Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,000 hours each month to produce 2,000 sets of covers. The standard costs associated with this level of production are:

During August, the factory worked only 1,050 direct labor-hours and produced 2,400 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 3.0 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Brief Exercise 2-3 T-accounts [LO2-3]

The Marchetti Soup Company entered into the following transactions during the month of June: (1) purchased inventory on account for $170,000 (assume Marchetti uses a perpetual inventory system); (2) paid $45,000 in salaries to employees for work performed during the month; (3) sold merchandise that cost $130,000 to credit customers for $225,000; (4) collected $205,000 in cash from credit customers; and (5) paid suppliers of inventory $150,000.

Post the above transactions to the below T-accounts. Assume that the opening balances in each of the accounts is zero except for cash, accounts receivable, and accounts payable that had opening balances of $67,500, $48,000, and $27,000, respectively. (Enter the transaction number in the column next to the amount.)

Swathmore Clothing Corporation grants its customers 30 days’ credit. The company uses the allowance method for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by multiplying 2% times the amount of credit sales for the month. At the fiscal year-end of December 31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly. At the end of 2017, accounts receivable were $584,000 and the allowance account had a credit balance of $48,000. Accounts receivable activity for 2018 was as follows: Beginning balance $ 584,000 Credit sales 2,670,000 Collections (2,533,000 ) Write-offs (44,000 ) Ending balance $ 677,000 The company’s controller prepared the following aging summary of year-end accounts receivable: Summary Age Group Amount Percent Uncollectible 0–60 days $ 395,000 5 % 61–90 days 94,000 14 91–120 days 54,000 24 Over 120 days 134,000 35 Total $ 677,000 Required: 1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year. 2. Prepare the necessary year-end adjusting entry for bad debt expense. 3-a. What is total bad debt expense for 2018? 3-b. How would accounts receivable appear in the 2018 balance sheet?

This year Burchard Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing and selling the product required $114,000 of fixed manufacturing costs and $174,000 of fixed selling and administrative costs. Its per unit variable costs follow. Material $ 3.40 Direct labor (paid on the basis of completed units) 2.40 Variable overhead costs 0.34 Variable selling and administrative costs 0.14 Next year the company will use new material, which will reduce material costs by 70% and direct labor costs by 30% and will not affect product quality or marketability. Management is considering an increase in the unit selling price to reduce the number of units sold because the factory’s output is nearing its annual output capacity of 34,000 units. Two plans are being considered. Under plan 1, the company will keep the selling price at the current level and sell the same volume as last year. This plan will increase income because of the reduced costs from using the new material. Under plan 2, the company will increase the selling price by 30%. This plan will decrease unit sales volume by 15%. Under both plans 1 and 2, the total fixed costs and the variable costs per unit for overhead and for selling and administrative costs will remain the same. Required: 1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2. (Round "per unit answers" and "CM ratio" percentage answer to 2 decimal places.)

Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion

The management of Firebolt Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Firebolt:

Direct labor hours were estimated as follows:

In addition, the direct labor hours (dlh) used to produce a unit of each product in each department were determined from engineering records, as follows:

a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base.

b. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department.

c. Recommend to management a product costing approach, based on your analyses in (a) and (b).

Management should select the ___________ factory overhead rate method of allocating overhead costs. The __________ factory overhead rate method indicates that both products have the same factory overhead per unit. Each product uses the direct labor hours __________. Thus, the __________ rate method avoids the cost distortions by accounting for the overhead __________.

Based on the Internal Controls and Transaction-Related Audit Objective follow the procedures below in determining the Control Activity, Existence Test and Error Test in bold. Follow by a brief explanation of why this is suitable for the specific category.

·         Determine the Control activity for your assigned control. e.g Separation of Duties. Adequate documents and records, etc

·         What test would you run to determine the Existence of the Control. e.g Observation, Inspection, etc.

·         What test would you run to determine that there are no errors of the type the control is designed to identify? e.g. Occurrence, Completeness, etc.

