John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital’s lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital’s lab for the past month. The following information is available: Two types of tests are performed in the lab—blood tests and smears. During the past month, 1,800 blood tests and 2,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $56,400. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 1,150 hours of labor time were recorded in the lab at a cost of $21,850. The lab’s variable overhead cost last month totaled $7,820. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Two plates are required per lab test. These plates cost $5.00 each and are disposed of after the test is completed. Labor: Each blood test should require 0.3 hours to complete, and each smear should require 0.15 hours to complete. The average cost of this lab time is $20 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. 2. For labor cost in the lab: a. Compute a labor rate variance and a labor efficiency variance. b. In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants. In an effort to reduce costs, Valley View Hospital employs only one-fourth senior technicians and three-fourths assistants. Would you recommend that this policy be continued? 3-a. Compute the variable overhead rate and efficiency variances. 3-b. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?

Problem 7-23 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO7-1, LO7-2, LO7-3]

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 33,350 units but sold 38,350 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

Prepare income statements using variable costing and absorption costing.

Alexandra Manufacturing manufactures a single product.​ Cost, sales, and production information for the company and its single product is as​ follows:

Sales price per unit $49

Variable manufacturing costs per unit manufactured (DM,DL and variable MOH) $30

Variable operating expenses per unit sold $3

Fixed manufacturing overhead (MOH) in total for the year $114,000

Fixed operating expenses in total for the year $46,000

Units manufactured during the year 19,000 units

Units sold during the year 16,500 units

Requirement 1. Prepare an income statement for the upcoming year using variable costing.

Requirement 2. Prepare an income statement for the upcoming year using absorption costing.

The president of the retailer Prime Products has just approached the company’s bank with a request for a $93,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories. Because the company has had some difficulty in paying off its loans in the past, the loan officer has asked for a cash budget to help determine whether the loan should be made. The following data are available for the months April through June, during which the loan will be used:

1. On April 1, the start of the loan period, the cash balance will be $36,000. Accounts receivable on April 1 will total $179,200, of which $153,600 will be collected during April and $20,480 will be collected during May. The remainder will be uncollectible.

2. Past experience shows that 30% of a month’s sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% is bad debts that are never collected. Budgeted sales and expenses for the three-month period follow:

3. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid in April, total $162,500.

4. In preparing the cash budget, assume that the $93,000 loan will be made in April and repaid in June. Interest on the loan will total $1,280.

Required:

1. Calculate the expected cash collections for April, May, and June, and for the three months in total.

2. Prepare a cash budget, by month and in total, for the three-month period. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Volunteer Corporation reported taxable income of $470,000 from operations this year. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp. The land’s fair market value was $85,000 and its tax and E&P basis to Volunteer was $58,500. Rocky assumed a mortgage attached to the land of $17,000. Any gain from the distribution will be taxed at 21 percent. The company had accumulated E&P of $780,000 at the beginning of the year.

b. Compute Volunteer's current E&P.
c. Compute Volunteer’s accumulated E&P at the beginning of next year.
d. What amount of dividend income does Rocky report as a result of the distribution?
e. What is Rocky’s income tax basis in the land received from Volunteer?

Impact on EPS, Rankings, and Computations

Waseca Company had 5 convertible securities outstanding during all of 2016. It paid the appropriate interest (and amortized any related premium or discount using the straightline method) and dividends on each security during 2016. Each of the convertible securities is described in the following table:

Additional data:

Net income for 2016 totaled $119,460. The weighted average number of common shares outstanding during 2016 was 40,000 shares. No share options or warrants are outstanding. The effective corporate income tax rate is 30%.

Required:

1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. Round to two decimal places.

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2. Prepare a ranking from 1-5 of the order in which each of the convertible securities should be included in diluted earnings per share. The convertible security having the most dilutive impact on diluted earnings per share is listed at the top of the ranking (i.e. "1").

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3. Compute basic earnings per share. Round to two decimal places.
$  per share

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4. Compute diluted earnings per share. Round to two decimal places.
$ per share

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5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2016 income statement. Round to the nearest cent.

Basic earnings per share: $

Diluted earnings per share: $

Equipment costing $590,000 with an expected useful life of 10 years and an expected salvage value of $40,000, was purchased at the beginning of the year.

Calculate the depreciation expense for the first five years using:

(a) Sum-of-the-years' digits method. Do not round until final calculation. Round answers to the nearest whole number.

(b) Double-declining balance method (without straight-line switchover). Do not round until final calculation. Round answers to the nearest whole number.

what are the 2 element that are an integral part of an accounting information system?

