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

$2,609

$11,391

$7,611

$6,831

YOUNG BRANDS (YB) is a manufacturer of sports clothing and team uniforms. Its industry is quite competitive, so the management team has attempted to operate a modern operation with state-of-the-art production facilities. Careful cost management has been an important factor in attaining profits. YB is considered a leader for its fashion sense, pricing, marketing, and product quality.

Professional and university-team uniforms and affiliated products are sold by company salesmen to teams and to retail stores throughout North America. YB currently uses a network of manufacturers' representatives to reach retailers in Europe, Latin America, and Asia. (A manufacturer's rep­resentative [MR] is an independent individual, sales agency, or company that sells a manufacturer's products to wholesale and retail customers in foreign countries.)

There is a large demand for licensed (approved) clothing with team logos and colors, and premium prices can be charged to retail customers who buy for themselves as fans, for friends and relatives as gifts, or simply to affiliate with a local (hopefully winning) team. The licensed clothing line includes sweatshirts; caps; jogging suits; baseball, football, and hockey shirts; and various accessories (such as tote bags, scarves, and towels).

CHANGES IN YB'S GLOBAL MARKETING STRATEGY

About a year ago, the senior managers concluded that YB products in global markets were “underappreciated” and that “sales could—and should—be substantially higher.” See Exhibit C6.1 for recent global sales results. They reasoned that trade shows in the major international markets are a relatively inexpensive way to display the company's products and provide an opportunity to meet major corporate buyers face to face.

EXHIBIT C6.1 Recent Financial Results

That is precisely what happened. The firm's exhibits were impressive, former athletes were used as spokespersons, and the company made important contacts with Asian and European buyers. The long-term plan is to eliminate the use of MRs and to sell directly to major retail chains. This will improve market saturation in metropolitan areas and end the commissions paid to the MR network (currently about 6 percent of revenue on average).

As a result of this, YB's sales growth is expected to increase sharply in the next three years, and revenues are estimated to more than double by the end of 2018. The marketing vice president forecasts worldwide sales of $160 million in 2016, $200 million in 2017, and $250 million in 2018. Management is pleased with the forecast because it is evidence of what they have long believed: that the company manufactures quality products with global appeal at a reasonable price. The downside is that such growth will undoubtedly require external financing and could cause administrative and operational difficulties.

Although YB will explore a number of financing alternatives, it is recognized that the first step is to estimate the external funds needed for the period ahead. After all, before a financing option is explored, a reasonable projection must be made of what needs to be raised. And it is even possible that a portion of the expected growth can be internally financed.

FORECASTING CONSIDERATIONS

In order to develop the forecast, the president, Henry Gilmore, called a group meeting of his senior managers. All agree that the sales projections are “quite reasonable” in view of the activity resulting from the trade shows and the global obsession with sports teams and competitions, and may even be a bit low. They also decide to concentrate on the 2016 forecast at their initial meeting.

A few months ago, YB began implementing a number of cost-cutting measures that are expected to generate a 32 percent gross margin each year of the forecast. Due to economies of scale, operating expenses are expected to increase less than proportionately with sales, and the manager group agrees to a 20 percent increase in 2016. The relevant tax rate is 40 percent.

The purchasing vice president noted that the financial forecast needs to consider the tighter credit terms offered by many of the firm's suppliers. Company records show that two years ago, about 70 percent of YB's purchases were on terms of 2/10, net 30. That is, most suppliers offered a 2 percent discount to customers who paid within 10 days, with full payment expected by day 30. “We always took the discount when it was offered.”

Company records show that during the past year, about half of the suppliers offered the 2/10, net 30, discount. Fewer vendors are likely to offer cash discounts in the future, which will impact the firm's gross margin due to slightly higher prices paid for materials. Therefore, he recommends that the gross margin estimate be reduced to 31 percent, which the group accepts.

WORKING CAPITAL ISSUES

The discussion then turned to working capital management. Inventory control has been a problem for YB at times. Some in the group believe that inventory turnover can be increased to eight times mainly by using suppliers with shorter delivery times. Others are skeptical, believing that it is unrealistic to think that inventory management can be improved unless there is specific evidence to support this conclusion. The group finally concurs that an estimate based on historical inventory patterns is appropriate.

Given the new global customer base, it is clear that the firm's historical experience with its accounts receivable will be of little help in predicting future receivables. For the purpose of this forecast, the group decides to assume that they will offer credit terms of net 30 and that 50 percent of customers will pay on time and all other receivables will be received in 50 days. YB expects that this experience will improve in future years.

The marketing vice president is tasked with the responsibility of making payment terms clear to the new foreign buyers, and to working with YB's banks to establish letter of credit facilities. (A letter of credit is a document issued by a bank ensuring payment to a seller of goods, provided certain documents have been presented to the bank. These are documents that prove that the seller has performed the duties under an underlying sales contract and the goods have been supplied as agreed.)

The group expects that nearly all sales will be collected, and it estimates that bad debt expense will be “insignificant” and can be ignored. The group also thinks that cash should be 4 percent of sales. The firm's predicted 2016 spending on fixed assets is $35 million. These expenditures partly reflect the replacement of existing equipment but mainly result from the new facilities necessary to accommodate the growth in sales.

The note payable will require a 20 percent payoff in 2016. Other current liabilities will increase at the same rate as sales. Existing bond debt and bank loans will require an average payoff of 15 percent of the principal amount.

FINANCIAL ISSUES

YB will pay $1 million in dividends during 2016, the same amount as in 2015. Although this might appear stingy, the group believes that most profits should be reinvested in the aggressive plans for global growth. Ignore any interest expense for the purpose of calculating the 2016 financial statements. The group realizes that it is likely that most of any new required funds will be borrowed. The finance vice president says he has enough information to develop an estimate for 2016.

* After accumulated depreciation.

EXHIBIT C6.2 Financial Statements ($ millions)

EXHIBIT C6.3 Selected Industry Ratios and Other Financial Data

Question: Develop the 2016 pro forma balance sheet.

Julia Baker died, leaving to her husband Henry an insurance policy contract that provides that the beneficiary (Henry) can choose any one of the following four options. Money is worth 2.50% per quarter, compounded quarterly. Compute Present value if: Click here to view factor tables Correct answer. Your answer is correct. (a) $55,260 immediate cash. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present value $Entry field with correct answer 55260 SHOW SOLUTION LINK TO TEXT LINK TO TEXT Correct answer. Your answer is correct. (b) $4,040 every 3 months payable at the end of each quarter for 5 years. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present value $Entry field with correct answer 62980 SHOW SOLUTION LINK TO TEXT LINK TO TEXT Correct answer. Your answer is correct. (c) $19,160 immediate cash and $1,916 every 3 months for 10 years, payable at the beginning of each 3-month period. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present value $Entry field with correct answer 68459 SHOW SOLUTION LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. (d) $4,040 every 3 months for 3 years and $1,490 each quarter for the following 25 quarters, all payments payable at the end of each quarter. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Present value $Entry field with incorrect answer 68894 LINK TO TEXT LINK TO TEXT Incorrect answer. Your answer is incorrect. Try again. Which option would you recommend that Henry exercise?