1) Plantwide Overhead Rate

2) Departmental Overhead Rate

3) Activity Based Costing

Example 1 (Plantwide Overhead Rate): A business needs to allocate factory overhead to a product. The direct material cost of the product is $200 and the direct labor cost is $150. The business applies factory overhead based on direct labor costs. Assume the business estimated factory overhead cost to be $350,000 and direct labor costs to be $250,000 for the year. The business can sell the product for $800.

Example 2 (Activity Based Costing):   A corporation reports the following (the estimated overhead costs/quantity relate to all products the company produces)

Activity                       Overhead Cost            Driver                          Total Quantity

Mixing                        $50,000                       Direct Labor hours      4,000 hours

Cooking                      $30,000                       Machine Hours           2,500 hours

Packaging                   $25,000                       Boxes                          50,000 boxes

The business produced 30,000 boxes of cookies. Additional information related to the 30,000 boxes:

Direct Material                       $20,000

Direct Labor                           22,500

Mixing            2,000 hours

Cooking          1,250 hours

Packaging       30,000 boxes

Exercise 17-15 Activity-based costing rates and allocations LO P3

A company has two products: standard and deluxe. The company expects to produce 38,375 standard units and 64,240 deluxe units. It uses activity-based costing and has prepared the following analysis showing budgeted cost and cost driver activity for each of its three activity cost pools.

   
Required:
1. Compute overhead rates for each of the three activities.
2. What is the expected overhead cost per unit for the standard units?
3. What is the expected overhead cost per unit for the deluxe units?
(Round activity rate and cost per unit answers to 2 decimal places.)

Wolfpack Company is a merchandising company that is preparing a budget for the month of July. It has provided the following information:

Budgeting Assumptions:

1. All sales are on account. Thirty percent of the credit sales are collected in the month of sale and the remaining 70% are collected in the month subsequent to the sale. The accounts receivable at June 30 will be collected in July.
2. All merchandise purchases are on account. Twenty percent of merchandise inventory purchases are paid in the month of the purchase and the remaining 80% is paid in the month after the purchase. The accounts payable at June 30 will be paid in July.
3. The budgeted inventory balance at July 31 is $37,800.
4. Depreciation expense is $3,980 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.
5. The company’s cash budget for July shows expected cash collections of $98,700, expected cash disbursements for merchandise purchases of $48,000, and cash paid for selling and administrative expenses of $20,620.

Required:

1. For the month of July, calculate the following:

a. Budgeted sales

b. Budgeted merchandise purchases

c. Budgeted cost of goods sold

d. Budgeted net operating income

2. Prepare a budgeted balance sheet as of July 31.

The following information is available for Robstown Corporation for 20Y8: Inventories January 1 December 31 Materials $77,250 $93,600 Work in process 108,800 96,700 Finished goods 112,500 108,400 December 31 Advertising expense $ 67,800 Depreciation expense-office equipment 23,000 Depreciation expense-factory equipment 14,600 Direct labor 186,100 Heat, light, and power-factory 5,550 Indirect labor 23,800 Materials purchased 123,800 Office salaries expense 78,300 Property taxes-factory 4,145 Property taxes-office building 13,800 Rent expense-factory 6,550 Sales 861,500 Sales salaries expense 138,500 Supplies-factory 4,750 Miscellaneous costs-factory 4,420 Required: A. Prepare the 20Y8 statement of cost of goods manufactured.* B. Prepare the 20Y8 income statement.* *Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Less” or “Plus” will automatically appear if it is required. Enter all amounts as positive numbers. Be sure to complete the statement heading

Marvin’s Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. A consultant has analyzed the delivery service using activity-based costing methods and identified four activities. Data on these activities follow:

Cost Driver volume

Activity Cost Driver Cost Driver Volume

Processing order Number of orders $ 126,000 9,000 orders

Loading truck Number of items 340,000 200,000 items

Delivering merchandise Number of orders 153,000 9,000 orders

Processing invoice Number of invoices 136,000 8,000 invoices

Total overhead $ 755,000

Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow:

City Diner Le Chien Chaud

Order value $ 89,000 $ 99,000

Number of orders 69 310

Number of items 600 1,900

Number of invoices 13 210

a. What would the delivery charge for each customer be under the current policy of 10 percent of order value? (please show work)

    Delivery charge per customer

City dinner ______

Le Chien Chaud _____

b. Calculate the cost of each activity for both restaurants to determine the total activity-based costing estimate of the cost of delivering to each customer. (Do not round intermediate calculations.) ((Please show work))

  City Diner Lechin Chaud

Processing order    _____ _____

Loading truck _____   _____

Delivery Merchandise _____ ____

Processing invoice ____ ____

Total ____ ______

Anne and Bill plan to form a limited liability company to engage in the business of developing and marketing computer software. Only Anne and Bill will have authority to act on behalf of the LLC. Because of the limited powers that the investor-members will be granted, Anne and Bill think it best that the investors be permitted to sell or assign their membership interests if they so desire. Of course, Anne and Bill want the business of the LLC to be uninterrupted by the death, bankruptcy, etc., of an investor-member.

