Consider the following income statement for the Heir Jordan Corporation: |
HEIR JORDAN CORPORATION Income Statement |
|||||||
Sales | $ | 48,800 | |||||
Costs | 34,800 | ||||||
Taxable income | $ | 14,000 | |||||
Taxes (30%) | 4,200 | ||||||
Net income | $ | 9,800 | |||||
Dividends | $ | 3,200 | |||||
Addition to retained earnings | 6,600 | ||||||
The balance sheet for the Heir Jordan Corporation follows. Based on this information and the income statement, supply the missing information using the percentage of sales approach. Assume that accounts payable vary with sales, whereas notes payable do not. (Leave no cells blank - be certain to enter "0" whenever the item is not a constant percentage of sales. Enter each answer as a percent rounded 2 decimal places, e.g., 32.16.) |
HEIR JORDAN CORPORATION Balance Sheet |
||||||||||||||
Percentage of Sales |
Percentage of Sales |
|||||||||||||
Assets | Liabilities and Owners’ Equity | |||||||||||||
Current assets | Current liabilities | |||||||||||||
Cash | $ | 2,650 | _______ | Accounts payable | $ | 2,400 | ______ | |||||||
Accounts receivable | 3,600 | _______ | Notes payable | 5,300 | ______ | |||||||||
Inventory | 9,000 | _______ | ||||||||||||
Total | $ | 15,250 | _______ | Total | $ | 7,700 | _______ | |||||||
Long-term debt | $ | 24,000 | _______ | |||||||||||
Owners’ equity | ||||||||||||||
Common stock and paid-in surplus | $ | 18,000 | _______ | |||||||||||
Retained earnings | 3,950 | _______ | ||||||||||||
Fixed assets | ||||||||||||||
Net plant and equipment | $ | 38,400 | ________ | Total | $ | 21,950 | _______ | |||||||
Total assets | $ | 53,650 | ________ | Total liabilities and owners’ equity | $ | 53,650 | _______ | |||||||
In: Accounting
A company has fixed costs of $900 and a per-unit contribution margin of $3. Which of the following statements is true? ______
A) Once the break-even point is reached; the company will increase income at the rate of $3 per unit.
B) Each unit "contributes" $3 toward covering the fixed costs of $900.
C) Each unit "contributes" $3 toward covering the fixed costs of $900 and once the break-even point is reached, the company will increase income at the rate of $3 per unit.
D) The firm will definitely lose money in this situation.
E) The situation described is not possible and there must be an error.
In: Accounting
Variable Costing Income Statement
On November 30, the end of the first month of operations, Weatherford Company prepared the following income statement, based on the absorption costing concept:
Weatherford Company Absorption Costing Income Statement For the Month Ended November 30 |
||||
Sales (2,500 units) | $52,500 | |||
Cost of goods sold: | ||||
Cost of goods manufactured (2,900 units) | $43,500 | |||
Inventory, November 30 (400 units) | (6,000) | |||
Total cost of goods sold | 37,500 | |||
Gross profit | $15,000 | |||
Selling and administrative expenses | 8,530 | |||
Income from operations | $6,470 |
Assume the fixed manufacturing costs were $9,135 and the fixed selling and administrative expenses were $4,180.
Prepare an income statement according to the variable costing concept. Round all final answers to whole dollars.
Weatherford Company | ||
Variable Costing Income Statement | ||
For the Month Ended November 30 | ||
Sales | $ | |
Variable cost of goods sold: | ||
Variable cost of goods manufactured | $ | |
Inventory, November 30 | ||
Total variable cost of goods sold | ||
Manufacturing margin | $ | |
Variable selling and administrative expenses | ||
Contribution margin | $ | |
Fixed costs: | ||
Fixed manufacturing costs | $ | |
Fixed selling and administrative expenses | ||
Total fixed costs | ||
Income from operations | $ |
In: Accounting
How do you calculate the multi product breakeven point and level of activity required to meet a target income?
In: Accounting
27) Lichtenstein Imports needs to determine the variable utilities rate per machine hour in order to estimate cost for August. Relevant information is as follows.
Month Machine Hours Worked Utilities Cost
April 4,500 $9,560
May 4,200 $9,440
June 6,500 $10,725
July 7,000 $11,400
Lichtenstein anticipates producing 5,000 units in August, each unit requiring 1.5 hours of machine time.
