Chapter 8: Applying Excel: Exercise (Part 2 of 2)

Requirement 2:

The company has just hired a new marketing manager who insists that unit sales can be dramatically increased by dropping the selling price from $8 to $7. The marketing manager would like to use the following projections in the budget:

a. What are the total expected cash collections for the year under this revised budget?

b. What is the total required production for the year under this revised budget?

c. What is the total cost of raw materials to be purchased for the year under this revised budget?

d. What are the total expected cash disbursements for raw materials for the year under this revised budget?

Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.

Total estimated overhead costs are $ 297,000. Overhead cost allocated to the machining activity cost pool is $ 189,000, and $ 108,000 is allocated to the machine setup activity cost pool.

Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 12.25.)

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Compute the overhead rates using the activity-based costing approach.

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Determine the difference in allocation between the two approaches.

3) Webb Corporation's trial balance for July 31, the end of its fiscal year, included the following accounts:

Accounts Receivable $35,000

Inventories 50,000 Franchise

35,000 Investments

50,000 Prepaid Insurance

5,000 Note Receivable 90,000

Cash in Bank 8,000

The investment account consists of marketable securities of which management plans to sell half of by December 31. Prepaid insurance is a two year policy that was purchased on July 31. The note receivable is an installment note that will be paid in three equal installments on December 31 of each year.

The amount that should be classified as current assets in the July 31 balance sheet is ________.

A) $150,500

B) $153,000

C) $175,500

D) $210,500

Dusty Jones is 23 years old and has accumulated $4,000 in her self-directed defined contribution pension plan. Each year she contributes $2,000 to the plan, and her employer contributes an equal amount. Dusty thinks she will retire at age 67 and figures she will live to age 81. The plan allows for two types of investments. One offers a 3.5% risk-free real rate of return. The other offers an expected return of 10% and has a standard deviation of 23%. Dusty now has 5% of her money in the risk-free investment and 95% in the risky investment. She plans to continue saving at the same rate and keep the same proportions invested in each of the investments. Her salary will grow at the same rate as inflation. How much can Dusty be sure of having in the safe account at retirement?

A: 37,221

B: 16,423

C: 11,856

D: 21,156

E: 49,219

Please let your classmates know about some of the advantages of reporting cash flows from operating activities by the indirect method on the Statement of Cash Flows.

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 5,600 units of product were as follows:

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.

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.

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.

Royal Lawncare Company produces and sells two packaged products—Weedban and Greengrow. Revenue and cost information relating to the products follow:

Common fixed expenses in the company total $111,000 annually. Last year the company produced and sold 39,000 units of Weedban and 17,500 units of Greengrow.

Required:

Prepare a contribution format income statement segmented by product lines.

Yahoo Gold Mining Company (YGMC) mines coal, puts it through a one-step crushing process, and loads the bulk raw coal onto river barges for shipment to customers.
YGMC’s management is currently evaluating the possibility of further processing the raw coal by sizing and cleaning it and selling it to an expanded set of customers at higher prices. The option of building a new sizing and cleaning plant is ruled out as being financially infeasible. Instead, Darrell Cornwall, a mining engineer, is asked to explore outside contracting arrangements for the cleaning and sizing process.

Darrell puts together the following summary:
Selling price of raw coal = $27 per tonne
Cost of producing raw coal = $22 per tonne
Selling price of sized and cleaned coal = $36 per tonne
Annual raw coal output = 10,000,000 tonnes
Percentage of material weight loss in sizing/cleaning coal = 6%

Incremental Costs of Sizing and Cleaning Processes
Direct labour = $800,000 per year
Supervisory personnel = 200,000 per year
Heavy equipment: rental, operating, maintenance costs = 25,000 per month
Contract sizing and cleaning = 3.50 per tonne of raw coal
Outbound rail freight = 240 per 60-tonne rail car

Darrell also learns that 75% of the material loss that occurs in the cleaning and sizing process can be salvaged as coal fines, which can be sold to steel manufacturers for their furnaces. The sale of coal fines is erratic and YGMC may need to stockpile it in a protected area for up to one year. The selling price of coal fines ranges from $15 to $24 per tonne and costs of preparing coal fines for sale range from $2 to $4 per tonne.

