Stampede Corporation, a Calgary based steak house, used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit.
Actual |
Budgeted |
|
Units Sold |
200,000units |
203,000 |
Variable Costs |
1,250,000 |
1,500,000 |
Fixed Costs |
925,000 |
900,000 |
Required:
1) Prepare a Level 1 static-budget variance analysis for Stampede Corporation using an income statement in contribution margin format. Use the following three column headings: Actual Results, Static Budget, and Static-budget Variance.
In: Accounting
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:
The finished goods inventory on hand at the end of each month must equal 3,000 units of Supermix plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 17,200 units.
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 108,000 cc of solvent H300.
The company maintains no work in process inventories.
A monthly sales budget for Supermix for the third and fourth quarters of the year follows.
Budgeted Unit Sales | |
July | 71,000 |
August | 76,000 |
September | 86,000 |
October | 66,000 |
November | 56,000 |
December | 46,000 |
Required:
Prepare a production budget for Supermix for the months July, August, September, and October.
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.
In: Accounting
Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records:
All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1.
Sixty percent of the merchandise purchases are paid for in the month of purchase; the remaining 40 percent are paid for in the month after acquisition.
The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $85,000; accounts receivable, $265,000; and accounts payable, $86,000.
Mary and Kay, Inc. maintains a $85,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 9 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time.
Additional data:
January | February | March | |||||||
Sales revenue | $ | 650,000 | $ | 740,000 | $ | 755,000 | |||
Merchandise purchases | 470,000 | 500,000 | 620,000 | ||||||
Cash operating costs | 113,000 | 92,000 | 155,000 | ||||||
Proceeds from sale of equipment | — | — | 35,000 | ||||||
Required:
1. Prepare a schedule that discloses the firm’s total cash collections for January through March.
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2. Prepare a schedule that discloses the firm’s total cash disbursements for January through March.
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3. Prepare a schedule that summarizes the firm’s financing cash flows for January through March.
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In: Accounting
Job Costs Using a Plantwide Overhead Rate
Naranjo Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $187,500, and budgeted direct labor hours were 15,000. The average wage rate for direct labor is expected to be $25 per hour. During June, Naranjo Company worked on four jobs. Data relating to these four jobs follow:
Job 39 | Job 40 | Job 41 | Job 42 | |
Beginning balance | $25,500 | $33,000 | $17,500 | $100 |
Materials requisitioned | 18,300 | 20,800 | 11,200 | 15,700 |
Direct labor cost | 9,400 | 17,900 | 5,850 | 6,600 |
Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 were completed; Job 39 was sold at 125 percent of cost. (Naranjo had originally developed Job 40 to order for a customer; however, that customer was near bankruptcy and the chance of Naranjo being paid was growing dimmer. Naranjo decided to hold Job 40 in inventory while the customer worked out its financial difficulties. Job 40 is the only job in Finished Goods Inventory.) Jobs 41 and 42 remain unfinished at the end of the month.
Required:
1. Calculate the balance in Work in Process as of June 30.
$
2. Calculate the balance in Finished Goods as of June 30.
$
3. Calculate the cost of goods sold for June.
$
4. Calculate the price charged for Job 39. Round your answer to the nearest cent.
$
5. What if the customer for Job 40 was able to pay for the job by June 30? What would happen to the balance in Finished Goods?
What would happen to the balance of Cost of Goods Sold?
In: Accounting
Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||
Total cash receipts | $ | 210,000 | $ | 360,000 | $ | 240,000 | $ | 260,000 |
Total cash disbursements | $ | 281,000 | $ | 251,000 | $ | 241,000 | $ | 261,000 |
The company’s beginning cash balance for the upcoming fiscal year
will be $26,000. The company requires a minimum cash balance of
$10,000 and may borrow any amount needed from a local bank at a
quarterly interest rate of 3%. The company may borrow any amount at
the beginning of any quarter and may repay its loans, or any part
of its loans, at the end of any quarter. Interest payments are due
on any principal at the time it is repaid. For simplicity, assume
that interest is not compounded.
Required:
Prepare the company’s cash budget for the upcoming fiscal year. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
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In: Accounting
Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company’s accounting records:
All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectibles amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1.
Sixty percent of the merchandise purchases are paid for in the month of purchase; the remaining 40 percent are paid for in the month after acquisition.
The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $80,000; accounts receivable, $260,000; and accounts payable, $85,000.
Mary and Kay, Inc. maintains a $80,000 minimum cash balance at all times. Financing is available (and retired) in $1,000 multiples at an 9 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time.