The company uses the high-low method to analyze costs.
Required:
A. Calculate the variable and fixed components of the utilities cost.
B. Using the data calculated above, estimate the utilities cost for August.
C. Compare the high-low method versus the visual-fit method with respect to (1) number of data observations used in the analysis and (2) objectivity of the results.
In: Accounting
Required information
[The following information applies to the questions
displayed below.]
Laker Company reported the following January purchases and sales
data for its only product.
Date | Activities | Units Acquired at Cost | Units sold at Retail | ||||||||||||||
Jan. | 1 | Beginning inventory | 175 | units | @ | $ | 10.00 | = | $ | 1,750 | |||||||
Jan. | 10 | Sales | 135 | units | @ | $ | 19.00 | ||||||||||
Jan. | 20 | Purchase | 130 | units | @ | $ | 9.00 | = | 1,170 | ||||||||
Jan. | 25 | Sales | 140 | units | @ | $ | 19.00 | ||||||||||
Jan. | 30 | Purchase | 275 | units | @ | $ | 8.00 | = | 2,200 | ||||||||
Totals | 580 | units | $ | 5,120 | 275 | units | |||||||||||
Required:
The Company uses a periodic inventory system. For specific
identification, ending inventory consists of 305 units, where 275
are from the January 30 purchase, 5 are from the January 20
purchase, and 25 are from beginning inventory. Determine the cost
assigned to ending inventory and to cost of goods sold using
(a) specific identification, (b) weighted
average, (c) FIFO, and (d) LIFO.
In: Accounting
) Randy's Pizza delivers pizzas to dormitories and apartments near a major state university. The company's annual fixed costs are $48,000. The sales price averages $9, and it costs the firm $3 to make and deliver each pizza.
Required:
A. How many pizzas must Randy's sell to break even?
B. How many pizzas must the company sell to earn a target profit of $54,000?
C. If budgeted sales total 9,900 pizzas, how much is the company's safety margin in dollars?
D. Tony's assistant manager, an accounting major, has suggested that the firm should try to increase the contribution margin per pizza. Explain the meaning of "contribution margin" in layman's terms.
In: Accounting
Briggs Excavation Company is planning an investment of $307,300 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for five years. Customers will be charged $120 per hour for bulldozer work. The bulldozer operator costs $31 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $41 per hour of bulldozer operation.
Present Value of an Annuity of $1 at Compound Interest | |||||
Year | 6% | 10% | 12% | 15% | 20% |
1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |
3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |
4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |
5 | 4.212 | 3.791 | 3.605 | 3.352 | 2.991 |
6 | 4.917 | 4.355 | 4.111 | 3.784 | 3.326 |
7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |
8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |
9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |
10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |
a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows.
Briggs Excavation | |||
Equal Annual Net Cash Flow | |||
Cash inflows: | |||
Hours of operation | |||
Revenue per hour | $ | ||
Revenue per year | $ | ||
Cash outflows: | |||
Hours of operation | |||
Fuel cost per hour | $ | ||
Labor cost per hour | |||
Total fuel and labor costs per hour | $ | ||
Fuel and labor costs per year | |||
Maintenance costs per year | |||
Annual net cash flow | $ |
Feedback
a. Subtract the operating expenses (hourly fuel and labor costs, multiplied by the operating hours, plus the annual maintenance costs) from the revenues (operating hours multiplied by the hourly revenue).
b. Determine the net present value of the investment, assuming that the desired rate of return is 6%. Use the present value of an annuity of $1 table above. Round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.
Present value of annual net cash flows | $ |
Amount to be invested | $ |
Net present value | $ |
c. Should Briggs Excavation invest in the
bulldozer, based on this analysis?
Yes , because the bulldozer cost is less than the
present value of the cash flows at the minimum desired rate of
return of 6%.
d. Determine the number of operating hours such
that the present value of cash flows equals the amount to be
invested. Round interim calculations and final answer to the
nearest whole number.
hours
In: Accounting
Talbot Riding Stables provides stables, care for animals, and grounds for riding and showing horses. The account balances at the beginning of 2018 were:
Problem Set B Enlarge Image During 2018, the following transactions occurred: Talbot provided animal care services, all on credit, for $210,300. Talbot rented stables to customers for $20,500 cash. Talbot rented its grounds to individual riders, groups, and show organizations for $41,800 cash.
