MacLean Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two​ departments: the assembly department and the finishing department. This problem focuses on the assembly department. The​ process-costing system at MacLean has a single​ direct-cost category​ (direct materials) and a single​ indirect-cost category​ (conversion costs). Direct materials are added when the assembly department process is​10% complete. Conversion costs are added evenly during the assembly​ department's process. MacLean uses the​ weighted-average method of process costing. Consider the following data for the assembly department in April 2017​:

a Degree of​ completion: direct​ materials, 100%; conversion​ costs, 40%.

b Degree of​ completion: direct​ materials, 100​%; conversion​ costs, 55​%

Question:

1. Budget Performance Reports for A decentralized unit in which the department or division manager has responsibility for the control of costs incurred and the authority to make decisions that affect these costs.Cost Centers

   Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow:

   Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30
   Plant	Budget		Actual		Over Budget		Under Budget
   Eastern Region	$422,700		$422,700				$0
   Central Region	304,300		301,300				(3,000)
   Western Region	(g)		(h)		(i)
   	$(j)		$(k)		$(l)		$(3,000)

   Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30
   Department	Budget		Actual		Over Budget		Under Budget
   Chip Fabrication	$(a)		$(b)		$(c)
   Electronic Assembly	78,140		79,160		1,020
   Final Assembly	125,020		124,020				$(1,000)
   	$(d)		$(e)		$(f)		$(1,000)

   Garland Company Budget Performance Report—Supervisor, Chip Fabrication For the Month Ended November 30
   Cost	Budget		Actual		Over Budget		Under Budget
   Factory wages	$29,520		$31,590		$2,070
   Materials	69,260		68,780				$(480)
   Power and light	4,070		4,840		770
   Maintenance	6,450		7,060		610
   	$109,300		$112,270		$3,450		$(480)

   a. Complete the budget performance reports by determining the correct amounts for the lettered spaces (a-l) as marked above.

   a. $	g. $
   b. $	h. $
   c. $	i. $
   d. $	j. $
   e. $	k. $
   f. $	l. $

   b. Complete the following memo to Cassandra Reid, vice president of production for Garland Company, explaining the performance of the production division for November.

   MEMO
   To: Cassandra Reid, Vice President of Production

   The Western Region

   • Eastern Region
   • Central Region
   • Western Region
   plant has experienced a budget overrun. Its budget reveals that the Chip Fabrication
   • Chip Fabrication
   • Electronic Assembly
   • Final Assembly
   Department caused the majority of the budget overrun. The supervisor of the Chip Fabrication
   • Chip Fabrication
   • Electronic Assembly
   • Final Assembly
   Department should investigate the reasons for the budget overruns in factory wages, power and light, and maintenance
   • factory wages, materials, and maintenance
   • materials, power and light, and maintenance
   • factory wages, power and light, and maintenance
   .

   Feedback

   a. Solve for (a) & (b) from the totals for the Chip Fabrication Report.

   Solve for (c) and the remaining amounts. Amounts (d) and (g) will be the same; amounts (e) and (h) will be the same; and amounts (i) and (l) will be the same.

   b. Review what is happening within the regions and how they are performing within their budgets. Discuss possible causes for the budget overruns.

   Learning Objective 2.

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The National Overnight (NatO) company provides express small package delivery overnight. Airplanes arrive 24 hours a day at the national hub in Dallas where their contents are unloaded onto cargo vans each capable of holding 1,000 packages. The cargo vans transport the packages to the sorting center. The sorting center has a large storage area designed to hold up to 50,000 packages. After being sorted, another fleet of cargo vans transports the packages to the outgoing planes. However, the following information details the receiving process only. During the night (6 p.m. to 6 a.m.), airplanes arrive at a high rate providing a continuous arrival flow of packages with an average rate of 25,000 packages per hour. However, during the day (6 a.m. to 6 p.m.) air landings are less frequent, resulting in an average arrival rate of 5,000 packages per hour. NatO runs two 12-hour shifts at the sorting center: the night shift starts at 8 p.m. and leaves by 8 a.m. The night shift has the largest number of employees and can process up to 21,000 packages per hour. The day shift, on the other hand, is smaller and can process up to 12,000 packages per hour from 8 a.m. to 8 p.m. It is known that the cargo vans typically had to wait to unload at the sorting center during some portions of the night shift. Cargo van drivers were paid $10/hour, benefits included. NatO begins each night with completely empty storage bins at 6 p.m. Cargo vans begin waiting as soon as the storage area is full. What is the maximum number of cargo vans waiting in line at any given during a 24-hour period? Input your answer as a whole integer such as "17" or "9". If capacity is such that no vans ever have to wait then input "0".