The intangible assets section of Grouper Corporation’s balance sheet at December 31, 2017, is presented here.

The patent was acquired in January 2017 and has a useful life of 10 years. The copyright was acquired in January 2011 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2018.

Prepare journal entries to record the 2018 amortization expense for intangible assets. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) How is it calculated?

Please show work and calculations on how you got to answer.

On June 30, 2018, Georgia-Atlantic, Inc. leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $450,399 over a four-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic’s incre-mental borrowing rate is 11%, the same rate IC uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each fiscal year. The fair value of the warehouse is $3.01 million.

Use this Present Value of annuity due factor = 6.68297

1. Determine the present value of the lease payments at June 30, 2018 (to the nearest $000) that Georgia-Atlantic uses to record the right-of-use asset and lease liability.
2. What amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2018 (ignore taxes)?
3. What amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2018 (ignore taxes)?

Question 3: Variance Analysis (20 marks in total)

You have introduced a standard cost accounting system for FOL. The following standard costs have been developed for producing 1kg of the Cattle drench.

Production and cost information for May was:

Required

1. Calculate the following standard cost variances for May and provide general journal entries to record the cost flows for May.

(a) materials price

(b) materials usage

(c) direct labour rate

(d) direct labour efficiency

(e) total overhead

Navidale, a listed engineering company, manufactures large scale plant and machinery for industrial companies. Until ten years ago, Navidale Limited purshed a strategy of organic growth. Since then, it has followed an aggressive policy of acquiring smaller engineering companies, which it feels have developed new technologies and methods, which could be used in its manufacturing process. However, it is estimated that only between 30% and 40% of the acquisitions made in the last ten years have successfully increased the company's shareholder value. Navidale Limited is currently considering acquiring Lochinvar, an unlisted company, which has three departments. Department A manufactures machinery for industrial companies, Department B produces electrical goods for the retail market, and the smaller Department C operates in the construction industry. Upon acquisition, Department A will become part of Navidale, as it contains the new technololgies which Navidale is seeking, but Departments B and C will be unbundled, whith the assets attached to Department C sold and Department B being spun off into a new company called Ndege Co.

Given below extracts of financial information for the two companies for the year ended 30 April 2014.

Navidale Co   Lochinvar Co

R Million R Million

Sales revenue: R790-2 R124.6

Profit before depreciation, interest and tax (PBDIT) R244.4    R37.4 million;

Interest R 13.8 R 4.3

Depreciation R 72.4 R 10.1

Pre tax profit R 158.2 R23.0

Non-current assets R723.9 R98.2

Current assets R142.6 R46.5

7% unsecured bond - R40.0

Other non-current and current liabilities R212.4 R20.2

Share capital (50c/share) R190.0 R20.0

Reserves R464.1 R64.5

Share of current and non-current assets and profit for Navidale Co's three departments:

Department A Department B Department C

Share of current and non-current assets 40% 40% 20%

Share of PBDIT and pre-tax profit 50% 40% 10%

Other information

(i) It is estimated that for Department C, the realisable value of its non-current assets is 100% of their book value, but its current assets' realisable value is only 90% of their book value. The costs related to closing Department C are estimated to be R3 million.

(ii) The funds raised from the disposal of Department C will be used to pay off Lonchivar Co's other non-current and current liabilities.

(iii)The 7% unsecured bond will be taken over by Ndege Co. It can be assumed that the current market value of the bond is equal to its book value.

(iv) At present, around 10% of the Department B's PBDIT come from sales made to Department C.

(v) Ndege Co's cost of capital is estimated to be at 10%. It is estimated that in the first year of operation Ndege Co's free cash flows to firm will grow by 20% and then by 5-2% annually thereafter.

(vi) The tax rate applicable to all the companies is 20%, and Ndege Co can claim 10% tax allowable depreciation on its non-current assets. It can be assumed that the amount of tax allowable depreciation is the same as the investment needed to maintain Ndege Co's operations.