There remains $15,600 of accounts receivable to be collected at December 31, 2018.
Feed in the amount of $62,900 was purchased on credit and debited to the supplies account.
Straw was purchased for $7,400 cash and debited to the supplies account.
Wages payable at the beginning of 2018 were paid early in 2018. Wages were earned and paid during 2018 in the amount of $112,000.
The income tax payable at the beginning of 2018 was paid early in 2018. Payments of $73,000 were made to creditors for supplies previously purchased on credit. One year's interest at 9% was paid on the notes payable on July 1, 2018. During 2018, Jon Talbot, a principal shareholder, purchased a horse for his wife, Jennifer, to ride. The horse cost $7,000, and Talbot used his personal credit to purchase it. Property taxes were paid on the land and buildings in the amount of $17,000. Dividends were declared and paid in the amount of $7,200. The following data are available for adjusting entries: Supplies (feed and straw) in the amount of $30,400 remained unused at year-end. Annual depreciation on the buildings is $6,000. Annual depreciation on the equipment is $5,500. Wages of $4,000 were unrecorded and unpaid at year-end. Interest for six months at 9% per year on the note is unpaid and unrecorded at year-end. Income taxes of $16,500 were unpaid and unrecorded at year-end.
In: Accounting
How do you calcuate the Fixed Overhead (FOH) spending variance and the Fixed Overhead (FOH) production volume variance given the following information:
(budgeted assembly time is 2 hrs per unit of output)
Actual Results | Static Budget | |
Number of fans assembled $ sold | 220 fans | 150 fans |
Hours of assembley time | 396 hours | - |
Variable Overhead (VOH) cost per hr of assembly time | - | $ 31.00 |
VOH costs | $ 12,693 | - |
FOH cost | $ 15,510 | $ 14,100 |
In: Accounting
How does managerial accounting differ from financial accounting? Please focus on the following elements: 1- Past versus Present 2- Precision versus Timeliness 3- Requirement to follow GAAP/IFRS
In: Accounting
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows: Sales $ 1,120,000 Variable expenses 560,000 Contribution margin 560,000 Fixed expenses 200,000 Net operating income $ 360,000 Required: Answer each question independently based on the original data: 1. What is the product's CM ratio? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. If this year's sales increase by $58,000 and fixed expenses do not change, how much will net operating income increase? 4-a. What is the degree of operating leverage based on last year's sales? 4-b. Assume the president expects this year's sales to increase by 14%. Using the degree of operating leverage from last year, what percentage increase in net operating income will the company realize this year? 5. The sales manager is convinced that a 14% reduction in the selling price, combined with a $80,000 increase in advertising, would increase this year's unit sales by 25%. a. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? b. Do you recommend implementing the sales manager's suggestions? 6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.10 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $360,000 net operating income as last year? Do not prepare an income statement; use the incremental analysis approach.
In: Accounting
Problem 3
Hood leased equipment from Rowe on January 1, 2021. Rowe manufactured the equipment at a cost of $200,000. Both lessee and lessor have December 31 year ends. Lease terms: Lease term 5 years, (20 quarterly periods) Quarterly payments, $15,000 beginning Jan 1, Mar 31, June 30, Sept.,30 and Dec. 31. Economic life of asset, 5 years Interest rate charged by lessor, 10% Depreciation is recorded quarterly
Required:
1. Prepare appropriate journal entries for the lessee at its beginning, January 1 2021, and on March 31.
2. Prepare appropriate journal entries for the lessor at its beginning, January 1 2021, and on March 31.
In: Accounting
J.P. Morgan, the iconic financier, is reputed to have estimated the proper compensation for an organization's chief executive officer to be 20 times the salary of its lowest paid employee. Today, however, the average CEO is compensated at 200 times the rate of the lowest paid employee. In your estimation, what should the distance between highest- and lowest-paid actually be? Explain your reasoning for either a larger or smaller gap between employee and board member compensation and highlight potential benefits and drawbacks to your chosen compensation structure.
In: Accounting
1. Who can contribute to a traditional IRA, and how much? Nick, age 53, is single and has AGI of $67,000. He contributes $5,000 to his IRA in 2018. How much can Nick deduct if he is not covered by an employer-sponsored qualified retirement plan? How much can Nick deduct if he is covered by an employer-sponsored qualified retirement plan?
In: Accounting