Optimus Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2020, and relevant budget data are as follows.

Actual

Comparison with Budget

Sales$1,400,000$100,000 favorable

Variable cost of goods sold665,00045,000 unfavorable

Variable selling and administrative expenses125,00025,000 unfavorable

Controllable fixed cost of goods sold170,000On target

Controllable fixed selling and administrative expenses80,000On target

Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount.

Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 2 decimal places, e.g. 1.57%.)

OPTIMUS COMPANY
Home Division
Responsibility Report
For the Year Ended December 31, 2020

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Gross ProfitControllable Direct Fixed CostsTotal Variable CostsVariable CostsContribution MarginControllable MarginTotal Controllable Direct Fixed CostsSalesCost of Goods SoldSelling and Administrative

$ $ $

FavorableUnfavorableNeither Favorable nor Unfavorable

SalesContribution MarginControllable Direct Fixed CostsSelling and AdministrativeControllable MarginCost of Goods SoldGross ProfitTotal Controllable Direct Fixed CostsTotal Variable CostsVariable Costs

    Variable Costs    Controllable Margin    Contribution Margin    Selling and Administrative    Controllable Direct Fixed Costs    Cost of Goods Sold    Gross Profit    Sales    Total Controllable Direct Fixed Costs    Total Variable Costs    

FavorableUnfavorableNeither Favorable nor Unfavorable

    Contribution Margin    Total Controllable Direct Fixed Costs    Controllable Direct Fixed Costs    Selling and Administrative    Total Variable Costs    Variable Costs    Controllable Margin    Cost of Goods Sold    Gross Profit    Sales    

FavorableUnfavorableNeither Favorable nor Unfavorable

    Variable Costs    Selling and Administrative    Cost of Goods Sold    Total Controllable Direct Fixed Costs    Controllable Direct Fixed Costs    Total Variable Costs    Sales    Contribution Margin    Gross Profit    Controllable Margin    

FavorableUnfavorableNeither Favorable nor Unfavorable

SalesSelling and AdministrativeContribution MarginGross ProfitTotal Controllable Direct Fixed CostsVariable CostsTotal Variable CostsControllable Direct Fixed CostsControllable MarginCost of Goods Sold

FavorableUnfavorableNeither Favorable nor Unfavorable

Total Variable CostsControllable MarginVariable CostsContribution MarginCost of Goods SoldGross ProfitControllable Direct Fixed CostsTotal Controllable Direct Fixed CostsSalesSelling and Administrative

    Contribution Margin    Sales    Selling and Administrative    Variable Costs    Cost of Goods Sold    Total Controllable Direct Fixed Costs    Controllable Direct Fixed Costs    Controllable Margin    Total Variable Costs    Gross Profit    

FavorableUnfavorableNeither Favorable nor Unfavorable

    Controllable Margin    Total Variable Costs    Sales    Total Controllable Direct Fixed Costs    Cost of Goods Sold    Variable Costs    Contribution Margin    Controllable Direct Fixed Costs    Selling and Administrative    Gross Profit    

FavorableUnfavorableNeither Favorable nor Unfavorable

    Total Controllable Direct Fixed Costs    Controllable Margin    Cost of Goods Sold    Variable Costs    Selling and Administrative    Gross Profit    Total Variable Costs    Contribution Margin    Controllable Direct Fixed Costs    Sales    

FavorableUnfavorableNeither Favorable nor Unfavorable

Controllable Direct Fixed CostsControllable MarginCost of Goods SoldGross ProfitSalesSelling and AdministrativeTotal Controllable Direct Fixed CostsTotal Variable CostsVariable CostsContribution Margin

$ $ $

FavorableUnfavorableNeither Favorable nor Unfavorable

ROI % % %

FavorableUnfavorableNeither Favorable nor Unfavorable

Compute the expected ROI in 2020 for the Home Division, assuming the following independent changes to actual data. (Round ROI to 2 decimal places, e.g. 1.57%.)

The expected ROI

(1)Variable cost of goods sold is decreased by 5%. %

(2)Average operating assets are decreased by 10%. %

(3)Sales are increased by $200,000, and this increase is expected to increase contribution margin by $80,000. %

For each audit activity, identify the audit procedure. Each activity has one answer, but the audit procedures can be used more than once.