(vii) Navidale Co's current share price is R3 per share and it is estimated that Lochinvar Co's price-to-earnings (PE) ratio is 25% higher than Navidale Co's PE ratio. After the acquisition, when Department A becomes part of Navidale Co, it is estimated that Navidale Co's PE ratio will increase by 15%.

(viii) It is estimated that the combined company's annual after-tax earnings will increase by R7 million due to the synergy benefits resulting from combining Navidale Co and Department A.

Required:

4.1 Discuss the possible reasons why Navidale Co may have switched its strategy of organic growth to one of growing by acquiring companies.(4)

4.2 Discuss the possible actions Navidale Co could take to reduce the risk that the acquisition of Lochinvar Co fails to increase shareholder value (7)

4.3 Estimate, showing all relevant calculations, the maximum premium Navidale Co could pay to acquire Lonchivar Co, explaining the approach taken and any assumptions made. (14)

Wil, Dave and Corinne are in a partnership as window repairers. Their business is called “Windows R Us”. Consider the following:

a. The business is run from an industrial shed which Dave owns. Dave pays for the upkeep of his shed, and the shed has remained basically unaltered since the business starting using it. However, due to rezoning of the area, the premises have substantially increased in value.

Explain the nature of the property in relation to the partnership and, if the premises is sold, whether profits must be shared.

b. Corinne purchases some expensive tinted glass on credit from a glass wholesaler –“Glass House”. Although Corinne actually wants the expensive tinted glass for her own private use (for a home she is building with her boyfriend Rove), she gives the impression to the salesperson at the Glass House that the purchase is on behalf of Windows R Us. Corinne has entered into this transaction on behalf of the partnership even though there was no express authority in the partnership agreement for Corinne to do so. Who will be liable for the debt incurred by Corinne?

c. (i) Dave and Corinne want to continue the business, but Wil is feeling like he wants to do something else with his life now, and thinks he would like to retire from the partnership. Advise Wil in relation to what action he should take regarding his liability for debts incurred by the partnership after he ceases to be a partner.

(ii) Unfortunately, before Wil makes up his mind as to whether he wants to retire, he dies suddenly. The partnership agreement does not include any provisions relating to the death of a partner.

Discuss the impact of Wil’s death on the partnership, and what happens with his share of the partnership.

1. HC3152e Business Applications

   Tutorial 4 (Week 5)

   E-Environment

   Read the following Case The implications of globalisation for consumer attitudes

   The article starts by discussing anti-globalisation. It then explores the implications of variations in the characteristics of different cultures on businesses providing services to them. At the end of the article, research about attitudes to globalisation is summarised, along with its implications for businesses trading internationally.

   Globalisation, or maybe more specifically, anti‐ globalisation issues, are never far from the headlines, whether it’s coverage of the latest anti‐WTO demonstration or news that McDonald’s has replaced Ronald McDonald in France with Asterix-in a move to ‘appease anti‐globalisation protesters’.

   But what does globalisation actually mean? Stemming from the application of free market principles it has manifested the belief that the world is small and that consumers are becoming more and more alike, thus allowing companies to use the same advertising and marketing across regions and countries. Such a doctrine has enabled companies to act global and think global, much to the distaste of the anti‐globalisation lobbies. Indeed, in 1985 it was Friends of the Earth that coined the slogan ‘think global, act local’ in its desire to counter such global forces – particularly with regard to environmental issues.

   However, such ‘glocalisation’ [global localisation] makes a lot of sense for multinational companies operating today and planning new market entry, for a number of reasons. Firstly, the term globalisation for many Europeans is virtually synonymous with that of ‘Americanisation’. For some this has negative con‐ notations of materialism, loss of native culture and the encroachment of the English language. At its extreme, it drives many of the anti‐globalisation activists. Thus there is real risk that companies will damage their brand and reputation if they don’t recognise the importance of localisation when considering market entry.

