4. Process Costing – Equivalent units of production, Weighted Average Method (7pts): The Lost Moon of Poosh, Inc. is a sports drink manufacturer who uses process costing to account for its production costs each period. The Lost Moon of Poosh uses two departments in the production of its product – Blending and Bottling. The following is information obtained for the Blending department for the month of January:

            Work in process (WIP) inventory, beginning balance:

                        Units in beginning WIP: 19,000

                        DM costs in beginning WIP: $91,000

                        Conversion Costs in beginning WIP: $49,400

            Units started / costs incurred during January:

                        Units started: 65,700

                        DM costs incurred: $167,500

                        Conversion Costs incurred: $85,900

At the end of January, as of January 31^st, there were 17,300 units left in ending WIP inventory. These partially completed units were 75% complete with respect to DM and 40% complete with respect to Conversion Costs. Use the Weighted-Average method to answer the questions below.

1. 1pt: Calculate how many units were completed and transferred out to the Bottling Department during January.

2. 2pts: Calculate the Equivalent Units of Production (EUP) for January for both DM and Conversion Costs.

3. 2pts: Calculate the cost per EUP for January for both DM and Conversion Costs. Round your final answer to two decimal places.

4. 1pt: Assign costs to the units completed and transferred out of the Blending Department to the Bottling Department during January.

5. 1pt: Assign costs to the units remaining in the Blending Department’s ending WIP inventory as of January 31^st.

Winslow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows: Winslow Inc. Product Income Statements—Absorption Costing For the Year Ended December 31, 20Y1 1 Cross Training Shoes Golf Shoes Running Shoes 2 Revenues $880,000.00 $685,000.00 $635,000.00 3 Cost of goods sold 420,000.00 339,200.00 416,000.00 4 Gross profit $460,000.00 $345,800.00 $219,000.00 5 Selling and administrative expenses 411,200.00 243,800.00 362,300.00 6 Income (Loss) from operations $48,800.00 $102,000.00 $(143,300.00) In addition, you have determined the following information with respect to allocated fixed costs: 1 Cross Training Shoes Golf Shoes Running Shoes 2 Fixed costs: 3 Cost of goods sold $127,500.00 $89,700.00 $120,000.00 4 Selling and administrative expenses 94,300.00 82,400.00 143,300.00 These fixed costs are used to support all three product lines and will not change with the elimination of any one product. In addition, you have determined that the effects of inventory may be ignored. The management of the company has deemed the profit performance of the running shoe line as unacceptable. As a result, it has decided to eliminate the running shoe line. Management does not expect to be able to increase sales in the other two lines. However, as a result of eliminating the running shoe line, management expects the profits of the company to increase by $143,300. Required: a. Do you agree with management’s decision and conclusions? Explain your answer. (Note: You may wish to complete part (b), the variable costing income statement, first.) b. Prepare a variable costing income statement for the three products. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign. Enter all other amounts as positive numbers. c. Use the report in (b) to determine the profit impact of eliminating the running shoe line, assuming no other changes. Use the minus sign to indicate a decline in profit. Labels December 31, 20Y1 Fixed costs For the Year Ended December 31, 20Y1 Amount Descriptions Contribution margin Contribution margin ratio Fixed manufacturing costs Fixed selling and administrative expenses Income (Loss) from operations Manufacturing margin Revenues Sales mix Total fixed costs Variable cost of goods sold Variable selling and administrative expenses b. Prepare a variable costing income statement for the three products. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign. Enter all other amounts as positive numbers. Score: 86/156 Winslow Inc. Variable Costing Income Statement—Three Product Lines For the Year Ended December 31, 20Y1 ✔ 1 Cross Training Shoes Golf Shoes Running Shoes 2 Revenues ✔ $880,000.00 ✔ $685,000.00 ✔ $635,000.00 ✔ 3 Variable cost of goods sold ✔ 292,500.00 ✔ 249,100.00 302,750.00 4 Manufacturing margin ✔ $587,500.00 ✔ $455,900.00 $322,250.00 5 Variable selling and administrative expenses ✔ 319,400.00 17,500.00 203,000.00 6 Contribution margin ✔ $268,100.00 $276,400.00 $119,250.00 7 Fixed costs: ✔ 8 Fixed manufacturing costs ✔ $126,500.00 $90,500.00 $119,250.00 9 Fixed selling and administrative expenses ✔ 94,600.00 83,000.00 142,000.00 10 Total fixed costs ✔ $22,100.00 $173,500.00 $261,250.00 11 Income (Loss) from operations ✔ $47,000.00 $102,900.00 $(142,000.00) Points: 20.95 / 38 Check My Work When recasting the variable costing income statement, remember that under variable costing, all fixed factory overhead costs are deducted in the period incurred. Revenues - Variable Cost of Goods Sold = Manufacturing Margin; Manufacturing Margin - Variable Selling and Administrative Expenses = Contribution Margin; Contribution Margin - (Fixed Manufacturing Costs + Fixed Selling and Administrative Expenses) = Income from Operations