__ Review lease agreements for capital leases.

__ Select a sample of inventory items from the receiving reports and follow the items to inventory records.

__ Select a sample of fixed asset additions and ask to see the assets.

__ Review the client's calculation of the allowance for doubtful accounts.

__ Compare sales invoice quantities to shipment documentation quantities to verify the client's assertion that this procedure is done by client personnel.

__ Select a sample of entries in the payroll journal and match the employee name, date of payment, and amount of pay to the employee personnel file.

__ Ask production and sales personnel concerning possible obsolete or slow-moving inventory.

__ Watch that an independent person double-checks the payroll wage rates and calculations before checks are printed.

__ Calculate the percentage of sales for salary and wages expense for this year and the prior year for reasonable presentation.

__ Send a form to the bank for the balances of the payroll checking accounts.

Answer Bank

Wingding Ltd. reports the following information:

Net income: $720,000

Depreciation expense: $210,000

Increase in accounts receivable: $90,000

Wingding should report cash provided by operating activities of:

Question 10 options:

The Rosa model of Mohave Corp. is currently manufactured as a very plain umbrella with no decoration. The company is considering changing this product to a much more decorative model by adding a silk-screened design and embellishments. A summary of the expected costs and revenues for Mohave’s two options follows:      

Required:
1. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.

  

2. Should Mohave add decorations to the Rosa umbrella?

3-a. Suppose that the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 19,000 units. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations.



3-b. Should Mohave add decorations to the Rosa umbrella?

June 1: Byte of Accounting, Inc. issued 2,650 shares of its common stock to Jeremy after $30,520 in cash and computer equipment with a fair market value of $43,680 were received.

June 1: Byte of Accounting, Inc. issued 2,165 shares of its common stock after acquiring from Courtney $43,400 in cash, computer equipment with a fair market value of $16,240 and office equipment with a fair value of $980.

June 1: Byte of Accounting, Inc. acquired $78,400 in cash from Christian Wilson-Poole and issued 2,800 shares of its common stock.

June 2: A down payment of $31,000 in cash was made on additional computer equipment that was purchased for $155,000. A five-year note was executed by Byte for the balance.

June 4: Additional office equipment costing $600 was purchased on credit from Discount Computer Corporation.

June 8: Unsatisfactory office equipment costing $120 was returned to Discount Computer for credit to be applied against the outstanding balance owed by Byte.

June 10: Byte paid $23,750 on the balance it owed on the June 2 purchase of computer equipment.

June 14: A one-year insurance policy covering its computer equipment was purchased by Byte for $4,968 in cash. The effective date of the policy was June 16.

June 16: Computer consultation revenue of $6,500 was received.

June 16: Byte purchased a building and the land it is on for $101,000, to house its repair facilities and to store computer equipment. The lot on which the building is located is valued at $16,000. The balance of the cost is to be allocated to the building. Byte made a cash down payment of $10,100 and executed a mortgage for the balance. The mortgage is payable in eight equal annual installments beginning July 1.

June 17: Cash of $6,600 was paid for rent for June, July and August. Put the total amount into the Prepaid Rent account.

June 17: Received a bill of $350 from the local newspaper for advertising.

June 21: Billed various miscellaneous local customers $4,100 for consulting services performed.

June 21: A fax machine for the office was purchased for $800 cash.

June 21: Accounts payable in the amount of $480 were paid.

June 22: Paid the advertising bill that was received on June 17.

June 22: Received a bill for $1,190 from Computer Parts and Repair Co. for repairs to the computer equipment.

June 22: Paid salaries of $1,035 to equipment operators for the week ending June 18.

June 23: Cash in the amount of $3,285 was received on billings.

June 23: Purchased office supplies for $680 on credit. Record the purchase as an increase to the assets.

June 28: Billed $5,595 to miscellaneous customers for services performed to June 25.

June 29: Cash in the amount of $5,300 was received for billings.

June 29: Paid the bill received on June 22, from Computer Parts and Repairs Co.

June 29: Paid salaries of $1,035 to equipment operators for the week ending June 25.

June 30: Received a bill for the amount of $865 from O & G Oil and Gas Co.

June 30: Paid a cash dividend of $0.18 per share to the three shareholders of Byte. [IMPORTANT NOTE: The number of shares of capital stock outstanding can be determined from the first three transactions.]

Adjusting Entries - Round to two decimal places.

