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Direct Materials Variances LO10–1 Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company $171,000. According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram.

2.

     Alternatively, the variances can be computed using the formulas:

         Materials quantity variance = SP (AQ – SQ)

            = $ _____per Kilogram (_______ Kilogram – _____ Kilogram)

            = $______ __

         Materials price variance = AQ (AP – SP)

            = _____ Kilogram ($____ per Kilogram* – $___ per Kilogram)

            = $____ __

            *$171,000 / 22,500 Kilogram = $____ per Kilogram.

Question 2:

On September 30, 2017, the Radison Avenue Incorporated post-closing trial balance was as follows. The company adjusts its accounts monthly.

During October, the following transactions were completed:

Paid $2,300 to employees for salaries due, of which $1,800 is for September salaries payable and $500 for October

Issued common shares for $4,800

Received $11,200 cash from customers in payment of accounts

Received $12,700 cash for services performed in October Purchased supplies on account, $675

Paid creditors $3,200 of accounts payable due

Paid October rent, $550

Paid salaries, $2,150

Performed services on account, $3,200

Paid a cash dividend, $600

Received $1,350 from customers for services to be provided in the future

Adjustment data for the month:

1. Accrued salaries payable are $1,100

2. Unearned revenue of $850 was earned during the month

3. Income tax payable is estimated to be $600

Required:

In good format, and making whatever assumption you feel appropriate, prepare an accrual-based Income Statement and Statement of Financial Position (Balance Sheet) for the month ending October 2017.

Jack is the only shareholder of XYZ Corporation. At year-end, XYZ had $200 of current year earnings and profits and $600 of accumulated earnings and profits. If XYZ distributes cash of $200 to Jack, what is Jack’s tax liability on the dividend, if any? Assume Jack has a basis of $10 in XYZ shares. How does this result change if XYZ only has $50 of current earnings and profits and $100 of accumulated earnings and profits?

Clearly identify the requirements being addressed. Show all calculations within the cells of an Excel spreadsheet. This means that you must use formulas and links so that the thought process can be examined:

Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.

In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit:

The fair values for each reporting unit (including goodwill) are $781,400 for Sand Dollar, $789,900 for Salty Dog, and $712,750 for Baytowne. To date, Destin has reported no goodwill impairments.

How much goodwill impairment should Destin report this year?

Jake Werkheiser decides to invest $4000 in an IRA at the end of each year for the next 5 years. If he makes these investments, and if the certificates pay 8%, compounded annually, how much will he have at the end of the 5 years?

(a) State whether the problem relates to an ordinary annuity or an annuity due.

ordinary annuityannuity due     

(b) Solve the problem. (Round your answer to the nearest cent.)

A family wants to have a $170,000 college fund for their children at the end of 14 years. What contribution must be made at the end of each quarter if their investment pays 7.5%, compounded quarterly?

(a) State whether the problem relates to an ordinary annuity or an annuity due.

ordinary annuityannuity due    

(b) Solve the problem. (Round your answer to the nearest cent.)

Sam deposits $400 at the end of every 6 months in an account that pays 5%, compounded semiannually. How much will he have at the end of 3 years?

(a) State whether the problem relates to an ordinary annuity or an annuity due.

ordinary annuityannuity due    

(b) Solve the problem. (Round your answer to the nearest cent.)

Grandparents plan to open an account on their grandchild's birthday and contribute each month until she goes to college. How much must they contribute at the beginning of each month in an investment that pays 10%, compounded monthly, if they want the balance to be $160,000 at the end of 18 years?

(a) State whether the problem relates to an ordinary annuity or an annuity due.

ordinary annuityannuity due    

(b) Solve the problem. (Round your answer to the nearest cent.)

Jane Adele deposits $1,400 in an account at the beginning of each 3-month period for 9 years. If the account pays interest at the rate of 12%, compounded quarterly, how much will she have in her account after 9 years?

(a) State whether the problem relates to an ordinary annuity or an annuity due.

ordinary annuityannuity due    

(b) Solve the problem. (Round your answer to the nearest cent.)

Many fast food restaurant chains, such as McDonald's, will occastionally discontinue restaurants in their system. What are some financial considerations in deciding to eliminate a store?

Explain Few Reasons Of budgeting. List The Three Approaches to Budget Preparation. Discuss Both the Positive and Negative Impact of Budgeting on the Behaviour of Individuals in the Organization”.

On January 1, 2020, Sheffield Company purchased 11% bonds, having a maturity value of $289,000 for $311,481.74. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sheffield Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.

