 and $78,000 for March and April, respectively. Typically, 20% of total purchases are paid for in the month of purchase with a 5% cash discount. The balance of purchases is paid for (without discount) in the following month.
| Marchpurchases | Answer |
| Aprilpurchases | Answer |
| Cash paid in April |
Answer |
c. Fixed administrative expenses, which total $11,000 per month, are paid in the month incurred. Variable administrative expenses amount to 20% of total monthly sales revenue, one-half of which is paid in the month incurred, with the balance paid in the following month.
| April fixed expenses | Answer |
| March variable expenses | Answer |
| April variable expenses | Answer |
| Cash paid in April | Answer |
d. A store asset originally costing $8,000, on which $6,000 depreciation has been taken, is sold for cash at a loss of $400.
$Answer
In: Accounting
Budget Performance Report
Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:
| Cost Category | Standard Cost per 100 Two-Liter Bottles |
|||||
| Direct labor | $1.22 | |||||
| Direct materials | 5.16 | |||||
| Factory overhead | 0.32 | |||||
| Total | $6.7 | |||||
At the beginning of July, GBC management planned to produce 580,000 bottles. The actual number of bottles produced for July was 626,400 bottles. The actual costs for July of the current year were as follows:
| Cost Category | Actual Cost for the Month Ended July 31 |
|||||||||
| Direct labor | $7,489 | |||||||||
| Direct materials | 31,547 | |||||||||
| Factory overhead | 2,025 | |||||||||
| Total | $41,061 | |||||||||
Enter all amounts as positive numbers.
a. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for WBC, assuming planned production.
| Genie in a Bottle Company | |
| Manufacturing Cost Budget | |
| For the Month Ended July 31 | |
| Standard Cost at Planned Volume(580,000 Bottles) | |
| Manufacturing costs: | |
| Direct labor | $ |
| Direct materials | |
| Factory overhead | |
| Total | $ |
Feedback
Compare the actual costs with the standard cost at actual volume for direct labor, direct materials, and overhead. Identify the cost variance as favorable (actual less than standard) or unfavorable (actual greater than standard).
Review the concepts of favorable and unfavorable variances.
Learning Objective 2.
b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If required, round your answers to nearest cent.
| Genie in a Bottle Company | |||
| Manufacturing Costs-Budget Performance Report | |||
| For the Month Ended July 31 | |||
| Actual Costs |
Standard Cost at Actual Volume(626,400 Bottles) | Cost Variance- (Favorable) Unfavorable |
|
| Manufacturing costs: | |||
| Direct labor | $ | $ | $ |
| Direct materials | |||
| Factory overhead | |||
| Total manufacturing cost | $ | $ | |
In: Accounting
Answer theses question fully and in detail. These questions are related to ASX Corporate Governance Council requirement for all listed companies to have a majority of "independent" board members.
1. What new agency conflicts would be created if director’s independence was compromise in regards to holding significant shareholdings in the company?
2. Statistic for Australian company's failure due to directors independecy comprosmised?
In: Accounting
Problem 6-15B Retail inventory method LO6
CHECK FIGURE: 2. Loss at cost = $2,040.27
The records of The Wilke Co. provided the following information for
the year ended December 31, 2020:
At Cost At Retail
January 1 beginning inventory ......................... $ 40,835 $
57,305
Purchases
...............................................................
251,945 383,530
Purchase returns ..................................................
5,370 7,665
Sales
........................................................................
393,060
Sales returns
......................................................... 2,240
Required
1. Prepare an estimate of the company’s year-end inventory by the
retail method. Round all calculations to
two decimal places.
2. Under the assumption the company took a year-end physical
inventory at marked selling prices that totalled
$39,275, prepare a schedule showing the store’s loss from theft or
other causes at cost and at retail.
In: Accounting
Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $40. Wesley expects the following unit sales:
| January | 2,200 |
| February | 2,300 |
| March | 2,900 |
| April | 2,600 |
| May | 2,200 |
Wesley’s ending finished goods inventory policy is 25 percent of
the next month’s sales.
