Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 40,000 Rets per year. Costs associated with this level of production and sales are given below:

The Rets normally sell for $46 each. Fixed manufacturing overhead is $200,000 per year within the range of 35,000 through 40,000 Rets per year.

Required:

1. Assume that due to a recession, Polaski Company expects to sell only 35,000 Rets through regular channels next year. A large retail chain has offered to purchase 5,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain’s name on the 5,000 units. This machine would cost $10,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special order? (Round your intermediate calculations to 2 decimal places.)

2. Refer to the original data. Assume again that Polaski Company expects to sell only 35,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 5,000 Rets. The Army would pay a fixed fee of $1.80 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. What is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

3. Assume the same situation as described in (2) above, except that the company expects to sell 40,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 5,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

Problem 4-34 Multiple Products, Break-Even Analysis, Operating Leverage Carlyle Lighting Products produces two different types of lamps: a floor lamp and a desk lamp. Floor lamps sell for $30, and desk lamps sell for $20. The projected income statement for the coming year follows: Check figures: 2. $277,778 4. Break-even revenue = $294,118 OBJECTIVE 0 0 Sales Less: Variable costs Contribution margin Less: Fixed costs Operatingincome $600 ,000 400,000 200,000 150,000 $ 50,000 The owner of Carlyle estimates that 60 percent of the sales revenues will be produced by floor lamps and the remaining 40 percent by desk lamps. Floor lamps are also responsible for 60 per- cent of the variable expenses. Of the fixed expenses, one-third are common to both products, and one-half are directly traceable to the floor lamp product line. Required: I. Compute the sales revenue that must be earned for Carlyle to break even. 2. Compute the number of floor lamps and desk lamps that must be sold for Carlyle to break even . 3. Compute the degree of operating leverage for Carlyle Lighting Products. Now assume that the actual revenues will be 40 percent higher than the projected revenues. By what percentage will profits increase with this change in sales volume? 4. CONCEPTUAL CONNECTION What is the theory behind the operating leverage concept?

Smith's Inc, Inc., produces widgets for the wind chime industry. The company sells all products on accounts with net 30 day terms. The company has been without someone to assess the financial condition for some time (using only a bookkeeper to post activity to the general ledger accounts) and, therefore, is asking you to help with a more current assessment of the company’s position.

Part A: Below you will find a series of accounts that represent the trial balance of the business firm. These accounts encompass both income statement and balance sheet accounts.

2009   2010   2011

Accumulated depreciation 176,580 209,050 242,275

Retained earnings     337,602   510,731 648,528

Sales 3,702,480   3,961,654   3,981,462

Cash 35,750    62,635 86,595

Bonds payable 421,000 334,000   325,000

Accounts receivable   246,580   293,430   349,182

Depreciation expense 31,265 32,470 33,675

Common stock shares outstanding 80,000   80,000 80,000

Plant and equipment, at cost   984,021 1,026,880 1,151,210

Taxes 79,484   93,223   74,198

Accounts payable 62,685 116,696 188,569

Common stock, $1 par 75,000 75,000 75,000

Inventory   185,652 243,117 312,622

Prepaid expenses 6,575 21,525   26,325

Cost of goods sold 2,665,786   2,879,049   2,936,630

Interest expense 12,532 10,325 10,235

Selling and administrative expenses   765,800 773,458 788,927

Marketable securities 12,545 23,564 24,153

Other current liabilities   123,256   150,674   195,265

Capital paid in excess of par (common) 275,000 275,000   275,000

Part B: Based on the financial statements that were prepared with this data, complete the following financial ratio calculations and provide a narrative discussion of these results as compared to industry averages (provided.)

Ratios required:

Ratio Industry Average

1. Profit margin 3.2%

2. Return on assets (use ending assets) 6.0%

3. Return on common equity (use ending common equity) 15.6%

4. Receivable turnover (use ending receivables) 8.5 x

5. Inventory turnover (use ending inventory) 12.0 x

6.Fixed asset turnover (use ending fixed asset balance) 5.75 x

7. Total asset turnover (use ending assets) 1.89 x

8. Current ratio 3.10

9. Quick ratio 1.40

10. Debt to total assets (use ending assets) 37.0%

Your solution should include the required ratios for each year and then provide a narrative discussion regarding the results as they compare to the industry averages. This analysis should discuss whether or not Smith's Inc. is better or worse than the industry average but it should not stop there. You should also include a discussion as to why or how the difference can be explained, i.e., the reason for the variance. The final solution is to be provided in the Word document, with the module and part clearly identified. The narrative discussion will reference the appropriate ratio and the comparison to the appropriate industry average.

