Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. He has computed the cost and revenue estimates for each product as follows:

The company’s discount rate is 19%.

Ignore income taxes. Note that Excel or a financial calculator must be used to calculate items 2 - 4.

Required:

1. Calculate the payback period for each product.

2. Calculate the net present value for each product.

3. Calculate the internal rate of return for each product.

4. Calculate the project profitability index for each product.

6a. For each measure, identify whether Product A or Product B is preferred.

On December 31, 2020, an analysis of the accounts for a company reveals the following:

$100,000 loss on disposal of discontinued operations, before tax

$6,000 gain on sale of investments, before tax

$10,000 depreciation expense understatement in 2018 due to error, before tax

$20,000 cumulative understatement of net income of prior years from changing inventory valuation method in 2020, before tax

$168,000 income from operations, before tax

$4,000 dividends declared

The applicable income tax rate is 40% for all tax-related items. Retained earnings on December 31, 2019 were reported as $600,000.

What is ending retained earnings on December 31, 2020?

spoke about auditing but specifically risk-based audit. Risk-based audit focuses on auditing controls and systems rather than numbers.

What are three FEDERAL documents in which tax-exempt organizations are REQUIRED to disclose to the public?

List three characteristics of Gen Z which were described in the video, "Gen Z in the Workforce" and also explain why you agree or disagree with the characteristics described in the video.

"Regular" volunteers are volunteers which essentially fill the role of a staff position, but are not paid, employees. An example might be a volunteer driver for Meals on Wheels.

Golden Ring Company produces two types of product: Large and Larger. Two work orders for two batches of the products are shown below, along with some additional cost information:

In the Mixing Department, conversion costs are applied on the basis of direct labor hours. Budgeted conversion costs for the department for the year were $50,000 for labor and $125,000 for overhead. Budgeted direct labor hours were 2,500. It takes three minutes to mix the ingredients needed for each bottle.

Large (Work Order 10) and Larger (Work Order 11) flow through the Mixing Department first, then through the Cooking and Bottling departments.

What is Golden Ring Company's journal entry to apply conversion costs in the Mixing Department for Work Order 10?

a.

Work in Process-Mixing45,000

Materials45,000

b.

Work in Process-Mixing17,500

Conversion Costs Control17,500

c.

Conversion Costs Control17,500

Work in Process-Mixing17,500

d.

Materials45,000

Work in Process-Mixing45,000

Hanks Corporation produces a single product. Operating data for the company and its absorption costing income statements for the last two years are presented below:

Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead was $18,000 in each year. This fixed manufacturing overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.

Required:

a. Compute the unit product cost in each year under variable costing.

b. Prepare new income statements for each year using variable costing.

c. Reconcile the absorption costing and variable costing net operating income for each year.

Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi-purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or [1.5 hours × (54,000 + 10,200)]. Estimated annual manufacturing overhead is $1,569,238. Thus, the predetermined overhead rate is $ 16.30 or ($ 1,569,238 ÷ 96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $19 per unit for both the home and the commercial models.

The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead by cost pool as follows.

(a)

Under traditional product costing, compute the total unit cost of each product. (Round answers to 2 decimal places, e.g. 12.50.)

2.)Under ABC, complete the schedule showing the computations of the activity-based overhead rates (per cost driver). (Round your answers to 2 decimal places, e.g. 2.25.)

3.)Complete the schedule assigning each activity's overhead cost pool to each product based on the use of cost drivers. (Use rates from part b above and round cost assigned to 0 decimal places, e.g. 12,250. Round overhead per unit to 2 decimal places, e.g. 2.25. Note that due to rounding your total cost assigned will be slightly different than calculated above.)
Cost Driver Home Model
Commercial Model
Cost Assigned

4.) Compute the total cost per unit for each product under ABC. (Round your answers to 2 decimal places, e.g. 12.25.)
Home Model $
Commercial Model $

5.)Classify each of the activities as a value-added activity or a non-value-added activity.
Activity
Receiving value-addednon-value-added
Forming non-value-addedvalue-added
Assembling value-addednon-value-added
Testing value-addednon-value-added
Painting non-value-addedvalue-added
Packing and shipping value-addednon-value-added

Borunda Corporation has provided the following data for its two most recent years of operation:

Required:

a. Assume the company uses absorption costing. Prepare an income statement for each year.

b. Assume the company uses variable costing. Prepare an income statement for each year.

c. Prepare a report in good form reconciling the variable costing and absorption costing net incomes.

Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of December:

Prepare the company's flexible budget performance report for December. Select each variance as favorable (F), unfavorable (U) or "None".

MSI’s educational products are currently sold without any supplemental materials. The company is considering the inclusion of instructional materials such as an overhead slide presentation, potential test questions, and classroom bulletin board materials for teachers. A summary of the expected costs and revenues for MSI’s two options follows:

  
Required:
1. Based on the given data, Compute the increase or decrease in profit that would result if instructional materials were added to the CDs.



2. Should MSI add the instructional materials or sell the CDs without them?

  
3-a. Suppose that the higher price of the CDs with instructional materials is expected to reduce demand to 20,000 units. Complete the table given below based on Requirement 1 and 2 data.



3-b. Should MSI add the instructional materials or sell the CDs without them?

MSI is considering eliminating a product from its ToddleTown Tours collection. This collection is aimed at children one to three years of age and includes “tours” of a hypothetical town. Two products, The Pet Store Parade and The Grocery Getaway, have impressive sales. However, sales for the third CD in the collection, The Post Office Polka, have lagged the others. Several other CDs are planned for this collection, but none is ready for production.

MSI’s information related to the ToddleTown Tours collection follows:

      
*Allocated based on total sales dollars.

MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. The remaining fixed overhead currently allocated to the POP product would be redistributed to the remaining two products.

Required:
1. Calculate the incremental effect on profit if the POP product is eliminated.



2. Should MSI drop the POP product?

3-a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $1,200 of the common fixed costs could be avoided if the POP product line were eliminated.



3-b. Should MSI drop the POP product?

NO PHOTO OR HANDWRITING CLEAR SCHEDULE

YOU CAN PUT ANY FIGURE ITS ASSUMPTIONS

1. Akbar Company is producing two types of products i.e. Product A and Product B. You are required to show quantitative analysis of one constrained resource i.e. total available machine hours. The following is a contribution income format of the company.                                                                                                  

(use your own figures in the following table)

            Assume a figure for total available machine hours as a constrained resource.

            Determine the following:

1. What is the total contribution margin if only Product A is produced?
2. What is the total contribution margin if only Product B is produced?

Solution: The answers of all the students will differ.

2. Prepare a cash flow statement from the following information under indirect method.

(Assume your own figure)                                                                              

Solution: There will be different answers for all students.

3-You are required to allot the support department cost to operations department by taking any Saudi based operating company.

Solution: There will be different answers for all students.

Cintra is the Management Accountant of Fine pens Ltd. The company manufactures various types of pens ranging from cheap disposable units to expensive units which are intended to be reusable. Both ball point pens and fountain pens are produced. The current cost allocation system in use is Absorption costing.and Cintra is very comfortable with the use and application of this costing method.

Ram has recently joined the company in a senior capacity. Both Cintra and Ram were recently discussing the current costing method and another method, namely Activity based costing. Ram suggested a switch to Activity based costing as the method of cost allocation .

Required:

a) Briefly state why Ram may have suggested such a switch . Relate to the scenario described above.                                                                      

b) List and briefly describe 3 advantages of Activity based costing over Absorption costing.                                                                                        ( 3 marks)