WoolCo buys sheep’s wool from farmers. The company began operations in January of this year, and is making decisions on product offerings, pricing, and vendors. The company is also examining its method of assigning overhead to products. You’ve just been hired as a production manager at WoolCo.

Currently WoolCo makes three products: (1) raw, clean wool to be used as stuffing or insulation; (2) wool yarn for use in the textile industry, and (3) extra-thick yarn for use in rugs.

The company would like you to evaluate its costing methods for its raw wool and wool yarn. Upper management would also like your recommendations regarding a production decision regarding their current and proposed product lines.

Traditional costing allocates overhead costs to products based upon a predetermined factory overhead rate, which is computed using an estimated activity base such as direct labor hours or machine hours. The rate is computed as follows:

Predetermined Factory Overhead Rate = (Estimated Total Factory Overhead Costs) ÷ (Estimated Activity Base)

WoolCo has been using traditional costing with combing machine hours as the activity base. The company would like to consider activity-based costing

A cost allocation method that identifies activities causing the incurrence of costs and allocates these costs to products (or other cost objects), based on activity drivers (bases).

. In order to understand their current system better, you evaluate WoolCo’s current method of costing for raw wool and wool yarn. The production staff has compiled the following information for you on the production of 500 pounds of either raw wool or wool yarn:

In the following table, use combing machine hours as the activity base for assigning overhead costs to each product. When required, round your answers to the nearest dollar.

Predetermined factory overhead rate: per direct labor hour

Points:

Sole Purpose Shoe Company

Sole Purpose Shoe Company is owned and operated by Sarah Charles. The company manufactures casual shoes, with manufacturing facilities in your state. Sarah began the business this year, and while she has a great deal of experience in manufacturing popular and comfortable shoes, she needs some help in evaluating her results for the year, and asks for your help.

Under normal conditions, Sarah spends $8.40 per unit of materials, and it will take 3.6 units of material per pair of shoes. During July, Sole Purpose Shoe Company incurred actual direct materials costs of $63,101 for 7,090 units of direct materials in the production of 2,175 pairs of shoes.

Complete the following table, showing the direct materials variance relationships for July for Sole Purpose Shoe Company. If required, round your answers to two decimal places. When entering variances, use a negative number for a favorable cost variance

A variance that occurs when the actual cost is less than standard cost.

, and a positive number for an unfavorable cost variance

A variance that occurs when the actual cost exceeds the standard cost.

.

Points:

0 / 18

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Review Exhibit 6

Under normal conditions, Sarah pays her employees $8.50 per hour, and it will take 2.8 hours of labor per pair of shoes. During August, Sole Purpose Shoe Company incurred actual direct labor costs of $65,148 for 7,320 hours of direct labor in the production of 2,300 pairs of shoes.

Complete the following table, showing the direct labor variance relationships for August for Sole Purpose Shoe Company. If required, round your answers to two decimal places. When entering variances, use a negative number for a favorable variance, and a positive number for an unfavorable variance.

Points:

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Review Exhibit 7 in the text.

Shaded cells have feedback.

Sarah has learned a lot from you over the past two months, and has compiled the following data for Sole Purpose Shoe Company for September using the techniques you taught her. She would like your help in preparing a Budget Performance Report

A report comparing actual results with budget figures.

for September. The company produced 2,500 pairs of shoes that required 8,750 units of material purchased at $8.20 per unit and 6,750 hours of labor at an hourly rate of $8.90 per hour during the month. Actual factory overhead during September was $21,000. When entering variances, use a negative number for a favorable cost variance, and a positive number for an unfavorable cost variance.

Use the data in the following table to prepare the Budget Performance Report for Sole Purpose Shoe Company for September.

Question not attempted.

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Solution

Points:

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Review Exhibit 3 and computations for the amounts in the report.

in the text.

You are about to start working at car dealership that is currently reporting losses due to flooding but will be profitable in a few years. Assume you’re your risk adverse and your supervisor cannot fully monitor your actions. The key metrics at this dealership include both financial data (number of sales, margin on sales) as well as qualitative data (survey of experience). You are tasked with designing a compensation contract.

1. Define in your own terms moral hazard and adverse-selection. Describe how the firm may want to establish a compensation contract for you given moral hazard and adverse selection issues.

2. Does this change depending on your level of risk aversion?

3. Discuss both tax and nontax factors from both the employee and employers perspective.  

4. Suppose a firm has a tax loss in the current period of $200, which when added to prior tax losses gives it an NOL carryforward of $300. The top statutory tax rate is 21%. Assume an after-tax discount rate of 10% and future taxable income of $50 per year. What is the firm’s marginal explicit tax rate?

5. Create the compensation contract with points 1-4 in mind. Keep this contract to a single page. You will be graded on creativity, presentation, and writing clarity.

Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The company’s activity-based costing system has four activity cost pools, which are listed below along with their activity measures and activity rates:

The company just completed a single order from Interstate Trucking for 2,200 custom seat cushions. The order was produced in three batches. Each seat cushion required 0.7 direct labor-hours. The selling price was $141.90 per unit, the direct materials cost was $103 per unit, and the direct labor cost was $14.30 per unit. This was Interstate Trucking’s only order during the year.

