Morton Company’s contribution format income statement for last month is given below: Sales (46,000 units × $22 per unit) $ 1,012,000 Variable expenses 708,400 Contribution margin 303,600 Fixed expenses 242,880 Net operating income $ 60,720 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.

Required: 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $6.60 per unit. However, fixed expenses would increase to a total of $546,480 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased.

2. Refer to the income statements in (1). For the present operations and the proposed new operations, compute (a) the degree of operating leverage, (b) the break-even point in dollar sales, and (c) the margin of safety in dollars and the margin of safety percentage.

3. Refer again to the data in (1). As a manager, what factor would be paramount in your mind in deciding whether to purchase the new equipment? (Assume that enough funds are available to make the purchase.)

4. Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company’s marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 30% without any change in selling price; the company’s new monthly fixed expenses would be $387,596; and its net operating income would increase by 20%. Compute the company's break-even point in dollar sales under the new marketing strategy.

Moranda and Sill, LLP, has served for over 10 years as the auditor of the financial statements of Highland Bank and Trust. The firm is conducting its audit planning for the current fiscal year and is in the process of performing risk assesment procedures. Based on inquiries ond other information obtained, the auditors learned that the bank is finalizing an aquisation of a smaller community bank located in another region of the state. Management anticipates that transaction will close in the third quarter, and, while there will be some challenges in integrating the IT systems of the aquired bank with Highland sytems, the bank should realize a number of operational cost savings over the long-term. During the past year, tha bank has expanded its online service options for customers, who can now remotely deposit funds into and withdraw funds from checkings and savings accounts. The systems has been well received by customers and the bank hopes to continue expanding those services. The challenge for Highland is that they are strugglingto retain IT personell given strong job market for individuals with those skills. Credit risk management continues to be a challenge for all banks, including Highland, and regulators continue to spend a lot of time on credit evaluation issues. The bankhas a dedicated underwriting staff that continually evaluates the collectibility of loans outstanding. Unfortunately , some of the credit review staff recently left the bank to work for a competitor. Competition in the community banking space is tough, especiallygiven the slowloan demand in the marketplace. The bank has expanded its investment portfolio into a number of new types of instruments subject to fair value accounting. Management has engaged an outside valuation expert to ensure that the valuation are properly measured and reported. Fortunately, the bank's capital position is strong and it far exceeds regulatory minimums. Capital is available to support growth goals in the bank's three-year strategic plan. 1. Describe any risks of material misstatement at the financial statement level. 2. Describe any risks of material misstatement at the assertion level. 3. Which, if any, risks would be considered a significant risk?

On January 1, 2019, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $700,000. The fair value of the noncontrolling interest at the acquisition date was $300,000.

Young reported stockholders’ equity accounts on that date as follows:

In establishing the acquisition value, Monica appraised Young's assets and ascertained that the accounting records undervalued a building (with a five-year remaining life) by $40,000. Any remaining excess acquisition-date fair value was allocated to a franchise agreement to be amortized over 10 years.

During the subsequent years, Young sold Monica inventory at a 30 percent gross profit rate. Monica consistently resold this merchandise in the year of acquisition or in the period immediately following. Transfers for the three years after this business combination was created amounted to the following:

In addition, Monica sold Young several pieces of fully depreciated equipment on January 1, 2020, for $47,000. The equipment had originally cost Monica $72,000. Young plans to depreciate these assets over a five-year period.

In 2021, Young earns a net income of $250,000 and declares and pays $80,000 in cash dividends. These figures increase the subsidiary's Retained Earnings to a $850,000 balance at the end of 2021. During this same year, Monica reported dividend income of $56,000 and an investment account containing the initial value balance of $700,000. No changes in Young's common stock accounts have occurred since Monica's acquisition.

1. Prepare the 2021 consolidation worksheet entries for Monica and Young.

2. Compute the net income attributable to the noncontrolling interest for 2021

.

Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1. On June 30, 2018, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $27,000 on the purchase date and the balance in eight annual installments of $4,000 on each June 30 beginning June 30, 2019. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment? 2. Johnstone needs to accumulate sufficient funds to pay a $570,000 debt that comes due on December 31, 2023. The company will accumulate the funds by making five equal annual deposits to an account paying 7% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2018. 3. On January 1, 2018, Johnstone leased an office building. Terms of the lease require Johnstone to make 20 annual lease payments of $137,000 beginning on January 1, 2018. A 10% interest rate is implicit in the lease agreement. At what amount should Johnstone record the lease liability on January 1, 2018, before any lease payments are made?

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $218,000.

Sales (58,000 units) $ 986,000

Costs:
Direct materials $ 160,800
Direct labor 240,800
Fixed factory overhead 104,000
Variable factory overhead 150,800
Fixed marketing costs 110,800
Variable marketing costs 50,800 / 818,000
Pretax income $ 168,000

• 32,545.

• 134,970.

• 65,576.

• 50,800.

• 172,394.

