Pareto Chart and Cost of Quality Report for a Manufacturing Company The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The result of the activity analysis is summarized as follows: Required: 1. Classify the activities into prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Classify the activities into value-added and non-value added activities. Activity Activity Cost Cost of Quality Classification VA/NVA Correcting invoice errors $22,600 External failure Non-value-added Disposing of incoming materials with poor quality 18,080 Internal failure Non-value-added Disposing of scrap 54,240 Internal failure Non-value-added Expediting late production 45,200 Internal failure Non-value-added Final inspection 40,680 Appraisal Value-added Inspecting incoming materials 9,040 Appraisal Value-added Inspecting work in process 40,680 Appraisal Value-added Preventive machine maintenance 31,640 Prevention Value-added Producing product 162,720 Not a quality cost Value-added Responding to customer quality complaints 27,120 External failure Non-value-added Total $452,000 2. On paper or in a spreadsheet program, prepare a Pareto chart for each of the activities listed above. Answer the following: What type of chart is a Pareto chart? Bar chart Which activity appears first, in order from left to right? Producing product 3. Use the activity cost information to determine the percentages of total department costs that are prevention, appraisal, internal failure, external failure, and not costs of quality. If required, round percentages to one decimal place. Quality Cost Classification Activity Cost Percent of Total Department Cost Prevention $ % Appraisal % Internal failure % External failure % Not a cost of quality % Total $ % 4. Determine the percentages of total department costs that are value-added and non-value-added. If required, round percentages to one decimal place. Activity Cost Percent of Total Department Cost Value-added $ % Non-value-added % Total $ % 5. The department has 37% of its total costs as non-value-added . Internal failure costs represent 26% of the total costs. This means there is significant opportunity for cost savings. External failure costs represent 11% of the total department costs.

Two items are omitted from each of the following summaries of balance sheet and income statement data for two corporations for the year 2019, Blue Spruce Corp. and Ayayai Enterprises.

Determine the missing amounts.

		Blue Spruce Corp.			Ayayai Enterprises
Beginning of year:
Total assets		$137,740			$183,180
Total liabilities		120,700				(c)
Total stockholders’ equity			(a)		106,500
End of year:
Total assets		227,200			255,600
Total liabilities		170,400			71,000
Total stockholders’ equity		56,800			184,600
Changes during year in stockholders’ equity:
Additional investment			(b)		35,500
Dividends		34,080				(d)
Total revenues		305,300			142,000
Total expenses		248,500			78,100

Many companies make annual reports available on their corporate website, often under an Investors tab. Annual reports also can be accessed through the SEC's EDGAR system at www.sec.gov (under Filings, click Company Filings Search, type in Company Name, and under Filing Type, search for 10-K).

Access the most recent annual report for the following U.S.-based multinational corporations to complete the requirements:

International Business Machines Corporation

Intel Corporation

Required:

a. Identify the location(s) in the annual report that provides disclosures related to foreign currency translation and foreign currency hedging.

b. Determine whether the company's foreign operations have a predominant functional currency.

c. Determine the amount of translation adjustment, if any, reported in other comprehensive income in each of the three most recent years. Explain the sign (positive or negative) of the translation adjustment in each of the three most recent years. Compare the relative magnitude of these translations adjustments for the two companies.

d. Determine whether each company hedges net investments in foreign operations. If so, determine the type(s) of hedging instruments used.

EMD Corporation manufactures two products, Product S and Product W. Product W is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product W. Product W is the more complex of the two products, requiring 3 hours of direct labor time per unit to manufacture compared to 2 hour of direct labor time for Product S. Product W is produced on an automated production line.