Riverbend Inc. received a $367,500 dividend from stock it held in Hobble Corporation. Riverbend's taxable income is $2,450,000 before deducting the dividends received deduction (DRD), a $60,500 NOL carryover, and a $138,000 charitable contribution. Use Exhibit 16-6. (Round your tax rates to 1 decimal place. Leave no answer blank. Enter zero if applicable.)

a. What is Riverbend’s deductible DRD assuming it owns 10 percent of Hobble Corporation?

b. Assuming the facts in part (a), what is Riverbend’s effective tax rate on the dividend?

c. What is Riverbend’s DRD assuming it owns 36 percent of Hobble Corporation?

d. Assuming the facts in part (c), what is Riverbend’s marginal tax rate on the dividend?

On January 2, 2018, Parrish Corporation purchased a tract of land (site no. 505) with a building for $2,000,000. Parrish also paid the following fees to complete the purchase:

Real estate broker’s commission $75,000

Legal fees                                              25,000

Title insurance                                      40,000

Back taxes (paid to clear a lien)      20,000

The closing statement indicated the fair value of the land was $1,700,000 and the building’s fair value was $300,000. Immediately after the purchase was finalized, the building was razed for a total cost of $200,000.

On March 1, 2018, Brock entered into a $3,000,000 fixed-price contract with Bob the Builder, Inc. for the construction of an office building on land site #505. The building was completed and occupied on October 31, 2019. Additional construction costs incurred in 2018 are as follows:

Architects fees for building plans and supervision of construction                              $150,000

Construction plans, specifications, blueprints, permits and inspections                       130,000

Parrish borrowed $2,500,00 on March 1, 2018 by issuing a note payable to L$L Financial Institution. The note is payable in 10 annual installments of $250,000 plus interest at a rate of 8%. Parrish’s weighted average accumulated expenditures for the construction project were as follows:

March 1 – December 31, 2018                                                                                              $1,100,000

January 1 – October 31, 2019                                                                                                   2,500,000

Parrish estimates that the building will have a 40-year useful life and a salvage value of $200,000. The building will be depreciated using the DDB method. The building is put into use on November 1, 2019.

Required:

1. Complete the schedule that shows the individual costs attributed to the Land account (#505).
2. Complete the schedule the shows the individual costs attributed to the Building account.
3. Compute depreciation expense for 2019 and 2020 for the Building.

Mast Corporation seeks your assistance in developing cash and other budget information for May, June, and July. At April 30, the company had cash of $11,000, accounts receivable of $869,000, inventories of $109,000, and accounts payable of $26,647. The budget is to be based on the following assumptions.

• Each month’s sales are billed on the last day of the month.
• Customers are allowed a 2 percent discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts).
• The billings are collected as follows: 70 percent within the discount period, 15 percent by the end of the month, and 12 percent by the end of the following month. Three percent is uncollectible.

Purchase data are as follows.

• Of all purchases of merchandise and selling, general, and administrative expenses, 63 percent is paid in the month purchased and the remainder in the following month.
• The number of units in each month’s ending inventory equals 125 percent of the next month’s units of sales.
• The cost of each unit of inventory is $8.
• Selling, general, and administrative expenses, of which $5,000 is depreciation, equal 15 percent of the current month’s sales.
• Actual and projected sales follow:

Required:

a. Compute the budgeted purchases in dollars for May.

budgeted purchases

  
b. Compute the budgeted purchases in dollars for June.

budgeted purchases

c. Compute the budgeted cash collections during May. (Do not round intermediate calculations.)

budgeted cash collections

d. Compute the budgeted cash disbursements during June. (Do not round intermediate calculations.)

budgeted cash disbursements

e. Compute the budgeted number of units of inventory to be purchased during July.

budgeted number of units

Haggstrom, Inc., manufactures steel fittings. Each fitting requires both steel and an alloy that allows the fitting to be used under extreme conditions. The following data apply to the production of the fittings:

The plant and equipment depreciation and miscellaneous costs are fixed and are based on production of 250,000 units annually. All other costs are variable. Plant capacity is 300,000 units annually. All other overhead costs are variable.

The following are forecast for year 2. Contract negotiations with the union are expected to lead to an increase in hourly direct labor costs of 4 percent, mostly in the form of additional benefits. Commodity prices, including steel, are expected to decline by 10 percent due to the economic slowdown. Alloy prices are expected to remain constant. Plant and equipment depreciation costs are expected to increase by 6 percent. All other unit overhead costs are expected to remain constant.

Haggstrom expects to sell 290,000 units in year 2. The current inventory of fittings is 20,000 units, and management would like to see a reduction of inventory of 10,000 units by the end of the year 2. Steel and alloy inventories will not change. Sales are approximately uniform over the year.

Required:

Prepare a production budget for the year 2.

expected sales

add: Desired ending inventory of finished goods

total needs

Less: Beginning inventory of finished goods

Units to be produced

Estimate the materials, labor, and overhead costs for year 2. (Do not round intermediate calculations.)

material costs

labor costs

overhead costs