Assignment 1 CVP Comprehensive Problem Gupta Travel is a charter airline service for corporate clients traveling between Atlanta and Boston. The company leases one jet aircraft and flies an average of 160 one-way trips per year. Gupta’s marketing strategy is to sell a more enjoyable travel experience than its rivals in the commercial airline industry. Gupta arranges ground transportation in Atlanta and Boston for its clients, offers a more spacious cabin with larger seats and more legroom, and serves gourmet meals on its flights. Gupta does not sell its services to individuals; rather its services are marketed directly to corporate clients. Therefore, when Gupta books a flight for a client, it is not merely selling a few seats on its aircraft. Rather, the corporate client is booking the use of the aircraft for its travel needs. Gupta uses a network of commissioned travel agents to sell its services. These agents are not employees of Gupta, and the agents receive a 20 percent commission (no fixed salary) on each flight sold on Gupta Travel. Gupta had the following income statement for the year ending December 31, 2018. Gupta Travel Income Statement For the Year Ending 12/31/2018 Sales Revenue (160 one-way flights _ $50,000 per flight) $8,000,000 Commissions Expense (20 percent of Sales Revenue) $1,600,000 Annual Lease Expense—Airplane $1,200,000 Annual Fee for Airport Ground Crew Services $900,000 Flight Crew Expense (160 one-way flights _ $1,600 per flight) $256,000 Fuel Expense (160 one-way flights _ $1,100 per flight) $176,000 Food Expense (160 one-way flights _ $900 per flight) $144,000 Ground Transportation Expense (160 one-way flights _ $250 per flight) $40,000 Other Fixed General and Administrative Expenses $180,000 Fixed Interest Expense $250,000 Net Income $ 3,254,000 (ignore tax)

(1) Prepare the contribution margin Income Statement (2) What is Gupta’s current breakeven point? (3) At the end of 2015, Gupta’s management learned that its commissioned travel agents are demanding an increase in their commission rate to 30 percent per flight for the upcoming year. As a result, Gupta’s president has decided to investigate the possibility of hiring an in-house sales staff to replace the commissioned travel agents. Gupta’s accounting department compiled the following information to be used to evaluate the cost of establishing an in-house sales department. Costs of Establishing an In-House Sales Department The accounting department estimates that Gupta would need to hire four salespeople at an average payroll cost of $85,000 per employee to cover the workload of the current travel agents. Also, in order to hire highly qualified individuals for these positions, the compensation package must include commissions. To be competitive with the industry-standard commission rate, Gupta must offer a 15 percent commission on each flight sold in addition to the salary. The cost of the in house sales department will also include travel costs and support staff. Travel and entertainment expense is expected to total $600,000 (fixed) for the year, and the annual cost of support staff positions will be fixed at $150,000. Gupta currently relies on the travel agents to sell its services. If Gupta were to replace its commissioned travel agents with an in-house sales department, then it would have to bear more of the cost of advertising its services. In order to maintain the company’s image and manage the transition from established travel agents to an inhouse sales staff, the accounting department recommends spending $550,000 (fixed) annually on advertising. (3) Use the December 31, 2018 Income Statement (with 160 flights sold) to estimate Gupta’s breakeven point in units (flights) if the company hires its own sales force and increases its advertising costs. Based on your answer, what amount of sales revenue would the company generate at this breakeven point? (4) Assume that Gupta decides not to hire its own sales force, but instead consents to give its current commissioned travel agents the raise they are demanding. How many flights must the company sell (with the new commission rate) to generate the same net income that was reported in 2018? (5) Management must choose between: (a) hiring its own sales force and (b) compensating its current network of travel agents with a higher commission rate. (i ) What is the profit formula for alternative (a), hiring an in-house sales force? (ii ) What is the profit formula for alternative (b), increasing the commission rate of the current travel agents? (iii ) At what level of sales volume (in flights) would management be indifferent between these two alternatives? (Indifference means the sales volume [units] that would produce the same profit between the alternatives.)

Compute Bond Proceeds, Amortizing Discount by Interest Method, and Interest Expense

Boyd Co. produces and sells aviation equipment. On the first day of its fiscal year, Boyd issued $80,000,000 of five-year, 9% bonds at a market (effective) interest rate of 12%, with interest payable semiannually. Compute the following, presenting figures used in your computations:

a. The amount of cash proceeds from the sale of the bonds. Use the tables of present values in Exhibit 5 and Exhibit 7. Round to the nearest dollar.
$fill in the blank 1

b. The amount of discount to be amortized for the first semiannual interest payment period, using the interest method. Round to the nearest dollar.
$fill in the blank 2

c. The amount of discount to be amortized for the second semiannual interest payment period, using the interest method. Round to the nearest dollar.
$fill in the blank 3

d. The amount of the bond interest expense for the first year. Round to the nearest dollar.
$fill in the blank 4

3. At September 30, the end of Beijing Company’s third quarter, the following stockholders’ equity accounts are reported.

In the fourth quarter, the following entries related to its equity are recorded:

Required:
Complete the following table showing the equity account balances at each indicated date.

4. The equity sections from Atticus Group’s 2016 and 2017 year-end balance sheets follow.

The following transactions and events affected its equity during year 2017.

Problem 13-4A Part 1

Required:
1. How many common shares are outstanding on each cash dividend date?

Required information

[The following information applies to the questions displayed below.]
  
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

Required:

1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)

Required information

[The following information applies to the questions displayed below.]
  