Problem:

Charity Going Concern You are the newly hired controller for a charitable organization that is in trouble. The organization Helping Hands assists disabled individuals with all aspect of looking for and getting jobs. The organization has been struggling for the entire time of your employment. You are concerned that Helping Hands can survive much longer. The recession has taken a toll on fundraising. Payroll was due and you delayed paying the utilities for as long as you could. The big problem is Helping Hands largest donor requires that he be provided quarterly financial statements for him to continue making donations. In fact, you have not provided Gerald with statements for the last two quarters. Gerald comes to see you and informs you that his accountant will not allow him to provide any more financial assistance until you provide him with financial statements. If Gerald could show his accountant that the organization was doing well he could give them this quarters check. He needs the financial statements that have been promised. You apologize that he has not received the statements yet and promise that he will have them next week.

Later, Don the executive director of Helping Hands visits your office. He realizes there is a problem but is thankful there is enough cash to get through another week. Don is sure that once you provide Gerald the promised financial statements the donations will continue. Don realizes the financials do not look that good. He suggests leaving the debt to a major vendor off the financials. Don is a golfing buddy with the vendor’s president and the vendor Charles has offered to give the charity an official letter immediately waiving the charities debt to his company, not permanently, but just until you get past the cash crunch. Don assures you that it will keep the charity afloat and you wouldn’t be doing anything illegal. Charles is fully authorized to do this, as a goodwill gesture to a worthy cause. Don is hoping that maybe in the end Charles will actually cancel the debt. It’s a possibility.

UPDATED INFO: what is the ethical issue? what are the facts? who are the stakeholders? any alternatives to solve this issue? what would be the correct decision on this issue? using the 8 step process to answer and using support from the AICPA, Explain what your options are (there are two).

The textbook and the code of ethics should give you the information you need to complete this assignment. Your paper should be of the quality you would submit to the executive director or the board, explain your decision in a factual business manner. - Recognizing Ethical Matters and making good decisions means being familiar with the profession’s rules and regulations from the AICPA and the state board of accountancy.

To be effective, you need to know how to analyze a matter or situation. One ethics decision making model contains 8 steps:

Step 1: Recognize the Ethical Issue – the ethical issue in this situation

Step 2: Gather the Critical Facts – All the facts may not be initially evident, make sure you have them all before making any decisions.

Step 3: Identify the Stakeholders – Considering the alternatives who will positively benefit or negatively be harmed by your decision or actions.

Step 4: Consider Alternatives – What are the various approaches that can be taken to address this matter and resolve the ethical conflict.

Step 5: Consider the Effect on Stakeholders – Consider how each approach is likely to affect the stakeholder.

Step 6: Consider Your Comfort Level – How comfortable are you with each option, if discussed in public, how would it reflect on your ethics.

Step 7: Consider Rules, Regulations and Laws – Are the options consistent with the professional rules, regulations and laws?

Step 8: Make a Decision – Once you have considered all of the above can you make a decision? Explain your decision and what the major factors in why you consider this to be the best option. Make your argument convincing.

The partners in Sandhill Company decide to liquidate the firm when the balance sheet shows the following.

The partners share income and loss 5:3:2. During the process of liquidation, the following transactions were completed in the following sequence.

Prepare the entries to record the transactions.

Post to the cash and capital account

You are considering the following mutually exclusive projects. Both projects will be depreciated using straight line depreciation to a zero book value over the life of the project. Neither project has any salvage value.