Smith's Inc.., produces wind chimes for the wind chime industry. The company sells all products on accounts with net 30 day terms. The company has been without someone to assess the financial condition and, therefore, is asking you to help.

Part A: Below you will find the trial balance of the business firm and need to be placed into the correct statement.

Required: Prepare a Income Statement and Balance Sheet for the company.

Part B: Based on the financial statements that were prepared with data above, complete the following financial ratio calculations and provide a narrative discussion of these results as compared to industry averages (provided.)

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 78,000 units of product were as follows: Standard Costs Actual Costs Direct materials 265,200 lbs. at $5.80 262,500 lbs. at $5.70 Direct labor 19,500 hrs. at $16.20 19,950 hrs. at $16.50 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 20,350 direct labor hrs.: Variable cost, $4.70 $90,730 variable cost Fixed cost, $7.40 $150,590 fixed cost Each unit requires 0.25 hour of direct labor. Required: a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct Material Price Variance $ Direct Materials Quantity Variance $ Total Direct Materials Cost Variance $ b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct Labor Rate Variance $ Direct Labor Time Variance $ Total Direct Labor Cost Variance $ c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Variable factory overhead controllable variance $ Fixed factory overhead volume variance $ Total factory overhead cost variance $

Western State University (WSU) is preparing its master budget for the upcoming academic year. Currently, 12,000 students are enrolled on campus; however, the admissions office is forecasting a 7 percent growth in the student body despite a tuition hike to $80 per credit hour. The following additional information has been gathered from an examination of university records and conversations with university officials:

• WSU is planning to award 160 tuition-free scholarships.
• The average class has 20 students, and the typical student takes 20 credit hours each semester. Each class is four credit hours.
• WSU’s faculty members are evaluated on the basis of teaching, research, and university and community service. Each faculty member teaches five classes during the academic year.

Required:
1. Prepare a tuition revenue budget for the upcoming academic year.
2. Determine the number of faculty members needed to cover classes.
3. Assume there is a shortage of full-time faculty members. Select at least five actions that WSU might take to accommodate the growing student body by selecting an "X" next to the action.
4. You have been requested by the university’s administrative vice president (AVP) to construct budgets for other areas of operation (e.g., the library, grounds, dormitories, and maintenance). The AVP noted: “The most important resource of the university is its faculty. Now that you know the number of faculty needed, you can prepare the other budgets. Faculty members are indeed the key driver—without them we don’t operate.” Are faculty members a key driver in preparing budgets?

luStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows:

BluStar estimates that the cost structure in its operations is as follows:

Required:

a. If BluStar outsources the Administration Department, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.)

b. If BluStar outsources the Accounting Department, what is the maximum it can pay an outside vendor without increasing total costs? (Do not round intermediate calculations.)

c. If BluStar outsources both the Administration and the Accounting Departments, what is the maximum it can pay an outside vendor without increasing total costs?

The Cocoa Mass Edibles Factory manufactures and distributes chocolate products

Additional Information:

It purchases cocoa beans and processes them into two intermediate​ products: chocolate-powder liquor base and​ milk-chocolate liquor base. These two intermediate products become separately identifiable at a single splitoff point. Every 2,000 pounds of cocoa beans yields 50 gallons of​ chocolate-powder liquor base and 50 gallons of​ milk-chocolate liquor base. The​ chocolate-powder liquor base is further processed into chocolate powder. Every 50 gallons of​ chocolate-powder liquor base yield 650 pounds of chocolate powder. The​ milk-chocolate liquor base is further processed into milk chocolate. Every 50 gallons of​ milk-chocolate liquor base yield 1,070 pounds of milk chocolate.

Production and sales data for August 2017 are as follows​ (assume no beginning​ inventory):

- Cocoa beans​ processed, 22,800 pounds times

- Costs of processing cocoa beans to splitoff point​ (including purchase of​ beans), $62,000

Cocoa Mass Edibles Factory fully processes both of its intermediate products into chocolate powder or milk chocolate. There is an active market for these intermediate products. In August 2017​, Cocoa Mass Edibles Factory could have sold the​ chocolate-powder liquor base for $20 a gallon and the​ milk-chocolate liquor base for $60 a gallon.

Question:

1. Calculate how the joint costs of $62,000 would be allocated between chocolate powder and milk chocolate under the following​ methods:

a. Sales value at splitoff

b. Physical measure​ (gallons)

c. NRV​ (Net Realizable​ Value)

d. Constant​ gross-margin percentage NRV

2. What are the​ gross-margin percentages of chocolate powder and milk chocolate under each of the methods in requirement​ 1?

3. Could Cocoa Mass Edibles Factory have increased its operating income by a change in its decision to fully process both of its intermediate​ products? Show your computations.