The rent payment made on June 17 was for June, July and August. Expense the amount associated with one month's rent.

A physical inventory showed that only $281.00 worth of office supplies remained on hand as of June 30.

The annual interest rate on the mortgage payable was 8.00 percent. Interest expense for one-half month should be computed because the building and land were purchased and the liability incurred on June 16.

Information relating to the prepaid insurance may be obtained from the transaction recorded on June 14. Expense the amount associated with one half month's insurance.

A review of Byte’s job worksheets show that there are unbilled revenues in the amount of $5,625 for the period of June 28-30.

The fixed assets have estimated useful lives as follows:
Building - 31.5 years
Computer Equipment - 5.0 years
Office Equipment - 7.0 years
Use the straight-line method of depreciation. Management has decided that assets purchased during a month are treated as if purchased on the first day of the month. The building’s scrap value is $500. The office equipment has a scrap value of $300. The computer equipment has no scrap value. Calculate the depreciation for one month.

A review of the payroll records show that unpaid salaries in the amount of $621 are owed by Byte for three days, June 28 - 30.

The note payable relating to the June 2, and 10 transactions is a five-year note, with interest at the rate of 12 percent annually. Interest expense should be computed based on a 360 day year.
[IMPORTANT NOTE: The original note on the computer equipment purchased on June 2 was $124,000. On June 10, eight days later, $23,750 was repaid. Interest expense must be
calculated on the $124,000 for eight days. In addition, interest expense on the $100,250 balance of the loan ($124,000 less $23,750 = $100,250) must be calculated for the 20 days remaining in the month of June.]

Income taxes are to be computed at the rate of 25 percent of net income before taxes.
[IMPORTANT NOTE: Since the income taxes are a percent of the net income you will want to prepare the Income Statements through the Net Income Before Tax line. The worksheet contains all of the accounts and their balances which you can then transfer to the appropriate financial statement.]

Closing Entries

Close the revenue accounts.

Close the expense accounts.

Close the income summary account.

Close the dividends account.

Some new production machinery has a first cost of $100,000 and a useful like of 10 years. Its estimated operating and maintenance costs are $10,000 the first year, which will increase annually by $4000. The asset’s before-tax market value will be $50,000 at the end of the first year and then will decrease by $5000 annually. This property is a 7-year MACRS property. The company uses a 6% after tax MARR and is subject to a combined federal/state tax rate of 40%. Calculate the after tax cash flows. The spreadsheet also needs to be able to use WACC in place of a given interest rate. The spreadsheet needs to accommodate different tax rates, and must include ATCF for O&M and Depreciation and ATCFs of disposal if the equipment is sold in each of the 10 years. Combine these to Identify the optimal life.

In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 300,000 units of the standard model and 120,000 units of the deluxe model during the coming year. The standard model requires 0.05 direct labor hour per unit, and the deluxe model requires 0.08. The controller has developed the following cost formulas for each of the four overhead items:

Cost Formula:

Maintenance $34,500+ $1.25 DLH

Power $0.50 DLH

Indirect labor $68,400+$2.30 DLH

Rent $31,500

1. Prepare an overhead budget for the expected activity level for the coming year.

2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products) and a budget for production that is 20 percent lower than expected.

Notes:

Can you please show me step-by-step (all calculations necessary) as to how to arrive at the correct answer?

Please provide your answer on spreadsheet as it is diffcult to read handwriting.

Which statement is FALSE?

Select one:

a. Diluted EPS is never higher than Basic EPS

b. Use of the "Treasury Stock Method" determines the effect of convertible bonds on Diluted EPS

c. Bond interest expense is the cash interest paid plus the discount amortized that period

d. Bond interest expense is the cash interest paid less the premium amortized that period

The following are audit procedures from different transaction​ cycles:

1. Examine sales invoices for evidence of internal verification of​ prices, quantities, and extensions.

2. Select items from the​ client's perpetual inventory records and examine the items in the​ company's warehouse.

3. Use audit software to foot and​ cross-foot the cash disbursements journal and trace the balance to the general ledger.

4. Select a sample of entries in the acquisitions journal and trace each one to a related​ vendor's invoice to determine whether one exists.

5. Examine documentation for acquisition transactions before and after the balance sheet date to determine whether they are recorded in the proper period.