In a 2-3 page paper, complete the case below and submit to instructor. Review the income statement for Uden Supply Company and answer the following:

Describe the purpose of analytical procedures performed in the planning stage of the audit.
Uden Supply has projected its 2004 gross profit at 31% of sales despite expectation for some shrinkage in margins. On the basis of Uden's operating performance in years 2001 - 2003 project your best guess for 2004. Project 2004 based on the incremental changes for each line item over the last three years.
Uden’s unaudited financial statements for the current year show a 31 percent gross profit rate. Assuming that this represents a misstatement from the amount that you developed as an expectation, calculate the estimated effect of this misstatement on net income before taxes for 20X4.
Indicate whether you believe that the difference calculated in part (c) is material. Explain your answer. (50-100 words).
Comparative income statement information for Uden Supply Company is presented in the accompanying table.

UDEN SUPPLY COMPANY

Comparative Income Statement

Years Ended December 20X1, 20X2, and 20X3

(Thousands)

20X1 Audited 20X2 Audited 20X3 Audited 20X4 Expected

Sales 8,700 9,400 10,100

Cost of goods sold 6,000 6,500 7,000

Gross profit    2,700 2,900 3,100

Sales Commissions 610 660 710

Advertising 175 190 202

Salaries 1,061 1,082 1,103

Payroll taxes 184 192 199

Employee benefits 167 174 181

Rent 60 61 62

Depreciation   60 63 66

Supplies   26 28 30

Utilities 21 22 23

Legal and accounting 34 37 40

Miscellaneous 12 13 14

Interest expense 210 228 240

Net income before taxes 80 150 230

Incomes taxes 18 33 50

Net income 62 117 180

Direct Materials Purchases Budget

Anticipated sales for Safety Grip Company were 35,000 passenger car tires and 11,000 truck tires. Rubber and steel belts are used in producing passenger car and truck tires according to the following table:

The purchase prices of rubber and steel are $3.2 and $4.2 per pound, respectively. The desired ending inventories of rubber and steel belts are 33,000 and 7,000 pounds, respectively. The estimated beginning inventories for rubber and steel belts are 39,000 and 6,000 pounds, respectively.

Prepare a direct materials purchases budget for Safety Grip Company for the year ended December 31, 20Y9.

RTI Company’s master budget calls for production and sale of 19,300 units for $98,430; variable costs of $44,390; and fixed costs of $18,600. During the most recent period, the company incurred $33,300 of variable costs to produce and sell 18,600 units for $86,300. During this same period, the company earned $26,300 of operating income. (Do not round intermediate calculations. Round final answer to the nearest whole dollar.)

iaz Company owns a milling machine that cost $125,400 and has accumulated depreciation of $93,000. Prepare the entry to record the disposal of the milling machine on January 3 under each of the following independent situations.

1. The machine needed extensive repairs, and it was not worth repairing. Diaz disposed of the machine, receiving nothing in return.
2. Diaz sold the machine for $17,300 cash.
3. Diaz sold the machine for $32,400 cash.
4. Diaz sold the machine for $40,400 cash

At the end of 2017 fiscal year, L&Z Co. has the following information:

Balance Sheets

Current Assets

Accounts receivable, net of allowance of $1,076                               $16,194

a)   During 2018, the company wrote off $200 of specific accounts that were deemed uncollectable. Prepare the journal entry to record the write-off of these accounts receivable. (4 pts)

b) At the end of 2018 (12/31/2018), management estimate 8% of account receivables balance will likely be difficult to collect. The company’s Accounts Receivable has a gross ending balance of $17,600 . Prepare the journal entry to record bad debt expense for 2018 using the percentage of receivables method (the balance sheet approach). (8 pts)

c)  If credit sales for 2018 were $118,000, compute the amount of cash collected from customers in 2018 (note: take into account the event in part a). (6 pts)

d) On Oct 1^st , 2018, the company sold coal to Beta Electric, receiving a 6-month, noninterest-bearing note for $100,000. The effective interest rate on the note is 8%. The company has a fiscal year-end of 12/31. (10 pts)

1. i. Prepare the journal entry to record the sale. (6 pts)

ii. Prepare adjusting journal entries regarding the note receivable on 12/31/2018. (4 pts)

Helix Corporation produces prefabricated flooring in a series of steps carried out in production departments. All of the material that is used in the first production department is added at the beginning of processing in that department. Data for May for the first production department follow: Percent Complete Units Materials Conversion Work in process inventory, May 1 73,000 85 % 50 % Work in process inventory, May 31 53,000 60 % 30 % Materials cost in work in process inventory, May 1 $ 57,900 Conversion cost in work in process inventory, May 1 $ 17,000 Units started into production 251,200 Units transferred to the next production department 271,200 Materials cost added during May $ 393,570 Conversion cost added during May $ 244,261 Required:

1. Assume that the company uses the weighted-average method of accounting for units and costs. Determine the equivalent units for May for the first process.

2. Compute the costs per equivalent unit for May for the first process. (Round your answers to 2 decimal places.)

3. Determine the total cost of ending work in process inventory and the total cost of units transferred to the next process in May. (Round your intermediate calculations to 2 decimal places.)