1. Based on the net present value method of analysis, which project should you accept? Provide Proof.

2. Based on the on the internal rate of return analysis, which project should you accept? Provide Proof.

1. Your company, Bearcat Inc., is planning to purchase new equipment with a price of $1,165,000. Bearcat Inc. is working out the financing plan with the manufacturer, and is considering the choice to finance for 36, 48, or 60 months at an annual interest rate of 5.124%. But you want to pay off the loan as quickly as possible. Bearcat Inc. has other projects in the company that require cash flow, therefore, you have some constraints that have to be considered when choosing the payment schedule. The payment budget per month is $28,000. After 24 months, you have the ability to add a balloon payment of up to $55,000; however, the manufacturer will only accept a balloon payment with your last monthly payment. They will allow you to make smaller additional principal payments throughout the life of the loan, but they must be the same amount each month (other than with the last payment, when you can make the large balloon payment).

Create the full amortization schedule (including any additional payment, such as the balloon payment). Stop the schedule with the month that has a beginning balance of zero, and show only the beginning balance for that month on the schedule (meaning, don’t show payments for that month).

Your full amortization schedule should consider the following: (don’t explicitly write it out)

1. What length of financing do you choose?
2. What is the normal monthly required payment?
3. Do you pay any extra per month, and if so, how much?
4. What is the earliest month in which you can pay off the loan (meaning, in which month does the final payment occur)?
5. What is the amount of the balloon payment?
6. What is the total interest paid?

What are product and period costs and how do they impact financial statements?

Equivalent Units and Related Costs; Cost of Production Report; Entries Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals. The balance in the account Work in Process—Filling was as follows on January 1: Work in Process—Filling Department (4,800 units, 60% completed): Direct materials (4,800 x $12.70) $60,960 Conversion (4,800 x 60% x $8.30) 23,904 $84,864 The following costs were charged to Work in Process—Filling during January: Direct materials transferred from Reaction Department: 61,900 units at $12.50 a unit $773,750 Direct labor 269,060 Factory overhead 258,508 During January, 61,400 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 5,300 units, 40% completed. Required: 1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places. Dover Chemical Company Cost of Production Report-Filling Department For the Month Ended January 31 Unit Information Units charged to production: Inventory in process, January 1 Received from Reaction Department Total units accounted for by the Filling Department Units to be assigned costs: Equivalent Units Whole Units Direct Materials Conversion Inventory in process, January 1 Started and completed in January Transferred to finished goods in January Inventory in process, January 31 Total units to be assigned costs Cost Information Costs per equivalent unit: Direct Materials Conversion Total costs for January in Filling Department $ $ Total equivalent units Cost per equivalent unit $ $ Costs charged to production: Direct Materials Conversion Total Inventory in process, January 1 $ Costs incurred in January Total costs accounted for by the Filling Department $ Cost allocated to completed and partially completed units: Inventory in process, January 1 balance $ To complete inventory in process, January 1 $ $ Cost of completed January 1 work in process $ Started and completed in January Transferred to finished goods in January $ Inventory in process, January 31 Total costs assigned by the Filling Department $ 2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the costs transferred from Filling to Finished Goods. (1) (2) 3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places. Increase or Decrease Amount Change in direct materials cost per equivalent unit $ Change in conversion cost per equivalent unit 4. The cost of production report may be used as the basis for allocating product costs between and . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

Cost of Production and Journal Entries

AccuBlade Castings Inc. casts blades for turbine engines. Within the Casting Department, alloy is first melted in a crucible, then poured into molds to produce the castings. On May 1, there were 500 pounds of alloy in process, which were 40% complete as to conversion. The Work in Process balance for these 500 pounds was $44,200, determined as follows:

During May, the Casting Department was charged $357,200 for 4,700 pounds of alloy and $38,080 for direct labor. Factory overhead is applied to the department at a rate of 150% of direct labor. The department transferred out 4,900 pounds of finished castings to the Machining Department. The May 31 inventory in process was 20% complete as to conversion.

a1. Prepare the May journal entry for the Casting Department for the materials charged to production.

a2. Prepare the May journal entry for the Casting Department for the conversion costs charged to production. If an amount box does not require an entry, leave it blank.

a3. Prepare the May journal entry for the Casting Department for the completed production transferred to the Machining Department.

b. Determine the Work in Process—Casting Department May 31 balance.
$

c. Compute the change in the costs per equivalent unit for direct materials and conversion from the previous month (April).