Glaser Company carries the following investments on its books at December 31, 2020 and December 31, 2021. Available for-Sale securities are considered to be non-current. All securities were purchased and properly recorded during February 2020. You need to combine all trading and AFS securities into trading portfolio and AFS portfolio, respectively, while making the fair value adjustment entries.

Required:

• Prepare the necessary fair value adjusting journal entries for Glaser on December 31, 2020.
• Assume Glaser sold its investment in “B” for $125 on December 15, 2021; prepare journal entries for sales of investment on December 15 and fair value adjusting journal entries on December 31, 2021.

• Ignoring income taxes and assuming both the retained earnings and accumulated other comprehensive income have a balance of 0 on December 31, 2019, complete the following schedule:

Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below:

From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 20% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $430,000, and March sales totaled $460,000.

Required:

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2. What is the accounts receivable balance on June 30th?

• Required 1

Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

• Required 2

What is the accounts receivable balance on June 30th?

Measures of liquidity, Solvency, and Profitability

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $ 68 on December 31, 20Y2.

Required:

Determine the following measures for 20Y2, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year.

Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations: Variable costs per unit: Manufacturing: Direct materials $ 28 Direct labor $ 14 Variable manufacturing overhead $ 2 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 320,000 Fixed selling and administrative expenses $ 50,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $84 per unit. Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2. 2. Assume the company uses absorption costing: a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2. 3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.

Burnaby Ltd. is considering the acquisition of new production equipment. If purchased, the new equipment would cost $1,850,000. Installation and testing costs would be $35,000 and $25,000 respectively. Once operational, the equipment will cause an increase in working capital of $120,000. The new equipment is expected to generate increased annual sales of $720,000. Variable costs to operate the machine are estimated at 42% of sales and annual fixed costs would be lowered by $75,000. The equipment has an estimate 6 year life and a salvage value of $90,000. The company requires an 11% return on its investments. Ignore income taxes.

Required: a.   Compute the net present value.

b. How do you compare NPV to Payback method? Which method is likely to be more reliable?

(PLEASE READ: ORIGINAL ANSWER ONLY, NO CUT AND PASTE OF PREVIOUSLY POSTED ANSWER. PLEASE TYPE RESPONSE NO HANDWRITTEN RESPONSES. IF YOU CAN'T FOLLOW INSTRUCTIONS DO NOT REPLY TO QUESTION.)

Cary and Elle Bronson had been married for 15 years when trouble arose in their marriage. Cary’s long hours of working had taken a toll on it; he was rarely around even for family functions. The last straw came when Elle found lipstick on the collar of Cary’s shirt and the unmistakable scent of a very expensive woman’s perfume; this wasn’t the first time she had noticed the telltale signs of what appeared to be a clandes¬tine affair. The next day, Elle visited an attorney to begin divorce proceedings. After some small talk, the attorney, Mark Smithson, asked Elle about the major assets accu¬mulated during the marriage. “Oh, there are the cars—a Jeep Cherokee, a Chevy Suburban, and a Bentley,” she answered. “A Bentley?” he queried, somewhat surprised. “Yes,” said Elle. “Our restaurant, The Roasted Duck, has done very well over the years. We began the business with almost nothing and both worked there until Karen, our second child, was born. At that point, I became a stay-at-home mom and left every¬thing to Cary.” “I’ve eaten at The Roasted Duck—the food is excellent,” Mark said. “Thank you,” replied Elle. “Is this the only source of income for you and your husband, Mrs. Bronson?” he asked. “Yes, other than some interest and dividends,” she answered. She and the lawyer discussed other matters pertaining to the divorce. He told Elle that he would obtain information from Cary’s attorney so that an equitable division of assets could occur and the issue of the custody of their children would be settled. Two weeks later, Elle received a call from Mark. Through the discovery process, Cary’s attorney had submitted a valuation of the restaurant that seemed unusually low and had not listed any other assets that could account for the house and vehicles that the Bron¬sons had acquired and the private education that they had provided for their children. “That can’t be right!” Elle exclaimed. “Well, it certainly doesn’t look right,” Mark said, “I’ll look into this some more and let you know what I find.” After he hung up the phone, Mark called Cary’s attorney. “This value placed on the restaurant doesn’t make any sense. What’s your take on this?” After a short pause, the attorney replied, “Cary told me that the restaurant business is not doing well and, thus, the value has declined.” After Mark hung up the phone, he pondered the situation: There must be an answer to this mystery. One thing’s for sure; if Cary isn’t telling the truth, he might as well change the name of his restaurant to The Cooked Goose.