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

[The following information applies to the questions displayed below.]

“We really need to get this new material-handling equipment in operation just after the new year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can get a short-term loan down at MetroBank.” This statement by Beth Davies-Lowry, president of Intercoastal Electronics Company, concluded a meeting she had called with the firm’s top management. Intercoastal is a small, rapidly growing wholesaler of consumer electronic products. The firm’s main product lines are small kitchen appliances and power tools. Marcia Wilcox, Intercoastal’s General Manager of Marketing, has recently completed a sales forecast. She believes the company’s sales during the first quarter of 20x1 will increase by 10 percent each month over the previous month’s sales. Then Wilcox expects sales to remain constant for several months. Intercoastal’s projected balance sheet as of December 31, 20x0, is as follows:

Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of 20x1. In the process, the following information has been accumulated:

1. Projected sales for December of 20x0 are $600,000. Credit sales typically are 75 percent of total sales. Intercoastal’s credit experience indicates that 10 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month.

2. Intercoastal’s cost of goods sold generally runs at 70 percent of sales. Inventory is purchased on account, and 40 percent of each month’s purchases are paid during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to half of the next month’s projected cost of goods sold.

3. Hanson has estimated that Intercoastal’s other monthly expenses will be as follows:

   Sales salaries	$	30,000
   Advertising and promotion		16,000
   Administrative salaries		30,000
   Depreciation		25,000
   Interest on bonds		625
   Property taxes		600

   In addition, sales commissions run at the rate of 3 percent of sales.

4. Intercoastal’s president, Davies-Lowry, has indicated that the firm should invest $105,000 in an automated inventory-handling system to control the movement of inventory in the firm’s warehouse just after the new year begins. These equipment purchases will be financed primarily from the firm’s cash and marketable securities. However, Davies-Lowry believes that Intercoastal needs to keep a minimum cash balance of $15,000. If necessary, the remainder of the equipment purchases will be financed using short-term credit from a local bank. The minimum period for such a loan is three months. Hanson believes short-term interest rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary, Davies-Lowry has decided it should be paid off by the end of the first quarter if possible.

5. Intercoastal’s board of directors has indicated an intention to declare and pay dividends of $75,000 on the last day of each quarter.

6. The interest on any short-term borrowing will be paid when the loan is repaid. Interest on Intercoastal’s bonds is paid semiannually on January 31 and July 31 for the preceding six-month period.

7. Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period.

Required:

Prepare Intercoastal Electronics Company’s master budget for the first quarter of 20x1 by completing the following schedules and statements.

Required information

[The following information applies to the questions displayed below.]
  
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

Fast-Flow Paints produces mixer base paint through a two–stage process, Mixing and Packaging. The following events depict the movement of value into and out of production. Journalize each event if appropriate; if not, provide a short narrative reason as to why you chose not to journalize the action. Nelson, the production manager, accepts an order to continue processing the current run of mixer base paint.

Prepare the journal entries for each event depict the movement of value into and out of production on December 31. Refer to the Chart of Accounts for exact wording of account titles. Round answers to the nearest dollar.

PAGE 1

JOURNAL

c. Nelson, who is paid a salary but earns about $35.00 per hour, spends one hour inspecting the production line.

Nelson's inspection of the assembly line is     chargeable to production. Since he is the manager of a production unit, it will be incorporated in the cost of production through the allocation of overhead.

Creative Computing sells a tablet computer called the Protab. The $605 sales price of a Protab Package includes the following:

• One Protab computer.
• A 6-month limited warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to six months.
• A coupon to purchase a Creative Probook e-book reader for $325, a price that represents a 50% discount from the regular Probook price of $650. It is expected that 20% of the discount coupons will be utilized.
• A coupon to purchase a one-year extended warranty for $55. Customers can buy the extended warranty for $55 at other times as well. Creative estimates that 30% of customers will purchase an extended warranty.
• Creative does not sell the Protab without the limited warranty, option to purchase a Probook, and the option to purchase an extended warranty, but estimates that if it did so, a Protab alone would sell for $585.

All Protab sales are made in cash.

Required:
1. & 2. Indicated below whether each item is a separate performance obligation and allocate the transaction price of 120,000 Protab Packages to the separate performance obligations in the contract.
3. Prepare a journal entry to record sales of 120,000 Protab Packages (ignore any sales of extended warranties).

Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2018, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $4,780,000. Curtiss concludes that the contract does not qualify for revenue recognition over time. The building was completed on December 31, 2020. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows:

Required:
1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years.
2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profit or loss to be recognized in each of the three years.
3. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2018 and 2019 as either cost in excess of billings or billings in excess of costs.

Mary Willis is the advertising manager for Culver Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $14,000 in fixed costs to the $133,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($20 to $19) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $12 per pair of shoes. Management is impressed with Mary’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

A)

Current break-even point_____________ pairs of shoes

New break-even point________________pairs of shoes

B)

Current Margin of safety ratio _________%

New margin of safety ratio _________%

C)

Prepare a cup income statement for current operations and after Mary's changes are introduced.

Income statement :