Problem 08-3A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report LO P1, P2, P3, P4 Skip to question [The following information applies to the questions displayed below.] Antuan Company set the following standard costs for one unit of its product. Direct materials (4.0 Ibs. @ $6.00 per Ib.) $ 24.00 Direct labor (1.9 hrs. @ $13.00 per hr.) 24.70 Overhead (1.9 hrs. @ $18.50 per hr.) 35.15 Total standard cost $ 83.85 The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% capacity level. Overhead Budget (75% Capacity) Variable overhead costs Indirect materials $ 15,000 Indirect labor 90,000 Power 15,000 Repairs and maintenance 30,000 Total variable overhead costs $ 150,000 Fixed overhead costs Depreciation—Building 24,000 Depreciation—Machinery 72,000 Taxes and insurance 18,000 Supervision 263,250 Total fixed overhead costs 377,250 Total overhead costs $ 527,250 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (61,000 Ibs. @ $6.20 per lb.) $ 378,200 Direct labor (22,000 hrs. @ $13.10 per hr.) 288,200 Overhead costs Indirect materials $ 41,050 Indirect labor 176,800 Power 17,250 Repairs and maintenance 34,500 Depreciation—Building 24,000 Depreciation—Machinery 97,200 Taxes and insurance 16,200 Supervision 263,250 670,250 Total costs $ 1,336,650 rev: 04_27_2020_QC_CS-209738 Problem 08-3A

Part 1&2 Required: 1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 4:2:2 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the business in hopes of remedying their personal financial problems. As of September 1, the partnership’s balance sheet is as follows:

Prepare journal entries for the following transactions: (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Sold all inventory for $72,000 cash.
2. Paid $12,300 in liquidation expenses.
3. Paid $56,000 of the partnership’s liabilities.
4. Collected $65,000 of the accounts receivable.
5. Distributed safe payments of cash; the partners anticipate no further liquidation expenses.
6. Sold remaining accounts receivable for 30 percent of face value.
7. Sold land, building, and equipment for $33,000.
8. Paid all remaining liabilities of the partnership.
9. Distributed cash held by the business to the partners.

In 1968 the Worcester Five Cent Savings Bank hired Ronald Haselton to be its new president and chief executive officer. One thing that Haselton did was change the name of the bank to Consumers Savings Bank. What else did Haselton do that later was considered one of the biggest innovations in the banking industry in the 20th century?

Assume that you are living in Dar Es Salaam, Tanzania and your friend, Safari in Rwanda invites you to visit him. Safari is so generous , he has promised you to pay your flight to Kigali to see him, The round trip Dar – Kigali airfare costs $ 1,200. A week later, your friend Mukai, from Nairobihears from Safari that you will be going to Kigali. She also decides to invite you to come to see her in Nairobi and offers to reimburse you as well. The Dar Nairobi round trip airfare costs $ 800. You decide to combine the two trips into one big trip: Dar- Nairobi – Kigali- Dar that will cost $ 1,500 in airfare and save them $ 500 had it been that you had visited them separately. Required: Using the stand alone method, the incremental method and the shapley value method of allocating common costs, show how much cost of the $ 1,500 do you allocate to each of them separately.

Consider that the key difference in revenue recognition under ASC 605 vs 606 is that ASC 605 focused on transferring risks and rewards, but ASC 606 focuses on transferring control. How is the difference in control under ASC 840 vs 842 similar or different to this?

What are the steps in completing the accounting cycle? How do the different steps affect the financial statements? What is the effect on the financial statements of missing a step when completing the accounting cycle? How do these steps play a roll in accrual basis accounting?

Explain the need for account reserves. What do accountants create reserves for (be specific)? What purpose do reserves serve? How do reserves make a company's financial records more accurate?

Snavely, Inc., manufactures and sells two products: Product E1 and Product A7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

The direct labor rate is $21.10 per DLH. The direct materials cost per unit for each product is given below:

The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

The total overhead applied to Product E1 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

rev: 03_25_2018_QC_CS-119201

Multiple Choice

• $1,214,465

• $608,732

• $523,169

• $436,128

A company has a December year end and creates checks to pay their vendors towards the end of the month. The company creates all the proper journal entries at the time of creating the checks, but they do not mail the checks until January. Explain which, if any financial ratios are affected by this decision. Explain why this decision would be made?

Second case

#1:CRV Corp manufactures small plastic fittings for plumbing applications. They have accepted a new contract to provide a wide range of custom plastic fittings. To service the contract, CRV purchases a new, highly complex plastic injection molding machine. CRV’s fiscal year coincides with the calendar year. The machine is installed and operational as of July 1, 2015.

CRV provides the following data:

1. Purchase price of machine: $275,000

2. Shipping and installation: $ 45,000

3. Training costs: $ 15,000

4. Useful life: 5 years

5. Estimated salvage: $ 12,500

Required:

1. Prepare a depreciation schedule showing Net Book value (beginning and ending), depreciation expense, and accumulated depreciation for the asset. Hint: pay attention to dates of acquisition and fiscal year.

Prepare one schedule for each method:

a. Straight-line

b. Double-declining balance

Excel Format

2. Qualitative analysis:

CRV Company receives an offer of $159,000 for the machine in December, 2018.

a. What factors should CRV Company consider in determining whether to sell or keep the machine?

b. Evaluate the implication on taxable income under each deprecation method assuming CRV sells the machine at the end of December 2018.

Use $ values to support your support your written narrative.

#2: Inventory valuation:

The operations manager for CRV has asked you to provide a quantitative and qualitative inventory analysis using a sample of purchases as shown below.

The manager has asked for the following:

1. Calculate the $ ending inventory and $ cost of goods sold using each of the following inventory methods:

a. FIFO

b. LIFO

c. Average cost

2. Which inventory method would you recommend for reporting for income tax purposes to minimize taxable income? Why?

3. The company is operating in an inflationary environment. Which method should the company use to maximize inventory valuation? Why?

4. Looking at the purchasing volume versus demand, what guidance would you offer to the operations manager regarding inventory management and cash flow?

All calculations must be indicated via Excel formulas.

Problem 10-10 Multiple Products, Materials, and Processes [LO10-1, LO10-2]

Mickley Corporation produces two products, Alpha6s and Zeta7s, which pass through two operations, Sintering and Finishing. Each of the products uses two raw materials—X442 and Y661. The company uses a standard cost system, with the following standards for each product (on a per unit basis):

Information relating to materials purchased and materials used in production during May follows:

The following additional information is available:

1. The company recognizes price variances when materials are purchased.

2. The standard labor rate is $22.00 per hour in Sintering and $21.50 per hour in Finishing.

3. During May, 1,300 direct labor-hours were worked in Sintering at a total labor cost of $30,680, and 2,960 direct labor-hours were worked in Finishing at a total labor cost of $69,560.

4. Production during May was 1,700 Alpha6s and 1,550 Zeta7s.

Required:

1. Complete the standard cost card for each product, showing the standard cost of direct materials and direct labor.

2. Compute the materials price and quantity variances for each material.

3. Compute the labor rate and efficiency variances for each operation.