What evidence (i.e., physical, documentary, and observational) could be collected to determine whether the valuation is correct?

How could you go about collecting this evidence?

Assume for a moment that the valuation is correct.

What other sources of money could Cary have to maintain his family’s lifestyle?

How would you test your theories?

USA - Federal Taxation | Filling Requirements

Determine whether each of the following taxpayers must file a return for 2018:

Jamie is a dependent who has wages of $4,150

Joel is a dependent who has interest income of $1,200

Martin is self-employed. His gross business receipts are $24,000, and business expenses are $24,300. His only other income is $2,600 in dividends from stock he owns.

Valerie is 68 and unmarried. Her income consists of $6,500 in Social Security benefits and $15,000 from a qualified employer-provided pension plan.

Raul and Yvonne are married and have two dependent children. Their only income is Yvonne’s $26,000 salary.

PROBLEM 7–18 Relevant Cost Analysis in a Variety of Situations [LO 7–2, LO 7–3, LO 7–4]Andretti Company has a single product called a Dak. The company normally produces and sells 60,000 Daks each year at a selling price of $32 per unit. The company’s unit costs at this level of activity are given below:Direct materials................................$10.00Direct labor ...................................4.50Variable manufacturing overhead................2.30Fixed manufacturing overhead ..................5.00($300,000 total)Variable selling expenses.......................1.20Fixed selling expenses ......................... 3.50($210,000 total)Total cost per unit..............................$26.50A number of questions relating to the production and sale of Daks follow. Each question is independent.Required: 1. Assume that Andretti Company has sufficient capacity to produce 90,000 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 25% above the present 60,000 units each year if it were willing to increase the fixed selling expenses by $80,000. Would the increased fixed selling expenses be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 90,000 Daks each year. A customer in a foreign market wants to purchase 20,000 Daks. Import duties on the Daks would be $1.70 per unit, and costs for permits and licenses would be $9,000. The only selling costs that would be associated with the order would be $3.20 per unit shipping cost. Compute the per unit break-even price on this order. 3. The company has 1,000 Daks on hand that have some irregularities and are therefore consid-ered to be “seconds.” Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What unit cost figure is relevant for set-ting a minimum selling price? Explain. 4. Due to a strike in its supplier’s plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company 318Chapter 7nor78542_ch07_280-332.indd 318 11/19/15 11:02 AMhas enough material on hand to operate at 30% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 60% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20%. What would be the impact on profits of closing the plant for the two-month period? 5. An outside manufacturer has offered to produce Daks and ship them directly to Andretti’s cus-tomers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 75%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. Compute the unit cost that is relevant for comparison to the price quoted by the outside manufacturer.PROBLEM 7–19 Dropping or Retaining a Segment [LO 7–2]Jackson County Senior Services is a nonprofit organization devoted to providing essential ser-vices to seniors who live in their own homes within the Jackson County area. Three services are provided for seniors—home nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow:TotalHomeNursingMeals OnWheelsHouse-keepingRevenues..........................$900,000$260,000$400,000$240,000Variable expenses .................. 490,000 120,000 210,000 60,000Contribution margin................. 410,000 140,000 190,000 80,000Fixed expenses: Depreciation .....................68,0008,00040,00020,000 Liability insurance.................42,00020,0007,00015,000 Program administrators’ salaries . . . .115,00040,00038,00037,000 General administrative overhead*... 180,000 52,000 80,000 48,000Total fixed expenses ................ 405,000 120,000 165,000 120,000Net operating income (loss) ..........$ 5,000$ 20,000$ 25,000$ (40,000)*Allocated on the basis of program revenues.The head administrator of Jackson County Senior Services, Judith Miyama, is concerned about the organization’s finances and considers the net operating income of $5,000 last year to be razor-thin. (Last year’s results were very similar to the results for previous years and are represen-tative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report, Ms. Miyama asked for more information about the financial advisability of perhaps discontinuing the housekeeping program.The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided.Required: 1. Should the Housekeeping program be discontinued? Explain. Show computations to support your answer. 2. Recast the above data in a format that would be more useful to management in assessing the long-run financial viability of the various services.PROBLEM 7–20 Sell or Process Further [LO 7–7](Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat Packers is a major processor of beef and other meat products. The company has a large amount of T-bone steak on hand, and it is trying to decide whether to sell the T-bone steaks as they are initially cut or to process them further into filet mignon and the New York cut. has enough material on hand to operate at 30% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 60% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20%. What would be the impact on profits of closing the plant for the two-month period? 5. An outside manufacturer has offered to produce Daks and ship them directly to Andretti’s cus-tomers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 75%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. Compute the unit cost that is relevant for comparison to the price quoted by the outside manufacturer.