Question: Will the LLC be taxed as a corporation if organized in the manner contemplated by Anne and Bill?

(CO A) Review some of the Panel on Audit Effectiveness recommendations.

The trial balance before adjustment of Skysong, Inc. shows the following balances:

Give the entry for bad debt expense for the current year assuming the allowance should be 3% of gross accounts receivable. (Credit account titles are automatically indented when 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.)

Give the entry for bad debt expense for the current year assuming historical records show that, based on accounts receivable aging, the following percentages will not be collected: (Credit account titles are automatically indented when 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.)

Give the entry for bad debt expense for the current year assuming allowance for doubtful accounts is $2,000 but it is a credit balance and the allowance should be 3% of gross accounts receivable. (Credit account titles are automatically indented when 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.)

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List of Accounts

Give the entry for bad debt expense for the current year assuming allowance for doubtful accounts is $2,000 but it is a credit balance and historical records show that the following percentages will not be collected: (Credit account titles are automatically indented when 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.)

List of Accounts

• Accounts Payable
• Accounts Receivable
• Accrued Liabilities
• Accumulated Depreciation - Equipment
• Advances to Employees
• Advertising Expense
• Allowance for Doubtful Accounts
• Allowance for Sales Returns and Allowances
• Bad Debt Expense
• Bank Charges Expense
• Cash
• Cash Over and Short
• Due from Factor
• Entertainment Expense
• Equipment
• Finance Expense
• Finance Revenue
• Freight in
• Freight out
• Gain on Disposal of Equipment
• Gain on Disposal of Land
• Interest Expense
• Interest Income
• Interest Receivable
• Inventory
• Land
• Loss on Disposal of Equipment
• Loss on Disposal of Land
• Loss on Disposal of Receivables
• Loss on Impairment
• Miscellaneous Expense
• No Entry
• Notes Payable
• Notes Receivable
• Office Expense
• Petty Cash
• Postage Expense
• Prepaid Expenses
• Purchase Discounts
• Recourse Liability
• Refund Liability
• Rent Expense
• Sales Discounts
• Sales Discounts Forfeited
• Sales Returns and Allowances
• Sales Revenue
• Servicing Liability
• Service Revenue
• Supplies
• Supplies Expense
• Unearned Revenue

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $90 per unit, and variable expenses are $60 per unit. Fixed expenses are $831,600 per year. The present annual sales volume (at the $90 selling price) is 25,600 units.

Required:

1. What is the present yearly net operating income or loss?

2. What is the present break-even point in unit sales and in dollar sales?

3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?

4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?

The following financial statements apply to Karl Company:

Required

Calculate the following ratios for 2018 and 2019. Since 2017 numbers are not presented, do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018 balance sheet.

1. Net margin. (Round your answers to 2 decimal places.)
2. Return on investment. (Round your answers to 2 decimal places.)
3. Return on equity. (Round your answers to 2 decimal places.)
4. Earnings per share. (Round your answers to 2 decimal places.)
5. Price-earnings ratio (market prices at the end of 2018 and 2019 were $11.88 and $9.54, respectively). (Round your intermediate calculations and final answers to 2 decimal places.)
6. Book value per share of common stock. (Round your answers to 2 decimal places.)
7. Times interest earned. Exclude extraordinary income in the calculation as they cannot be expected to recur and, therefore, will not be available to satisfy future interest payments. (Round your answers to 2 decimal places.)
8. Working capital.
9. Current ratio. (Round your answers to 2 decimal places.)
10. Quick (acid-test) ratio. (Round your answers to 2 decimal places.)
11. Accounts receivable turnover. (Round your answers to 2 decimal places.)
12. Inventory turnover. (Round your answers to 2 decimal places.)
13. Debt to equity ratio. (Round your answers to 2 decimal places.)
14. Debt to assets ratio. (Round your answers to the nearest whole percent.)

Please help me fill in the blanks...

Provide at least one example of when the gross profit method would be useful. Explain the rationale for selecting the example provided.

Part 2:

Part 3:

Based on the analysis, you are required to make conclusions and recommendation which will answer the following questions:

1. Which business would you expect to be a better short-term credit risk?
   2. Do you think both companies have adequate cash resources?
   3. Assess both companies’ ability to survive in the longer term.
   4. Which company is better at generating cash from their sales revenue?

Personal Electronix sells iPads and iPods. The business is divided into two divisions along product lines. CVP income statements for a recent quarter’s activity are presented below.

Determine sales mix percentage and contribution margin ratio for each division. (Round answers to 0 decimal places, e.g. 15%.)

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Calculate the company’s weighted-average contribution margin ratio. (Round computations and final answer to 2 decimal places, e.g. 15.26%.)

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Calculate the company’s break-even point in dollars. (Round computations to 2 decimal places and final answer to 0 decimal places, e.g. 1,526.)

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Determine the sales level in dollars for each division at the break-even point. (Round computations to 2 decimal places and final answers to 0 decimal places, e.g. 1,526.)