Overhead is currently assigned to the products on the basis of direct-labor-hours. The company estimated it would incur $912,811 in manufacturing overhead costs and produce 19,000 units of Product W and 76,000 units of Product S during the current year. Unit cost for materials and direct labor are:

	Product S			Product W
Direct material	$	15		$	25
Direct labor		10			12

Required:

a-1. Compute the predetermined overhead rate under the current method of allocation.

a-2. Determine the unit product cost of each product for the current year.

b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below:

			Total Activity
Activity Cost Pool	Total Cost		Product S	Product W	Total
Machine setups required	$	405,000	1,620	1,620	3,240
Purchase orders issued		60,680	553	187	740
Machine-hours required		273,450	7,460	10,770	18,230
Maintenance requests issued		173,681	673	864	1,537
	$	912,811

Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.

Complete this question by entering your answers in the tabs below.

• Req A1
• Req A2
• Req B

Compute the predetermined overhead rate under the current method of allocation. (Round your answer to 2 decimal places.)

Req A1

	Predetermined overhead rate per DLH

Determine the unit product cost of each product for the current year. (Round your answers to 2 decimal places.)

Req A2

	Unit Product Cost Product S Product W

Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. (Round your answer to 2 decimal places.)

Req B

	Unit Product Cost Product S Product W

A meteorite landed in Lindsay’s back yard. She sold it to a science museum for $10,000. Which of the following investments has the higher effective rate, assuming that Lindsay is investing the money for one year: a certificate of deposit (CD) with a 3.00% stated interest rate compounded monthly, or a money market fund that pays 3.25% simple interest?

		The CD has a higher effective interest rate and will earn $3,932.61 more than the money market fund.
		The money market fund has a higher effective annual interest rate and will earn $20.84 more than the CD.
		The money market fund has a higher effective annual interest rate and will earn $300.00 more than the CD.
		The money market fund has a higher effective annual interest rate and will earn $25.00 more than the CD.

Campbell Soup Company estimates that 240,000 direct labor hours will be worked during 2018 in the Mixing Department. On this basis, the following budgeted manufacturing overhead data are computed:

Variable Overhead Costs		Fixed Overhead Costs
Indirect labor	$96,000	Supervision	$73,200
Indirect materials	72,000	Depreciation	62,280
Repairs	21,600	Insurance	51,900
Utilities	7,200	Rent	20,760
	$196,800		$208,140

It is estimated that direct labor hours worked each month will range from 5,000 to 20,000 hours. During June, 15,000 direct labor hours were worked and the following overhead costs were incurred (shown in the chart below):

Variable Overhead Costs		Fixed Overhead Costs
Indirect labor	$7,500	Supervision	$6,100
Indirect materials	4,100	Depreciation	5,230
Repairs	1,375	Insurance	4,325
Utilities	420	Rent	1,730
	$13,395		$17.385

Instructions:

1. Prepare a monthly flexible manufacturing overhead budget for the Mixing Department for each increment of 5,000 direct labor hours over the relevant range for the year ending December 31, 2018.
2. Prepare a manufacturing overhead budget report for June.

Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 11,600 square yards.

Bid A: A surface that costs $6.25 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 25 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface.

Bid B: A surface that costs $10.25 per square yard to install. This surface has a probable useful life of 10 years and will require annual maintenance in each year except the last year, at an estimated cost of 11 cents per square yard.

Click here to view factor tables

Compute present value of the bids. You may assume that the cost of capital is 11%, that the annual maintenance expenditures are incurred at the end of each year, and that prices are not expected to change during the next 10 years. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Present value of outflows for Bid A		$
Present value of outflows for Bid B		$

Which bid should be accepted by Wal-Mart.

Wal-Mart should accept                                                           Bid ABid B

NAME OF ACCOUNTS Dr. Balance £ Cr. Balance £ Opening stock 8,000 Buildings 15,000 Debtors 4,000 Purchases 22,000 Salaries 1,200 Sales 36,000 Discounts 800 Sales returns 1,000 Furniture 3,000 Office expense 300 Wages 600 Purchase returns 600 Interest 500 Travelling expenses 400 Insurance 600 Machinery 8,000 Carriage on purchases 800 Commission 600 Cash in hand 1,400 Rent and rates 2,400 Capital 25,000 Creditors 8,000 70,100 70,100 Following adjustments need to be made: a) Closing stock was valued at £ 9,000 b) Office expenses: £ 2,000 and wages: 300 are outstanding c) Depreciate building by 2%, machinery by 10% and furniture by 20% d) Prepaid Insurance: £ 100 Required: 1) Prepare Trading & Profit and Loss account for the year ended 31 December 2017 2) Prepare Balance Sheet as on 31 December 2017

Doggie Pawz produces two models of dog beds: rectangle and circle. The following information about the costs to produce the company’s products has been provided.