Required:

Calculate the customer margin on sales to Interstate Trucking for the year.

are there any major differences between P & G and European based rivals? What conclusion can you draw from this?

on December 27, 2014 wolcott windows purchased a piece of equipment for 107,500. the estimated useful life of the equipment is either three years or 60,000 units, with a residual value of 10,500. the company has a December 31 fiscal year end and normally used straight-line detection. management us considering the merits of using the units of production or diminishing balance method of detection instead of the straight line method. the actual numbers of units produced by the equipment were 10,000 in 2015, 20,000 in 2016 and 29,000 in 2017. the equipment was sold on January 5, 2018, for 15,000.
a) calculate the depreciation for the equipment for each year. under 1) the straight line method 2) the diminishing balance method using 40% rate and 3) units of production
d
b) calculate the gain or loss on the sale of equipment under each of the three methods l.
c) calculate the total depreciation expense plus the loss on sales ( minus the gain on sale) under each of the three depreciation methods. comment on your results

1. For companies with patterns of increasing R&D expenditure, the expenses avoided by capitalization in a given period exceed that period's amortization charges. In such cases, what would be the impact of R&D capitalization on the reported profits?

a. The reported profits would be inflated relative to a full-expensing system.

b. The reported profits would be deflated relative to a full-expensing system.

c. There would be no impact on the reported profits.

d. The reported profits would be doubled, compared to a full-expensing system.

2. "Costs that are excluded from the costs of inventories are abnormal amounts of ______ materials, labor, or other production costs and storage costs that are not related to the production process."

a. wasted

b. direct

c. manufacturing

d. production

3. The removal of an asset or liability from the balance sheet and the accounts refers to ______.

a. derecognition

b. deletion

c. recognition

d. removal

e. None of the choices

4. According to IAS 2, the net realizable value is computed by subtracting the estimated costs of completion and the estimated costs necessary to make the sale from ______.

a. the estimated selling price in the ordinary course of business

b. the estimated selling price in a booming market condition

c. the historical cost or the original purchase price

d. the estimated selling price in a recession

5. The acquisition costs of property, plant, and equipment do not include:

a. Maintenance costs during the first 30 days of use.

b. Legal fees, delivery charges, installation, and any applicable sales tax.

c. The net invoice price.

d. The ordinary and necessary costs to bring the asset to its desired condition and location for use.

6. According to International Financial Reporting Standards (IFRS), the revaluation of equipment when fair value exceeds book value, results in

a. An increase in other comprehensive income.

b. A decrease in other comprehensive income.

c. A decrease in net income.

d. An increase in net income.

7. Under U.S. GAAP, research and development costs for projects other than software development should be:

a. Expensed in the period incurred.

b. Expensed if unsuccessful, capitalized if successful.

c. Deferred pending determination of success.

d. Expensed in the period they are determined to be unsuccessful.

10. IAS 16 covers all of the following aspects of accounting for fixed assets, except ______.

a. recognition of initial costs of merchandise held for resale

b. depreciation

c. recognition of initial costs of property, plant, and equipment

d. measurement at initial recognition

e. All of the choices are covered in IAS 16.

The Welding Department of Healthy Company has the following production and manufacturing cost data for February 2020. All materials are added at the beginning of the process.

Prepare a production cost report for the Welding Department for the month of February. (Round unit costs to 2 decimal places, e.g. 2.25 and all other answers to 0 decimal places, e.g. 1,225.)

The following measures belong to one of the four perspectives of the balanced scorecard:

1) Return on investment

2) Time to market

3) Number of new customers

4) Percentage of income from new sources

5) Quality costs

6) Employee productivity

Required:

a. Identify the appropriate perspective for each measure listed above.

b. Suggest a possible strategic objective that could be associated with each measure (Be sure to clearly label each article)

Note:Could you please don't use your handwriting to answer this question to be easy for me to solve...Thanks

  
Use the above adjusted trial balance to prepare Wilson Trucking Company’s classified balance sheet as of December 31, 2017.

Eclectic Ergonomics Company manufactures designer furniture. Eclectic Ergonomics uses a job order cost system. Balances on April 1 from the materials ledger are as follows:

The materials purchased during April are summarized from the receiving reports as follows:

Materials were requisitioned to individual jobs as follows:

The glue is not a significant cost, so it is treated as indirect materials (factory overhead).

Required:

Compare and contrast measures based on activity and measures based on strategy

Edison Leasing leased high-tech electronic equipment to Manufacturers Southern on January 1, 2018. Edison purchased the equipment from International Machines at a cost of $131,379. (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.)

Required:
Prepare a lease amortization schedule and appropriate entries for Edison Leasing from the beginning of the lease through January 1, 2019. Edison’s fiscal year ends December 31.

"Amort Schedule and General Journal"

You are an audit manager currently finalizing your 31 December 2013 audits. The following independent and material matters have come to your attention:
1. The audit of the statutory records of Whale Ltd, a reporting entity, revealed the following problems:
•   Failure to update the members’ register for changes in shareholders;
•   Failure to obtain written consent from directors to act;
•   Directors’ minutes not prepared in respect of the current year;
•   Failure to hold the AGM in respect of the previous financial year.
The company made no comment in respect of either the failure to keep properly updated statutory registers or the holding of the AGM.

2.   Shark Ltd, a reporting entity, uses the last-in first-out basis in respect of valuation of closing inventory, which is one of the most significant balance sheet accounts. The difference between first-in first-out and last-in-first-out has a material effect on the closing inventory balance.

3.   ABC Ltd (ABC) is a holding company with a number of wholly owned subsidiaries. One of these, FX Ltd (FX), is a self-sustaining foreign subsidiary with manufacturing and distribution facilities throughout South-East Asia. The group accounts of ABC and its subsidiaries consist of the consolidated accounts of ABC and its subsidiaries and exclude the accounts of FX, which are attached separately.
The consolidated accounts include a note stating that the directors believe that it is misleading to consolidate FX as its operations are very different from those of the rest of the group and carried out under substantially different conditions. The note includes details of inter-company balances and transactions.

REQUIRED:
Critically discuss in relation to each of the above circumstances the audit and internal control issues to be considered and their likely impact on the audit report to be issued.