   Secondly, consumers are as different as they are similar – local and regional cultures have a profound effect in shaping consumer demand. These difference are potentially more interesting than the similarities, in that they can allow product and service differentiation as well as new approaches to segmentation and marketing communications. To take advantage of such opportunities, businesses have to have a clear insight into how and why consumers in one market may differ from ones in another.

   Feelings of anti‐Americanisation are a strong under‐ current in Europe. Businesses have to plan how to counter such a groundswell of feeling if planning on entering new markets – given that some 50% of Europeans believe that ‘our society is too Americanised’ and such an attitude has increased over the past 10 years. While the degree of agreement varies within Europe (e.g. 67% of Spaniards agreeing with the statement, as compared with 44% of Brits), it is a significant influence of customer behaviour. To compound matters, multinational companies are the least trusted of 27 entities when European consumers have been asked to state which they trust to be honest and fair.

   As a result, not only have we seen an increase in consumer activism (such as anti‐WTO protests, growth of the slow food movement in Europe etc.), but also we have seen global brands coming under threat from emergent local brands which are gaining in currency. We would expect this to continue. This is not to say that there is no room for global brands! Many global brands have successfully tapped into local culture and tastes and recognised the need to either modify the product/ service completely or change different elements of the offer and how it is ultimately marketed. Thus companies expanding into new geographic markets have to ensure that their strategies are based on a real understanding of regional and local markets.

   Globalisation is not making the world a smaller, homogeneous place. While this presents many opportunities for businesses, it also implies a need for a clear understanding of what shapes consumer needs and desires in the different nations. Not surprising perhaps that many businesses found the notion of a ‘globalised’ world compelling, given the significant implications for researching a multitude of different markets in terms of time and money budgets. Similarly, it is easy to under‐ stand the temptation of taking well‐established national stereotypes and assuming that they are representative of the truth.

   Recent attitudinal studies in Europe and the US undertaken by the Henley Centre show the complexity of attempting to categorise consumers on a broad scale. Let’s take an example. At one level, results show that all consumers take pride in their family, so a global advertising campaign using the ‘family’ as a theme may feel like safe territory. To some extent it is. Dig down a bit deeper, however, and you find that different people define ‘family’ in very different ways, so what people take pride in will be subtly different. At a country level, many more differences expose themselves.

   Businesses wanting to broaden their geographic reach have to consider at a strategic level what level of understanding of consumer needs they require. Generalisations are important and are a good place to start, but it is critical to then delve further – national stereotypes are too simplistic. Differences, rather than similarities, have to be considered, and interrogated in terms of how these will impact customer needs.

   Source: The Henley Centre.

   Tutorial Questions - Debate in classes

2. Based on this article and your experiences, debate the statement: ‘Site localisation is essential for each country for an e‐commerce offering to be successful in that country? please answer this question

What is use and purpose of financial analysis?

Colper Grant is the president of Acme Brush of Brazil, the whole owned Braziliain Subsidiary of US based Acme Brush Inc. Cooper Grant's compensation package consists of a combination of salary and bonus. His annual bonus is calculated as a predetermined percentage of the pre-tax annual income earned by Acme Brush of Brazil. A condensed income statement for Acme Brush of Brazil for the most recent year is as follows (amounts in thousands of Brazilian reals (BRL)): BRL Sales 10,000 Expenses 9,500 Pre-tax income 500 After translating the Brazilian real income statement to the US dollars, the condensed income statement for Acme Brush of Brazil appears as follows (amounts in thousand of US Dollars (USD): Sales 3,000 Expenses 3,300 Pre-tax loss -300 A. Explain how Acme Brush of Brazil's pre-tax income in BRL becamea US dollar pretax loss. In order to receive the full credit, you are required to show all steps in calculation. B. Discuss whether Cooper Grant should be paid a bonus or not...... please dont forget to clearly show the steps.. thanks:)