Suppose each handisaw takes approximately 0.65 hours to
manufacture, and Wesley pays an average labor wage of $13.50 per
hour.
Each handisaw requires a plastic housing that Wesley purchases from
a supplier at a cost of $5.00 each. The company has an ending
direct materials inventory policy of 10 percent of the following
month’s production requirements. Materials other than the housing
unit total $3.50 per handisaw.
Manufacturing overhead for this product includes $63,000 annual
fixed overhead (based on production of 24,000 units) and $0.80 per
unit variable manufacturing overhead. Wesley’s selling expenses are
5 percent of sales dollars, and administrative expenses are fixed
at $16,000 per month.
Required:
1. Compute the budgeted cost of goods sold for the first
quarter.
2. Compute the budgeted selling and administrative
expenses for the first quarter.
3. Complete the budgeted income statement for the
handisaw product for the first quarter.
In: Accounting
Reba Dixon is a fifth grade school teacher who earned
a salary of 38,000 in 2018. She is 45 years old and has been
divorced for four years. She receives 1,200 of alimony payments
each month from her former husband. Reba also rent out a small
apartment building. This year Reba receive 50,000 of rental
payments from tenant and she incurred 19,500 of expenses associated
with the rental.
Reba and her daughter
Heather (20 years old at the end of the year) moved to Georgia in
January of this year. Reba provides more than one half of Heather
support. They had been living in Colorado for the past 15 years,
but ever since her divorced, Reba has been wanting to go back to
Georgia to be closer to her family. Luckily last December, a
teaching position opened up and Reba and Heather decided to make a
move. Reba paid a moving company 2,010 to move their personal
belongings, and she and Heather spent two days driving the 1,426
miles to Georgia.
Reba rented
a home in Georgia. Heather decided to continue living at home with
her mom, but she started attending school full time in January at
near by university. She was awarded a & 3000 partial tuition
scholarship this year and Reba help out by paying the remaining 500
tuition cost. If possible, Reba thought it would be best to claim
the education credit for these expenses.
Reba
wasn't sure if she would have enough items to help her benefit from
itemizing on her tax return, however she kept track of several
expenses this year that she thought might qualify if she was able
to itemized. Reba paid 5800 in state income taxes and 12500 in
charitable contribution during the year. She also paid the
following medical related expenses for herself and Heather :
Insurance premiums. 5,795
Medical care expenses 1,100
Prescription
medicine 350
Nonprescription medicine. 100
New contact lenses for Heather. 200
Shortly after the move, Reba got
distracted while driving and she ran into a street sign. The
accident caused 900 in damage to the car and gave her whiplash.
Because the repair was less than her insurance deductible, she paid
the entire cost of the repair. Reba wasn't able to work for two
months after the accident. Fortunately, she receives 2000 from her
disability insurance. Her employer, the central Georgia school
district, paid 60%of premium on the policy as a non-taxable fringe
benefits and Reba paid the remaining 40% portion.
A few years ago, Reba acquired
several investments with her portion of the divorce settlement.
This year she reported the following income from her investments :
2200 of interest income from corporate bonds and 1500 interest
income from city of Denver municipal bonds. Overall, Reba stock
portfolio appreciated by 12000 but she did not sell any of her
stock.
Heather reported 6200 of interest
income from corporate bonds she received as a gift from her father
over the last several years. This was Heather only sources of
income for the year. Reba had 10,000 of federal income taxes
withheld by employer. Heather made 1000 estimates tax payments
during the year. Reba did not make any estimate payments. Reba had
qualifying insurance for purposes of the affordable care Act
(ACA).
Required :
(A) Determine Reba federal income taxes due or taxes payable for current year, complete pages 1 and 2 of forms 1040 for Reba.
(b) is Reba allowed to file as a head of household or single?
(c) Determine the amount of FICA taxes Reba was required to pay on her salary.