Cost of Production Report Arabica Highland Coffee Company roasts and packs coffee beans. The process begins by placing coffee beans into the Roasting Department. From the Roasting Department, coffee beans are then transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at July 31: ACCOUNT Work in Process—Roasting Department ACCOUNT NO. Date Item Debit Credit Balance Debit Credit July 1 Bal., 6,500 units, 1/5 completed 13,780 31 Direct materials, 260,000 units 546,000 559,780 31 Direct labor 104,300 664,080 31 Factory overhead 26,100 690,180 31 Goods transferred, 261,000 units ? 31 Bal., ? units, 1/5 completed ? Required: 1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Roasting Department. If an amount is zero, enter "0". When computing cost per equivalent units, round to two decimal places. Arabica Highland Coffee Company Cost of Production Report-Roasting Department For the Month Ended July 31 Unit Information Units charged to production: Inventory in process, July 1 Received from materials storeroom Total units accounted for by the Roasting Department Units to be assigned costs: Equivalent Units Whole Units Direct Materials Conversion Inventory in process, July 1 Started and completed in July Transferred to Packing Department in July Inventory in process, July 31 Total units to be assigned costs Cost Information Costs per equivalent unit: Direct Materials Conversion Total costs for July in Roasting Department $ $ Total equivalent units Cost per equivalent unit $ $ Costs charged to production: Direct Materials Conversion Total Inventory in process, July 1 $ Costs incurred in July Total costs accounted for by the Roasting Department $ Cost allocated to completed and partially completed units: Inventory in process, July 1 balance $ To complete inventory in process, July 1 $ $ Cost of completed July 1 work in process $ Started and completed in July Transferred to Packing Department in July $ Inventory in process, July 31 Total costs assigned by the Roasting Department $ 2. Assuming that the July 1 work in process inventory includes $13,000 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between June and July. If required, round your answers to the nearest cent. Increase or Decrease Amount Change in direct materials cost per equivalent unit $ Change in conversion cost per equivalent unit $

Ratio of Liabilities to Stockholders' Equity and Times Interest Earned

Hasbro, Inc. and Mattel, Inc., are the two largest toy companies in North America. Condensed liabilities and stockholders' equity from a recent balance sheet are shown for each company as follows (in thousands):

The income from operations and interest expense from the income statement for both companies were as follows (in thousands):

a. Determine the ratio of liabilities to stockholders' equity for both companies. Round to one decimal place.

b. Determine the times interest earned ratio for both companies. Round to one decimal place.

Entries for Process Cost System Preston & Grover Soap Company manufactures powdered detergent. Phosphate is placed in process in the Making Department, where it is turned into granulars. The output of Making is transferred to the Packing Department, where packaging is added at the beginning of the process. On July 1, Preston & Grover Soap Company had the following inventories: Finished Goods $9,720 Work in Process—Making 3,780 Work in Process—Packing 4,920 Materials 2,130 Departmental accounts are maintained for factory overhead, which both have zero balances on July 1. Manufacturing operations for July are summarized as follows: a. Materials purchased on account $121,030 b. Materials requisitioned for use: Phosphate—Making Department $79,950 Packaging—Packing Department 27,810 Indirect materials—Making Department 3,130 Indirect materials—Packing Department 1,120 c. Labor used: Direct labor—Making Department $57,120 Direct labor—Packing Department 38,550 Indirect labor—Making Department 11,060 Indirect labor—Packing Department 19,830 d. Depreciation charged on fixed assets: Making Department $10,430 Packing Department 8,610 e. Expired prepaid factory insurance: Making Department $1,980 Packing Department 790 f. Applied factory overhead: Making Department $27,260 Packing Department 30,110 g. Production costs transferred from Making Department to Packing Department $164,790 h. Production costs transferred from Packing Department to Finished Goods $259,360 i. Cost of goods sold during the period $260,310 Required: 1. Journalize the entries to record the operations, identifying each entry by letter. For a compound transaction, if an amount box does not require an entry, leave it blank. Item Account Debit Credit a. b. c. d. e. f. g. h. i. 2. Compute the July 31 balances of the inventory accounts. Materials $ Work in Process—Making Department $ Work in Process—Packing Department $ Finished Goods $ 3. Compute the July 31 balances of the factory overhead accounts. Factory Overhead—Making Department $ Factory Overhead—Packing Department $

THUMB Ltd, which manufactures a single product, is considering whether to use absorption costing or marginal costing to report its budgeted profit in its management accounts. The following information is available:

K /unit Direct materials 4.00

Direct labour 15.00

Total 19.00

Selling price 50.00

Fixed production overheads are budgeted to be K300,000 per month and are absorbed on an average activity level of 100,000 units per month. For the month of April 2020, sales are expected to be 100,000 units although production units will be 120,000 units. Fixed selling costs of K150,000 per month will need to be included in the budget as will the variable selling costs of K2.00 per unit. There are no opening inventories expected at 1 April 2020. Required: (a) Prepare the budgeted statement of profit or loss for the month of April 2020 for THUMB Ltd using absorption costing. Clearly show the valuation of any inventory figures. [6 Marks] (b) Prepare the budgeted statement of profit or loss for the month of April 2020 for THUMB Ltd using marginal costing. Clearly show the valuation of any inventory figures.

At the beginning of the current period, Muebles de Pavo Real, a furniture company out of Madrid, Spain, had the following data referring to its inventory at the end of March. They use the FIFO method for costing. They sold 1800 chairs: 300 of type A and 1000 of Type B and 500 of type C. They apply the lower of cost or market to the total inventory. Determine the cost of goods sold. Remember write-downs of inventory are included in the COGS.

Cost/purchases

Type A

Type B 

Type C

March 1—Beginning Inventory

200- € 200 each

800 - € 50 each

250 - € 100 each

March 10—purchases 

10 - € 205 each

200 - € 45 each

125 - € 102 each

March 15—purchases

100 - € 52 each

250- € 106 each 

March 20—purchases 

90 - € 210 each

100 - € 110 each 

March 25—purchases 

150- € 205 each

175 - € 55 each

March 30—purchases 

50 - € 207 each

450 - € 50 each

Market for chairs at end of March

Type A

Type B

Type C

€ 202

€ 53

€ 90

Sales:

Type A:                                Type B:                                 Type C:

190 @ € 340                         500 @ € 75                           500 @ € 175

100 @ € 360                         400 @ € 80

10 @ € 365                           100 @ € 90             

Cost using FIFO (10 points)

Type A       

Type B       

Type C                                                                                Total:  

Value of ending inventory (5 points)

FIFO:  

Market  

Adjustment:                                                                        Value of ending Inventory:  

Gross Profit Margin: 

Cost of Production Report The debits to Work in Process—Roasting Department for Morning Brew Coffee Company for August, together with information concerning production, are as follows: Work in process, August 1, 1,100 pounds, 10% completed $4,917* *Direct materials (1,100 X $4.3) $4,730 Conversion (1,100 X 10% X $1.7) $187 $4,917 Coffee beans added during August, 34,000 pounds 144,500 Conversion costs during August 61,038 Work in process, August 31, 1,800 pounds, 40% completed ? Goods finished during August, 33,300 pounds ? All direct materials are placed in process at the beginning of production. a. Prepare a cost of production report, presenting the following computations: Direct materials and conversion equivalent units of production for August Direct materials and conversion costs per equivalent unit for August Cost of goods finished during August Cost of work in process at August 31 If an amount is zero, enter in "0". For the cost per equivalent unit, round your answer to two decimal places. Morning Brew Coffee Company Cost of Production Report-Roasting Department For the Month Ended August 31 Unit Information Units charged to production: Inventory in process, August 1 1,100 Received from materials storeroom Total units accounted for by the Roasting Department Units to be assigned costs: Equivalent Units Whole Units Direct Materials (1) Conversion (1) Inventory in process, August 1 1,100 0 1,100 Started and completed in August 33,300 Transferred to finished goods in August Inventory in process, August 31 Total units to be assigned costs Cost Information Costs per equivalent unit: Direct Materials Conversion Total costs for August in Roasting Department $ $ Total equivalent units Cost per equivalent unit (2) $ $ Costs assigned to production: Direct Materials Conversion Total Inventory in process, August 1 $ Costs incurred in August Total costs accounted for by the Roasting Department $ Costs allocated to completed and partially completed units: Inventory in process, August 1 balance $ To complete inventory in process, August 1 $ $ Cost of completed August 1 work in process $ Started and completed in August Transferred to finished goods in August (3) $ Inventory in process, August 31 (4) Total costs assigned by the Roasting Department $ b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (July). If required, round your answers to the nearest cent. Increase or Decrease Amount Change in direct materials cost per equivalent unit $ Change in conversion cost per equivalent unit