1. Vertical Analysis of Income Statement

   Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:

   	Current Year		Previous Year
   Sales	$580,000		$522,000
   Cost of goods sold	324,800		261,000
   Selling expenses	104,400		104,400
   Administrative expenses	110,200		93,960
   Income tax expense	17,400		26,100

   a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.

   Innovation Quarter Inc.
   Comparative Income Statement
   For the Years Ended December 31
   	Current year Amount	Current year Percent	Previous year Amount	Previous year Percent
   Sales	$580,000	%	$522,000	%
   Cost of goods sold	324,800	%	261,000	%
   Gross profit Income from operations Net income Total operating expenses	$	%	$	%
   Selling expenses	104,400	%	104,400	%
   Administrative expenses	110,200	%	93,960	%
   Gross profit Income from operations Net income Total operating expenses	$	%	$	%
   Gross profit Income from operations Net income Total operating expenses		%		%
   Income tax expense	17,400	%	26,100	%
   Gross profit Income from operations Net income Total operating expenses	$	%	$	%

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   b. The vertical analysis indicates that the cost of goods sold as a percent of sales

   • increased
   • decreased
   by 6 percentage points, while selling expenses
   • increased
   • decreased
   by 2 percentage points, and administrative expenses
   • increased
   • decreased
   by 1 percentage points. Thus, net income as a percent of sales
   • increased
   • decreased
   by 3 percentage points.

Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below:

*Contains direct materials, direct labor, and variable manufacturing overhead.

Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to “get things under control.” Upon reviewing the plant’s income statement, Ms. Dunn has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool:

*Based on machine-hours.

During June, the plant produced 15,000 pools and incurred the following costs:

1. Purchased 60,000 pounds of materials at a cost of $4.95 per pound.
2. Used 49,200 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
3. Worked 11,800 direct labor-hours at a cost of $17.00 per hour.
4. Incurred variable manufacturing overhead cost totaling $18,290 for the month. A total of 5,900 machine-hours was recorded.

It is the company’s policy to close all variances to cost of goods sold on a monthly basis.

Required:

1. Compute the following variances for June:

a. Materials price and quantity variances.

b. Labor rate and efficiency variances.

c. Variable overhead rate and efficiency variances.

2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month.

Problem 17-3A Applying activity-based costing LO P1, P3, A1, A2, C3

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

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Additional information on the drivers for its production activities follows.

Problem 17-3A Parts 2, 3 & 4

2, 3 & 4. Compute the activity overhead rates using ABC. Combine the grinding and polishing activities into a single cost pool. Determine overhead costs to assign to the following jobs using ABC. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286? (Round your activity rate and average overhead cost per unit to 2 decimal places. Round "overhead assigned" to the nearest whole dollar.)
                                               

                                       Overhead Cost----Activity Drivers-----Activity Rate---Activity Driver incurred----------Overhead assigned------Activity Driver incurred------Overhead Assigned

Grinding and Polishing---------------------------/--------------/Machine Hours-------------/--------------------------------/-------------------------------------/------------------------------------/------------------------------------l

Product Modification-----------------------------/---------------/Engineering Hours--------/--------------------------------/-------------------------------------/------------------------------------/-------------------------------------l

Providing Power----------------------------------/----------------/Direct Labor Hours--------/-------------------------------/--------------------------------------/------------------------------------/-------------------------------------l

System Calibration-----------------------------/---------------/batches-------------------------/-------------------------------/--------------------------------------/-------------------------------------/------------------------------------l

Waterway Family Instruments makes cellos. During the past year, the company made 6,380 cellos even though the budget planned for only 5,580. The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate. The production manager budgets four direct labor hours per cello. During the year, a total of 24,790 direct labor hours were worked.

(a) Calculate the direct labor rate and efficiency variances. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Department G had 3,600 units 25% completed at the beginning of the period, 11,000 units were completed during the period, 3,000 units were 20% completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period:

All direct materials are placed in process at the beginning of production, and the first-in, first-out method of inventory costing is used. What is the total cost of the units started and completed during the period (round unit cost calculations to whole dollars)?

a.$211,200

b.$190,275

c.$20,934

d.$120,060

Alpha Company provided the following data concerning its income statement: sales, $1,025,000; purchases, $500,000; beginning inventory, $260,000; ending inventory, $242,000; operating expenses, $93,000; freight-in, $5,000; sales discounts, $27,000; purchases discounts, $15,000; sales returns & allowances, $95,000; and purchases returns & allowances, $38,000. The data are complete and provide the basis for preparation of an income statement. How much is net income?

Marilyn Helm Retailers is attempting to decide on a location for a new retail outlet. At the​ moment, the firm has three​ alternatives: stay where it is but enlarge the​ facility; locate along the main street in nearby Newbury​; or locate in a new shopping mall in Hyde Park.

The company has selected the four factors listed in the following table as the basis for evaluation and has assigned weights as​ shown:

​a) Based on the given​ information, the best location for Marilyn Helm Retailers is to open the new retail outlet in _____, with a total weighted score of_____​(Enter your response rounded to two decimal​ places.)

​b) A new subway station is scheduled to open across the street from the present location in about a​ month, so its third factor score should be raised to 75. Then, the best location for Marilyn Helm Retailers is to open the new retail outlet in ______, with a total weighted score of ____.(Enter your response rounded to two decimal​places.)