Category	Estimated Cost	Cost Driver	Rectangle	Circle
Unit-Level	$293, 000	Labor Hours	200	300
Batch-Level	$45, 000	Inspections	19	15
Product-Level	$390,000	Storage Space	2900 sq. ft	3700 sq.ft
Facility-Level	$125,000	Machine Hours	4,000	7,000

a. If all costs are allocated based on machine hours, what is the rate per machine hour?

b. If all costs are allocated based on machine hours, what is the amount allocated to circle dog beds?

c. If ABC uses activity based costing based on the cost pools above, what is the rate for unit-level costs?

d. If ABC uses activity based costing based on the cost pools above, what is the rate for batch-level costs?

e. If ABC uses activity based costing based on the cost pools above, what is the rate for product-level costs?

f. If ABC uses activity based costing based on the cost pools above, what is the rate for facility-level costs?

g. If ABC uses activity based costing based on the cost pools above, what amount is allocated to rectangle beds?

Label and place your final answer for a-g at the top of the answer box. Then after the answer to g, label and show your work for each part of the question. Just show me numbers - that is usually enough for me to follow your logic.

Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May.

	Standard Cost per Unit						Actual Cost per Unit
Direct materials:
Standard: 1.80 feet at $1.40 per foot	$	2.52
Actual: 1.75 feet at $1.80 per foot							$	3.15
Direct labor:
Standard: 0.90 hours at $17.00 per hour		15.30
Actual: 0.95 hours at $16.40 per hour								15.58
Variable overhead:
Standard: 0.90 hours at $6.00 per hour		5.40
Actual: 0.95 hours at $5.60 per hour								5.32
Total cost per unit	$	23.22					$	24.05
Excess of actual cost over standard cost per unit				$	0.83

The production superintendent was pleased when he saw this report and commented: “This $0.83 excess cost is well within the 5 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product."

Actual production for the month was 11,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.

Required:

2. How much of the $0.83 excess unit cost is traceable to each of the variances computed in (1) above.

3. How much of the $0.83 excess unit cost is traceable to apparent inefficient use of labor time?

2

	Materials: Price variance U Quantity variance F 0.00 U Labor: Rate variance F Efficiency variance U 0.00 U Variable overhead: Rate variance F Efficiency variance U 0.00 F Excess of actual over standard cost per unit $0.00

3

Excess of actual over standard cost per unit U Less portion attributable to labor inefficiency: Labor efficiency variance U Variable overhead efficiency variance U 0.00 U Portion due to other variances $0.00 F

On January 1, 2018, the general ledger of 3D Family Fireworks includes the following account balances:
  

Accounts	Debit			Credit
Cash	$	25,500
Accounts Receivable		14,400
Allowance for Uncollectible Accounts				$	2,400
Supplies		3,300
Notes Receivable (6%, due in 2 years)		28,000
Land		77,800
Accounts Payable					9,400
Common Stock					104,000
Retained Earnings					33,200
Totals	$	149,000		$	149,000

During January 2018, the following transactions occur:
  

January	2		Provide services to customers for cash, $43,100.
January	6		Provide services to customers on account, $80,400.
January	15		Write off accounts receivable as uncollectible, $2,000.
January	20		Pay cash for salaries, $32,200.
January	22		Receive cash on accounts receivable, $78,000.
January	25		Pay cash on accounts payable, $6,300.
January	30		Pay cash for utilities during January, $14,500.

The following information is available on January 31, 2018.