Required
1) Prepare an analysis to show whether it is more profitable for YGMC to continue selling raw bulk coal or to process it further through sizing and cleaning. (Ignore coal fines in your analysis.)
2) How would your analysis be affected if the cost of producing raw coal could be held down to $20 per tonne?
3) Now consider the potential value of the coal fines and prepare an addendum that shows how their value affects the results of your analysis prepared in requirement 1.

Describe types and sources of data and information required for preparing your budget and forecast. Please include examples with your answer

On July 1, 2010, ABC co. had a cash balance of $10 000.During July the following summary transactions were completed.

1.Received $1,200 cash from customers on account.

2.Received $2,400 cash for services performed in July.

3.Purchased store equipment on account $3,000.

4.Paid cash $ 2000 for a one – year insurance policy.

5.Purchased supplies on account $1,200.

6.Paid creditors $4,400 on account.

7.Performed services on account and billed customers for services provided $1,500.

8.Signed a contract with Alex company to buy furniture of $2 000 next month.

9.Received $800 from customers for future service.

10.Paid salaries of $ 5 000.

11.Rent of $400 was unpaid at July 31.

Required:

(a) Journalize the transactions.

(b) Post to the cash ledger account.

The general ledger of Zips Storage at January 1, 2021, includes the following account balances:

The following is a summary of the transactions for the year:

2. Prepare a post-closing trial balance. (Hint: The balance of Retained Earnings will be the amount shown in the balance sheet.)

4. Prepare an unadjusted trial balance

7. Prepare an adjusted trial balance

8-a. Prepare the income statement for the year ended December 31, 2021.

8-b. Prepare the classified balance sheet for the year ended December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

9. Record closing entries. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

1. 3. 6. & 10. Post the transactions, adjusting entries and closing entries to the T-accounts. Be sure to include beginning balances.

Thornton Manufacturing Company was started on January 1, 2018, when it acquired $86,000 cash by issuing common stock. Thornton immediately purchased office furniture and manufacturing equipment costing $7,700 and $35,500, respectively. The office furniture had an 8-year useful life and a zero salvage value. The manufacturing equipment had a $3,500 salvage value and an expected useful life of four years. The company paid $11,900 for salaries of administrative personnel and $15,100 for wages to production personnel. Finally, the company paid $10,010 for raw materials that were used to make inventory. All inventory was started and completed during the year. Thornton completed production on 4,300 units of product and sold 3,340 units at a price of $14 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

Required

1. Determine the total product cost and the average cost per unit of the inventory produced in 2018. (Round "Average cost per unit" to 2 decimal places.)

2. Determine the amount of cost of goods sold that would appear on the 2018 income statement. (Do not round intermediate calculations.)

3. Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round intermediate calculations.)

4. Determine the amount of net income that would appear on the 2018 income statement.

5. Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet.

6. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet.

Jordan Inc. makes a smartphone case that includes a battery that extends the operating life of an iPhone. The manufacturing costs per unit include $14 direct materials, $16 direct labor and $8 manufacturing overhead. These costs are based on a production and sales volume of 4,000 units. Advertising costs amounted to $24,000. Research and development cost for the materials used in the phone cases amounted $27,000. Companywide administrative costs amounted to $44,000. Fashion design costs amounted to $29,000. Jordan’s management team established the sales price at 150 percent of GAAP-defined product cost.

Required

1. Determine the total amount of upstream costs.

2. Determine the total amount of downstream cost.

3. Determine the total amount of midstream cost.

4. Determine the sales price per unit.

5. Prepare a GAAP-based income statement.

Are there other ways to measure productivity increases besides amount produced each year per hours of work?