(d) Determine Heather federal income taxes due or
payable
In: Accounting
Hana Coffee Company roasts and packs coffee beans. The process begins by placing coffee beans into the Roasting Department. From the Roasting Department, coffee beans are then transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at July 31:
| ACCOUNT Work in Process—Roasting Department | ACCOUNT NO. | ||||||||
| Date | Item | Debit | Credit | Balance | |||||
| Debit | Credit | ||||||||
| July | 1 | Bal., 7,500 units, 2/5 completed | 26,700 | ||||||
| 31 | Direct materials, 337,500 units | 1,113,750 | 1,140,450 | ||||||
| 31 | Direct labor | 217,100 | 1,357,550 | ||||||
| 31 | Factory overhead | 54,260 | 1,411,810 | ||||||
| 31 | Goods transferred, 338,000 units | ? | |||||||
| 31 | Bal., ? units, 3/5 completed | ? | |||||||
Required:
1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Roasting Department. If an amount is zero, enter "0". When computing cost per equivalent units, round to two decimal places.
| Hana Coffee Company | |||
| Cost of Production Report-Roasting Department | |||
| For the Month Ended July 31 | |||
| Unit Information | |||
| Units charged to production: | |||
| Inventory in process, July 1 | |||
| Received from materials storeroom | |||
| Total units accounted for by the Roasting Department | |||
| Units to be assigned costs: | |||
| Equivalent Units | |||
| Whole Units | Direct Materials | Conversion | |
| Inventory in process, July 1 | |||
| Started and completed in July | |||
| Transferred to Packing Department in July | |||
| Inventory in process, July 31 | |||
| Total units to be assigned costs | |||
| Cost Information | |||
| Cost per equivalent unit: | |||
| Direct Materials | Conversion | ||
| Total costs for July in Roasting Department | $ | $ | |
| Total equivalent units | |||
| Cost per equivalent unit | $ | $ | |
| Costs assigned to production: | |||
| Direct Materials | Conversion | Total | |
| Inventory in process, July 1 | $ | ||
| Costs incurred in July | |||
| Total costs accounted for by the Roasting Department | $ | ||
| Costs allocated to completed and partially completed units: | |||
| Inventory in process, July 1 balance | $ | ||
| To complete inventory in process, July 1 | $ | $ | |
| Cost of completed July 1 work in process | $ | ||
| Started and completed in July | |||
| Transferred to Molding Department in July | $ | ||
| Inventory in process, July 31 | |||
| Total costs assigned by the Roasting Department | $ | ||
2. Assuming that the July 1 work in process inventory includes $24,000 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between February and July. If required, round your answers to the nearest cent.
| Increase or Decrease | Amount | |
| Change in direct materials cost per equivalent unit | $ | |
| Change in conversion cost per equivalent unit | $ |
In: Accounting
Pabbatti Corporation, which has only one product, has provided the following data concerning its most recent month of operations:
| Selling price | $ | 94 |
| Units in beginning inventory | 850 | |
| Units produced | 2,660 | |
| Units sold | 3,190 | |
| Units in ending inventory | 320 | |
| Variable costs per unit: | ||
| Direct materials | $ | 23 |
| Direct labor | $ | 16 |
| Variable manufacturing overhead | $ | 1 |
| Variable selling and administrative | $ | 19 |
| Fixed costs: | ||
| Fixed manufacturing overhead | $ | 61,180 |
| Fixed selling and administrative | $ | 9,570 |
The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. (Hint: Use the reconciliation method.)
Required:
a. What is the unit product cost for the month under variable costing?
b. Prepare a contribution format income statement for the month using variable costing.
c. Without preparing an income statement, determine the absorption costing net operating income for the month.(Hint: Use the reconciliation method.)
In: Accounting
Your company provides catering services throughout the United States. As part of the company’s growth strategy, they plan on acquiring businesses which complement the catering service by providing full service restaurants.
In: Accounting
Which of the following does not affect the gross profit:
Select one:
a. dropping a product line due to declining consumer interest
b. an increase in freight costs of inventory from shipping port
c. having to pay more for insurance premiums after making several claims
d. having to change suppliers and pay more for inventory
e. reducing selling prices due to increased competition
In: Accounting