ABC, Resource Drivers, Service Industry Glencoe Medical Clinic operates a cardiology care unit and a maternity care unit. Colby Hepworth, the clinic’s administrator, is investigating the charges assigned to cardiology patients. Currently, all cardiology patients are charged the same rate per patient day for daily care services. Daily care services are broadly defined as occupancy, feeding, and nursing care. A recent study, however, revealed several interesting outcomes. First, the demands patients place on daily care services vary with the severity of the case being treated. Second, the occupancy activity is a combination of two activities: lodging and use of monitoring equipment. Since some patients require more monitoring than others, these activities should be separated. Third, the daily rate should reflect the difference in demands resulting from differences in patient type. Separating the occupancy activity into two separate activities also required the determination of the cost of each activity. Determining the costs of the monitoring activity was fairly easy because its costs were directly traceable. Lodging costs, however, are shared by two activities: lodging cardiology patients and lodging maternity care patients. The total lodging costs for the two activities were $5,700,000 per year and consisted of such items as building depreciation, building maintenance, and building utilities. The cardiology floor and the maternity floor each occupy 20,000 square feet. Hepworth determined that lodging costs would be assigned to each unit based on square feet. To compute a daily rate that reflected the difference in demands, patients were placed in three categories according to illness severity, and the following annual data were collected:

To compute a daily rate that reflected the difference in demands, patients were placed in three categories according to illness severity, and the following annual data were collected:

The demands associated with patient severity are also provided:

1. Suppose that the costs of daily care are assigned using only patient days as the activity driver (which is also the measure of output). Compute the daily rate using this unit-based approach of cost assignment.
$ per day

2. Compute activity rates using the given activity drivers (combine activities with the same driver). If required, round your answers to the nearest cent.

3. Compute the charge per patient day for each patient type using the activity rates from Requirement 2 and the demands on each activity. Round your interim calculations and final answers to the nearest cent.

1. EMO Company had the following inventory items at 12/31/xx
Inventory items purchased from another company that cost $3,300 and were in transit on December 31 with shipping terms of FOB Shipping Point.
Inventory items purchased from another company that cost $2,800 and were in transit on December 31 with shipping terms of FOB Destination.
Inventory items sold to another company that had cost $3,500 and were in transit on December 31 with shipping terms FOB Shipping Point.
Inventory items sold to another company that had cost $3,000 and were in transit on December 31 with shipping terms FOB Destination.
How much of the above items should be included in the company's inventory on the December 31 Balance Sheet?

2. Tagit Inc. had the following inventory items on 12/31/xx
Goods for sale in the store of another retailer on consignment from Tagit Inc. that had a cost of $3,300.
Goods in the store of Tagit Inc. placed on consignment from another company with a cost of $2,600.
Goods owned by Tagit Inc. that cost $3,300 have been damaged by water. The goods can be sold for $3,800 if $2,900 is spent cleaning and repairing them.
How much of the above items should be included in the company's inventory on the December 31 Balance Sheet?

Single plantwide factory overhead rate

Bach Instruments Inc. makes three musical instruments: flutes, clarinets, and oboes. The budgeted factory overhead cost is $103,020. Overhead is allocated to the three products on the basis of direct labor hours. The products have the following budgeted production volume and direct labor hours per unit:

If required, round all per unit answers to the nearest cent.

a. Determine the single plantwide overhead rate.
$ per direct labor hour

b. Use the overhead rate in (a) to determine the amount of total and per-unit overhead allocated to each of the three products.

Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements:

1. The finished goods inventory on hand at the end of each month must equal 4,000 units of Supermix plus 25% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 18,250 units.

2. The raw materials inventory on hand at the end of each month must equal one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 87,375 cc of solvent H300.

3. The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

Required:

1. Prepare a production budget for Supermix for the months July, August, September, and October.

3. Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total.

Prepare a production budget for Supermix for the months July, August, September, and October.

Cranberry 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 Cranberry 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. Cranberry 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, 15​%.

Question:

Tabet Corporation uses the FIFO method in its process costing system. Operating data for the Curing Department for the month of March appear below:

According to the company’s records, the conversion cost in beginning work in process inventory was $20,449 at the beginning of March. The cost per equivalent unit for conversion costs for March was $5.10. How much conversion cost would be assigned to the units completed and transferred out of the department during March?

• $279,174

• $299,623

• $290,300

• $299,224

Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto,Inc., which manufactures greeting cards. Toto’s average annual net profit (before deduction of Mr. Lion’s salary) is $290,000. For each of the following cases, compute the income tax burden on this profit. (Ignore any payroll tax consequences.)

A) Mr. Lion’s salary is $100,000, and Toto pays no dividends.

B)Mr. Lion’s salary is $100,000, and Toto distributes its after-tax income as a dividend.

C) Toto is an S corporation. Mr. Lion’s salary is $100,000, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent Section 199A deduction.

D) Toto is an S corporation. Mr. Lion draws no salary, and Toto makes no cash distributions. Assume Toto's ordinary income qualifies for the 20 percent Section 199A deduction.

E)Toto is an S corporation. Mr. Lion draws no salary, and Toto makes cash distributions of all its income to Mr. Lion. Assume Toto's ordinary income qualifies for the 20 percent Section 199A deduction.

Crowd funding is not only a profitable and beneficial way of generating funds for the company but can also be a useful promotion tool. What role do you think crowd funding has played in the promotion of Amazfit – X. How does this approach relate to the promotion mix you studied in this course?

Deleon Inc. is preparing its annual budgets for the year ending December 31, 2020. Accounting assistants furnish the data shown below.

An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling expenses of $664,000 for product JB 50 and $365,000 for product JB 60, and administrative expenses of $545,000 for product JB 50 and $345,000 for product JB 60. Interest expense is $150,000 (not allocated to products). Income taxes are expected to be 30%

Complete a Budgeted Income Statement