Additional data:
January | February | March | |||||||
Sales revenue | $ | 640,000 | $ | 730,000 | $ | 745,000 | |||
Merchandise purchases | 460,000 | 490,000 | 610,000 | ||||||
Cash operating costs | 112,000 | 91,000 | 154,000 | ||||||
Proceeds from sale of equipment | — | — | 34,000 | ||||||
Required:
1. Prepare a schedule that discloses the firm’s total cash collections for January through March.
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2. Prepare a schedule that discloses the firm’s total cash disbursements for January through March.
|
3. Prepare a schedule that summarizes the firm’s financing cash flows for January through March.
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In: Accounting
Mexican Motors’ market cap is 200 billion pesos. Next year’s
free cash flow is 8.6 billion pesos. Security analysts are
forecasting that free cash flow will grow by 7.60% per year for the
next five years.
a. Assume that the 7.60% growth rate is expected
to continue forever. What rate of return are investors expecting?
(Do not round intermediate calculations.
Enter your answer as a percent rounded to 2 decimal
places.)
Rate of Return:_________%
b-1. Mexican Motors has generally earned about 10%
on book equity (ROE = 10%) and reinvested 50% of earnings. The
remaining 50% of earnings has gone to free cash flow. Suppose the
company maintains the same ROE and investment rate for the long
run. What will be the growth rate of earnings? (Do not
round intermediate calculations. Enter your answer as a percent
rounded to 1 decimal places.)
Growth Rate: ______%
b-2. What would be the rate of return? (Do
not round intermediate calculations. Enter your answer as a percent
rounded to 2 decimal places.)
Rate of return:_____%
In: Accounting
The Trump, Clinton, Mueller Partnership has been around for several years | |||||||||
The partners share profits equally but Trump and Clinton take 40% of losses while Mueller only take 20% of losses. | |||||||||
Mueller receives $30,000 in salary and all partners get 10% return on their beginning of the year capital accounts. | |||||||||
Each year Trump makes a withdrawl of $6000 for hair care products and Clinton makes a withdrawl of $15,000 for new pant suits. | |||||||||
At the beginning of 2017 Trump, Clinton and Mueller had the following capital accounts | |||||||||
Trump | 500,000 | ||||||||
Clinton | 300,000 | ||||||||
Mueller | 200,000 | ||||||||
Income before Mueller salary and partners interest is as follows: | |||||||||
2017 | 400,000 | ||||||||
2018 | 50,000 | ||||||||
2019 | 300,000 | ||||||||
Required: determine each partner's capital account on December 31 | |||||||||
2017 | |||||||||
2018 | |||||||||
2019 |
In: Accounting
Job Cost Sheet
Remnant Carpet Company sells and installs commercial carpeting for office buildings. Remnant Carpet Company uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On October 1, Remnant Carpet Company gave Jackson Consulting an estimate of $2,418 to carpet the consulting firm’s newly leased office. The estimate was based on the following data:
Estimated direct materials: | |
30 meters at $34 per meter | $ 1,020 |
Estimated direct labor: | |
16 hours at $30 per hour | 480 |
Estimated factory overhead (75% of direct labor cost) | 360 |
Total estimated costs | $1,860 |
Markup (30% of production costs) | 558 |
Total estimate | $2,418 |
On October 3, Jackson Consulting signed a purchase contract, and the delivery and installation were completed on October 10.
The related materials requisitions and time tickets are summarized as follows:
Materials Requisition No. | Description | Amount | |
112 | 15 meters at $34 | $510 | |
114 | 19 meters at $34 | 646 |
Time Ticket No. | Description | Amount | |
H10 | 8 hours at $30 | $240 | |
H11 | 12 hours at $30 | 360 |
Required:
Enter amounts as positive numbers.
1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer.