1. The company estimates future uncollectible accounts. The company determines $5,800 of accounts receivable on January 31 are past due, and 20% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)
2. Supplies at the end of January total $650.
3. Accrued interest revenue on notes receivable for January. Interest is expected to be received each December 31.
4. Unpaid salaries at the end of January are $34,300.

1. Record each of the transactions listed above in the 'General Journal' tab (these are shown as items 1 - 7). Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances.

2. Record the adjusting entries in the 'General Journal' tab (these are shown as items 8-11).

3. Review the adjusted 'Trial Balance' as of January 31, 2018, in the 'Trial Balance' tab.

4. Prepare an income statement for the period ended January 31, 2018, in the 'Income Statement' tab.

5. Prepare a classified balance sheet as of January 31, 2018 in the 'Balance Sheet' tab.

6. Record the closing entries in the 'General Journal' tab (these are shown as items 12 and 13).

7. Using the information from the requirements above, complete the 'Analysis' tab.

Please help

the following selected circumstances related to pending lawsuits for Erismus, Inc. Erismus's fiscal year ends on December 31st. Financial statements are issued on March 2017. Erismus prepares its financial statements according to us gaap.

indicate the amount of asset or liability that Erismus would record and explain your answer.

1. Erismus is defending against a lawsuit. Erismus's management believes the company has a slightly worse than 50-50 chance eventually prevailing in court and that if it loses the judgement will be $1000000.
2. Erismus is defending against a lawsuit. Erismus's management believes it is probable that the company will lose in court. If it loses, management believes that damages could fall anywhere in the range of 2 million dollars to four million dollars with any damage in that range equally likely.
3. Erismus is defending against a lawsuit. Erismus's management believes it is probable that the company will lose in Court. if it loses, management believes the damages will eventually be $5000000 with the present value of 3500000 dollars.
4. Erismus is a plaintiff in a lawsuit. Erismus management believes it is probable that the company eventually will prevail in court, and that if it prevails the judgement will be $1000000.
5. Erismus is a plaintiff in a lawsuit. Erismus's management believes it is virtually certain that the company eventually will prevail in court and that if it reveals the judgment will be $500,000.

E12-4 (L01,2,5) (Intangible Amortization) The following is selected information for Alatorre Company.
1. Alatorre purchased a patent from Vania Co. for $1,000,000 on January 1, 2015. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2025. During 2017, Alatorre determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the bal-ance sheet for the patent, net of accumulated amortization, at December 31, 2017?
2. Alatorre bought a franchise from Alexander Co. on January 1, 2016, for $400,000. The carrying amount of the franchise on Alexander’s books on January 1, 2016, was $500,000. The franchise agreement had an estimated useful life of 30 years. Because Alatorre must enter a competitive bidding at the end of 2018, it is unlikely that the franchise will be retained beyond 2025. What amount should be amortized for the year ended December 31, 2017?
3. On January 1, 2017, Alatorre incurred organization costs of $275,000. What amount of organization expense should be reported in 2017?
4. Alatorre purchased the license for distribution of a popular consumer product on January 1, 2017, for $150,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Alatorre can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2017?
Instructions Answer the questions asked about each of the factual situations.

Using an indirect method statement of cash flows from a publicly traded company, discuss an item that was recorded when calculating net income, but is adjusted as an increase or decrease to determine cash provided by (used by) operating activities, specifically an asset, liability, gain, or loss. Include a summary of how that item impacted net income (or net loss) and why there is an adjustment necessary to determine cash from operations.

Your colleague claims that all of the statements below regarding a partner’s sale or exchange of a partnership interest are true. Do you agree? If so, why? If not, why not?

a. The sale or exchange of a partner’s interest in a partnership usually results in a capital gain or loss.

b. Gain or loss recognized by the selling partner is the difference between the amount realized and the adjusted basis of the partner’s interest in the partnership.

c. The selling partner must include, as part of the amount realized, any partnership liability he/she is relieved of.

d. The installment method cannot be used by the partner who sells a partnership interest at a gain.