6. Inquire of the credit manager whether each account receivable on the aged trial balance is collectible.

7. Compute inventory turnover for each major product and compare with previous years.

8. Confirm a sample of notes payable​ balances, interest​ rates, and collateral with lenders.

9. Use audit software to foot the accounts receivable trial balance and compare the balance with the general ledger.

a. For each audit​ procedure, identify the transaction cycle being audited.

b. For each audit​ procedure, identify the type of evidence.

c. For each audit​ procedure, identify whether it is a test of control or a substantive test.

d. For each substantive audit​ procedure, identify whether it is a substantive test of​ transactions, a test of details of​ balances, or a substantive analytical procedure. ​(Select N/A for those items identified as only a TOC in requirement​ c.)

e. For each test of control or substantive test of transactions​ procedure, identify the​ transaction-related audit objective or objectives being satisfied. ​(Select N/A for those items identified as a TD of B or SAP in requirement​ d.)

f. For each substantive analytical procedure or test of details of balances​ procedure, identify the​ balance-related audit objective or objectives being satisfied. ​(Select N/A for those items identified as a ST of T in requirement​ d.)

Complete all answers boxes for each audit procedure in the table below. ​(Abbreviations used:​ A+P = Acquisition and​ payment, CA+R​ = Capital acquisition and​ repayment, I+W​ = Inventory and​ warehousing, P+P​ = Payroll and​ personnel, SAP​ = substantive analytical​ procedure, S+C​ = Sales and​ collections, ST of T​ = test of​ transactions, SUB​ = substantive​ test, TD of B​ = test of details of​ balance, TOC​ = test of​ control.)

Ellie’s Edibles, Inc. is segmented into three divisions, and $42,000 of the fixed expenses relate to the corporate (common) expenses and had been allocated equally between the three divisions.

A. Calculate the Contribution Margin Ratio for each segment and for the Total Company.

B. Revise the income statement presented above into a segmented income statement.

The Shippecasse Company had a Current Ratio of 1:2. The Company paid a $10,000 cash dividend to preferred shareholders that was previously declared. What is the effect of the payment journal entry on the current ratio and total stockholders' equity, respectively?

Select one:

a. Increase, Increase

b. Decrease, Decrease

c. Increase, No Effect

d. No Effect, Increase

e. Decrease, No Effect

1. Break-Even Sales

   BeerBev, Inc., reported the following operating information for a recent year:

   Net sales	$11,712,000
   Cost of goods sold	$2,928,000
   Selling, general and administration	610,000
   	$3,538,000
   Income from operations	$ 8,174,000*

   *Before special items

   In addition, assume that BeerBev sold 61,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $31,100.

   When computing the cost per unit amounts for the break-even formula, round to two decimal places. If required, round your final answer to one decimal place.

   a. Compute the break-even number of barrels for the current year.
   barrels

   b. Compute the anticipated break-even number of barrels for the following year.
   barrels

Individual team member timely commitment and active participation are critical individual contributions to team-
based innovation.

Falcon Crest Aces (FCA), Inc., is considering the purchase of a small plane to use in its wing-walking demonstrations and aerial tour business. Various information about the proposed investment follows:     

Assume straight line depreciation method is used.

Required:
Help FCA evaluate this project by calculating each of the following:

1. Accounting rate of return. (Round your answer to 2 decimal places.)

2. Payback period. (Round your answer to 2 decimal places.)

3. Net present value (NPV). (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Round the final answer to nearest whole dollar.)

4. Recalculate FCA's NPV assuming the cost of capital is 3% percent. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar amount.)

Greater than 7%

Between 3% and 7%

Less than 3%

LarkspurFurniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $6,000,000 on January 1, 2020. Larkspur expected to complete the building by December 31, 2020. Larkspur has the following debt obligations outstanding during the construction period.

A. Assume that Larkspur completed the office and warehouse building on December 31, 2020, as planned at a total cost of $6,240,000, and the weighted-average amount of accumulated expenditures was $4,320,000. Compute the avoidable interest on this project. (Use interest rates rounded to 2 decimal places, e.g. 7.58% for computational purposes and round final answers to 0 decimal places, e.g. 5,275.)

B. Compute the depreciation expense for the year ended December 31, 2021. Larkspur elected to depreciate the building on a straight-line basis and determined that the asset has a useful life of 30 years and a salvage value of $360,000. (Round answer to 0 decimal places, e.g. 5,275.)