2. Record the costs incurred, and complete the job order cost sheet.
JOB ORDER COST SHEET | |||||||||||||||||||||||||||||||||||||||||||||||
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Direct Materials | Direct Labor | Summary | |||||||||||||||||||||||||||||||||||||||||||||
Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
30 Meters at $34 | $______ | 16 Hours at $30 | $____ | Direct Materials | $_______ | ||||||||||||||||||||||||||||||||||||||||||
Direct Labor | ________ | ||||||||||||||||||||||||||||||||||||||||||||||
Factory Overhead | ________ | ||||||||||||||||||||||||||||||||||||||||||||||
Total | $_______ | Total | $______ | Total cost | $________ | ||||||||||||||||||||||||||||||||||||||||||
ACTUAL | |||||||||||||||||||||||||||||||||||||||||||||||
Direct Materials | Direct Labor | Summary | |||||||||||||||||||||||||||||||||||||||||||||
Mat. Req. No. | Description | Amount | Time Ticket No. | Description | Amount | Item | Amount | ||||||||||||||||||||||||||||||||||||||||
112 | 15 Meters at $34 | $_______ | H10 | 8 Hours at $30 | $_____ | Direct Materials | $_____ | ||||||||||||||||||||||||||||||||||||||||
Direct Labor | _____ | ||||||||||||||||||||||||||||||||||||||||||||||
114 | 19 Meters at $34 | ______ | H11 | 12 Hours at $30 | ______ | Factory Overhead | ________ | ||||||||||||||||||||||||||||||||||||||||
Total | $____ | Total | $_____ | Total Cost | $_____ |
What is the best explanation for the variances between actual costs and estimated costs. (For this purpose, assume that the additional meters of material used in the job were spoiled, the factory overhead rate has proven to be satisfactory, and an inexperienced employee performed the work.)
Select the correct answer from the above choices.
a, b, c, d
In: Accounting
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $511,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,300. Project B will cost $330,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $49,600. A discount rate of 8% is appropriate for both projects. Click here to view PV table.
Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Net present value - Project A $
Profitability index - Project A
Net present value - Project B $
Profitability index - Project B
Which project should be accepted based on Net Present Value? choice project a/ project b
Which project should be accepted based on profitability index? choice project a/ project b
In: Accounting
Ethical dilemma......................................Ethical dilemma..................................Ethical dilemma.....................................Ethical dilemma
Suzanne Cureis an American who has been a well-regarded Motorolan for many years. She worked in a division of Motorola that was highly profitable. One of the reasons for her satisfaction with the corporation was that she had been involved in a fine performance bonus plan. The benefits she and her family enjoyed were more generous than those available to employees in a number of other divisions. She had often wondered about those discrepancies, but since her own situation was so good, she never took the time to look into the matter in any great depth.
Three year ago, however, things took a turn which made her look into it deeply indeed. Suzanne was given a promotion and assigned to manage an operation in Pacifica, a rapidly developing Pacific Rim nation. Her assignment was to build up the operation significantly, and she succeeded beyond most people’s expectations. In the process, she got to know many Pacifican Motorolans quite well, and was struck by their strong commitment and loyalty to the corporation and to their work units.
In Pacifica, it was not the tradition for companies, local or multinational, to award performance bonuses, and Motorola conformed to this pattern. Suzanne noted that most local employees were quite happy to work for Motorola because they felt that they earned competitive wages and enjoyed good job security. Local Motorolans knew little about performance bonuses, nor were they aware that such rewards varied among different divisions and geographies within the corporation.
Suzanne decided to pursue an innovative pilot project, and, on the basis of her excellent track record, managed to convince her Motorola superiors to allow her to try it for a period of three years. The project was to introduce rewards for good performance, in the form of a quarterly bonus. What made the project truly audacious, though, was that each employee would receive the samemonetary amount, regardless of salary level. (New employees with less than one year’s service were handled differently, and the bonus was handled separately form merit raises, promotions in grade, etc.)
At the end of the first year, the total bonus turned out to be $456 for each employee, regardless of rand or salary. This amount was seen as trivial by the higher-paid employees but, in this low-wage country with considerable annual inflation, was eagerly welcomed by the lesser-paid ones. Suzanne had learned, from extensive dialogues with local employees, that they preferred to be rewarded as members of a unit. They would have regarded individual bonuses as unfair and divisive.
The program is now in the early stage of its second year. Already, the results have been encouraging. Productivity has generally risen. Employees, especially those at lower pay levels, seem enthusiastic. None of those at higher levels appear quite satisfied with the new arrangement, but few have complained formally. Various surveys conducted at this facility confirm that morale is generally higher, as measured by a number of quantitative indicators.
Answer the following questions.
1. What is the issue?
2. Are there any ways that the performance bonus program be improved?
3. What are possible pitfalls in this bonus program over the short-term? The long-term?
In: Accounting
The demand for solvent, one of numerous products manufactured by RZM Industries Inc., has dropped sharply because of recent competition from a similar product. The company’s chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior product can be started on June 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed.