Oriole Company was organized on July 1, 2019. Quarterly financial statements are prepared. The unadjusted and adjusted trial balances as of September 30 are shown as follows.

FIRST Journalize the adjusting entries that were made THEN create an income statement, retained earnings, and balance sheet.

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 3 3. Compute the direct materials cost variance, including its price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance.)

Problem 08-3A Part 4

4. Compute the direct labor cost variance, including its rate and efficiency variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and No variance. Round "Rate per hour" answers to two decimal places.

Selected information about income statement accounts for the Rogers Company, Inc. is presented below (the company's fiscal year ends on December 31):

On July 1, 2018, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2018, for $50,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:

In addition to the account balances above, several events occurred during 2018 that have not yet been reflected in the above accounts:

1. A fire caused $50,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.
2. Inventory that had cost $40,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $5,000.
3. Income taxes have not yet been recorded.

Required:
Prepare a multiple-step income statement for the Rogers Company for 2018, showing 2017 information in comparative format, including income taxes computed at 40% and EPS disclosures assuming 300,000 shares of common stock.

Discussion Question

Cash in Hand Topic: Revenue Recognition/Misrepresentation of Fact by Client Characters: Heather Hunter, Senior in CPA firm “Buzz” Thompson, Owner/manager of Fashion First Sandy, part-time bookkeeper of Fashion First Author: Mary Brady Greenawalt, Associate Professor of Business Administration, The Citadel Co-author: Janine Cloutier, Virginia Tech

In addition to the usual mix of compilation, review, and audit clients for which Heather Hunt serves as a senior in a small office of a regional CPA firm, she has been assigned a new client that recently engaged the firm. Fashion First, an incorporated retail outlet, is a thriving local store. The business is run by a single owner/manager, “Buzz” Thompson, who makes all major decisions. The business has not previously used the services of a CPA firm. In addition to preparation of financial statements, the CPA firm will handle tax returns for the business. At her first visit to the client’s office, Heather is introduced to Sandy, the part-time bookkeeper who is also a full-time accounting student at the local university. At a subsequent meeting, Sandy confides to Heather that she found the job at the beginning of the semester after an extensive search. Sandy really needs the money to help finance her education, and feels lucky to have found a good-paying job during the current economic downturn. Feeling that Heather is someone she can talk to and get advice from, Sandy describes a situation that has been on her mind for some time now. Sandy’s concern relates to the handling of sales revenues. When monies from sales revenues are counted and deposited on a weekly basis, a chart is filled out with categories carefully delineating the type of payment: cash, checks, American Express, or Visa/Mastercard. Sandy’s employer, after depositing the weekly total, brings this chart back with his own written-in total of the actual amount deposited. After looking over some of these weekly deposit chats, Sandy noticed that $500 cash was missing from each deposit. After a more thorough inspection of monthly tax documents that “Buzz” Thompson has filled out, Sandy noticed that the reported monthly gross revenue was $2,000 less than what had been actually counted. The employer is the only person handling the money after it has been counted. He is also the only one to deposit the money. When Sandy asked Mr. Thompson about revenue not being reported for tax purposes, he assured her that every dollar of income was reported on the tax forms. Furthermore, “Buzz” asserted, since Sandy wasn’t the person who signed the forms, she shouldn’t be concerned.

Questions: Explain your reasoning for each question in full length! What are the Ethical Issues? Who are the Primary Stakeholders? What are the Possible Alternatives? What are the Ethics of the Alternatives?

Porter Corporation owns all 28,000 shares of the common stock of Street, Inc. Porter has 58,000 shares of its own common stock outstanding. During the current year, Porter earns net income (without any consideration of its investment in Street) of $209,000 while Street reports $181,000. Annual amortization of $13,000 is recognized each year on the consolidation worksheet based on acquisition-date fair-value allocations. Both companies have convertible bonds outstanding. During the current year, bond-related interest expense (net of taxes) is $41,000 for Porter and $21,000 for Street. Porter’s bonds can be converted into 5,000 shares of common stock; Street’s bonds can be converted into 7,000 shares. Porter owns none of these bonds.

1. What are the basic earnings per share amounts that Porter should report in its current year consolidated income statement? (Round your answers to 2 decimal places.)

2. What are the diluted earnings per share? (Round your answers to 2 decimal places.)

The information that follows is for Nancy’s Name Tents for the year ended December 31, 2015 and

covers questions 26-31. All per unit costs below are based on the production and sale of 3,000 name tents.

The relevant range is from 0 - 3,500 units.

Sales                                                                                                    $50 sales price per name tent                              

Costs:

Variable Costs                                                Per Tent (3,000 name tents produced and sold)     

                        Direct materials                                                          8

                        Direct labor                                                                7

Manufacturing overhead                              8

Period Costs                                                               5

            Fixed Costs

                        Manufacturing overhead                                            10                               

                        Period Costs                                                              5         

1) If 10,000 tents are produced and sold, what is the product cost per tent?

2) If 15,000 tents are produced and sold, what is the product cost per tent? ​​​​​​​

3) If 2,000 tents are produced and sold, what is the product cost per tent?

​​​​​​​4) What is the fixed cost per tent at 1,000 tents (including period costs) produced and sold?

​​​​​​​5) What are total period costs at 1,000 name tents (produced and sold)? ​​​​​​​   

Classifying Costs

The following is a manufacturing cost report of Marching Ants Inc. Evaluate and correct this report.