The controller has been asked by the president of the company for advice on whether to continue production during May or to suspend the manufacture of solvent until June 1. The controller has assembled the following pertinent data:
RZM Industries Inc. |
Income Statement—Solvent |
For the Month Ended April 30 |
1 |
Sales (4,000 units) |
$500,000.00 |
2 |
Cost of goods sold |
424,000.00 |
3 |
Gross profit |
$76,000.00 |
4 |
Selling and administrative expenses |
102,000.00 |
5 |
Loss from operations |
$(26,000.00) |
The production costs and selling and administrative expenses, based on production of 4,000 units in April, are as follows:
Direct materials | $45 per unit |
Direct labor | 20 per unit |
Variable manufacturing cost | 16 per unit |
Variable selling and administrative expenses | 15 per unit |
Fixed manufacturing cost | $100,000 for April |
Fixed selling and administrative expenses | 42,000 for April |
Sales for May are expected to drop about 20% below those of the preceding month. No significant changes are anticipated in the fixed costs or variable costs per unit. No extra costs will be incurred in discontinuing operations in the portion of the plant associated with solvent. The inventory of solvent at the beginning and end of May is expected to be inconsequential.
Required: | |||
1. | Prepare an estimated income statement in absorption costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals.* | ||
2. | Prepare an estimated income statement in variable costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals.* | ||
3. | What would be the estimated loss in income from operations if the solvent production were temporarily suspended for May? If a loss is incurred, enter that amount as a negative number using a minus sign. | ||
4. | What advice should the controller give to management?
|
Prepare an estimated income statement in absorption costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals. 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.
RZM Industries Inc. |
Estimated Income Statement—Absorption Costing—Solvent |
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Prepare an estimated income statement in variable costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals. 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.
RZM Industries Inc. |
Estimated Income Statement—Variable Costing—Solvent |
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What would be the estimated loss in income from operations if the solvent production were temporarily suspended for May? If a loss is incurred, enter that amount as a negative number using a minus sign. ___________
Labels | |
Cost of goods sold | |
Fixed costs | |
For the Month Ending May 31 | |
May 31 | |
Selling and administrative expenses | |
Variable cost of goods sold | |
Amount Descriptions | |
Contribution margin | |
Contribution margin ratio | |
Direct labor | |
Direct materials | |
Fixed manufacturing cost | |
Fixed selling and administrative expenses | |
Gross profit | |
Income from operations | |
Loss from operations | |
Manufacturing margin | |
Planned contribution margin | |
Sales | |
Sales mix | |
Total cost of goods sold | |
Total fixed costs | |
Total selling and administrative expenses | |
Total variable cost of goods sold | |
Variable manufacturing cost | |
Variable selling and administrative expenses |
In: Accounting
Nautical Creations is one of the largest producers of miniature ships in a bottle. An especially complex part of one of the ships needs special production equipment that is not useful for other products. The company purchased this equipment early in 2016 for $200,000. It is now early in 2020, and the manager of the Model Ships Division, Jeri Finley, is thinking about purchasing new equipment to make this part. The current equipment will last for four more years with zero disposal value at that time. It can be sold immediately for $30,000. The following are last year's total manufacturing costs, when production was 7,800 ships: Direct materials $28,080 Direct labor 28,080 Variable overhead 13,260 Fixed overhead 36,660 Total $106,080 The cost of the new equipment is $140,000. It has a four year useful life with an estimated disposal value at that time of $30,000. The sales representative selling the new equipment stated, "The new equipment will allow direct labor and variable overhead combined to be reduced by a total of $2.10 per unit." Finley thinks this estimate is accurate, but also knows that a higher quality of direct material will be necessary with the new equipment, costing $0.21 more per unit. Fixed overhead costs will increase by $4,500. Finley expects production to be 8,400 ships in each of the next four years. Assume a discount rate of 5%.
In: Accounting
Do you pay GST on taxable supplies and can you claim GST credits for purchases associated with taxable supplies?
In: Accounting
SUBJECT 3
a. A company with a dividend payout ratio of 40% for 2018, has a ROE of 10%. The dividends and stock’s earnings are expected to grow at the same rate. The current year earnings per share are 7 euros and the company has a beta coefficient of 1. The risk-free rate is 6% and analysts estimate that the market risk premium is 5%. Taking into account the above information, estimate:
I. The expected growth rate, and its P/E ratio.
II. The intrinsic value of Salomon company using the P/E ratio approach.
III. If dividend growth forecasts for Salomon Company are revised downward by 1% what will happen to the Salomon stock price and P/E ratio. IV. Explain how an increase in dividend payout would affect the (all other factors remain constant) growth rate and P/E ratio.
b. Τhe price to earnings ratio indicates the expected price of a share based on its earnings. As a company’s earnings per share rise, so does their market value per share. A company with a high P/E ratio usually indicates positive future performance and investors are willing to pay more for this company’s shares. But reported earnings are computed in accordance with generally accepted accounting rules and often management can easily manipulate it with specific accounting techniques. Which are those accounting methods that artificially may restructure the P/E ratio trend line?
In: Accounting