Equivalent Units and Product Cost Report—FIFO Method

In its first month's operations (January 2016), Allred Company's Department 1 incurred charges of $165,000 for direct materials (10,000 units), $70,000 for direct labor, and $84,700 for manufacturing overhead. At month-end, 8,800 units had been finished and transferred out. The remaining units were finished with respect to material but only 25% complete with respect to conversion costs.

Assuming Allred uses the FIFO method and that materials are added at the beginning of the process and conversion costs occur evenly, compute the following:

b. The cost per equivalent unit for material and conversion.

c. The total cost assigned to the units transferred out.

d. The total cost assigned to the ending inventory.

e. Prove that your solutions to requirements (c) and (d) sum to the total costs to be accounted for.

M7-8 Calculating Cost of Goods Available for Sale, Cost of Goods Sold, and Ending Inventory under Periodic FIFO, LIFO, and Weighted Average Cost [LO 7-3]

Mullet Technologies is considering whether or not to refund a $75 million, 15% coupon, 30-year bond issue that was sold 5 years ago. It is amortizing $9 million of flotation costs on the 15% bonds over the issue's 30-year life. Mullet's investment banks have indicated that the company could sell a new 25-year issue at an interest rate of 9% in today's market. Neither they nor Mullet's management anticipate that interest rates will fall below 9% any time soon, but there is a chance that rates will increase.

A call premium of 7% would be required to retire the old bonds, and flotation costs on the new issue would amount to $7 million. Mullet's marginal federal-plus-state tax rate is 40%. The new bonds would be issued 1 month before the old bonds are called, with the proceeds being invested in short-term government securities returning 4% annually during the interim period.

1. Conduct a complete bond refunding analysis. What is the bond refunding's NPV? Do not round intermediate calculations. Round your answer to the nearest cent

   $ _____

2. What factors would influence Mullet's decision to refund now rather than later? (100 words or 4 bullet points)

   _____________________________________________________________

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Inventory Turnover and days’ sales in inventory

Kroger, Sprouts Farmers Market, Inc., and Whole Foods Markets, Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory (in millions) information:

a. & b. Determine the inventory turnover and the number of days’ sales in inventory (use 365 days and round to one decimal place) for the three companies. Round all interim calculations to one decimal place. For days' sales in inventory, round final answers to the nearest day, and for inventory turnover, round to two decimal places.

c. The inventory turnover ratios and days’ sales in inventory are similar  for Kroger and Sprouts. Whole Foods has a higher  inventory turnover and a lower days’ sales in inventory than Kroger and Sprouts. These results suggest that Kroger and Sprouts are less  efficient than Whole Foods in managing inventory.

d. If Kroger had Whole Foods’ days’ sales in inventory, how much additional cash flow would have been generated from the smaller inventory relative to its actual average inventory position? Round interim calculations to one decimal place and your final answer to the nearest million.
$ million

Russell Company is a pesticide manufacturer. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Russell’s chemical pesticides. In the coming year, Russell will have environmentally safe and competitive chemicals to replace these discontinued products. Sales in the next year are expected to greatly exceed any prior years. The decline in sales and profits appears to be a one-year aberration. Even so, the company president fears a large dip in the current year’s profits. He believes that such a dip could cause a significant drop in the market price of Russell’s stock and make the company a takeover target.

To avoid this possibility, the company president calls in Zoe Baas, controller, to discuss this period’s year-end adjusting entries. He urges her to accrue every possible revenue and to defer as many expenses as possible. He says to Zoe, “We need the revenues this year, and next year can easily absorb expenses deferred from this year. We can’t let our stock price be hammered down!” Zoe didn’t get around to recording the adjusting entries until January 17, but she dated the entries December 31 as if they were recorded then. Zoe also made every effort to comply with the president’s request.

1. Who are the stakeholders in this situation?
2. What are the ethical considerations of (a) the president’s request and (b) Zoe dating the adjusting entries December 31?
3. Can Zoe accrue revenues, defer expenses, and still be ethical?
4. Can Zoe’s accrued revenues and deferred expenses be illegal?
5. Who do you think can discover Zoe’s accrued revenues and deferred expenses?

The following selected accounts and their current balances appear in the ledger of Kanpur Co. for the fiscal year ended June 30, 2019:
Please let me know the answer of Note payable (current portion) and Note payable (final payment due 2032) using below information.

Andretti Company has a single product called a Dak. The company normally produces and sells 124,000 Daks each year at a selling price of $44 per unit. The company’s unit costs at this level of activity are given below:

A number of questions relating to the production and sale of Daks follow. Each question is independent.

Required:

1. The company has 400 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling price?

2. Due to a strike in its supplier’s plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 30% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period.

a. How much total contribution margin will Andretti forgo if it closes the plant for two months?

b. How much total fixed cost will the company avoid if it closes the plant for two months?

3. An outside manufacturer has offered to produce 124,000 Daks and ship them directly to Andretti’s customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andretti’s avoidable cost per unit that it should compare to the price quoted by the outside manufacturer?

Laraia Corporation has provided the following contribution format income statement. All questions concern situations that are within the relevant range.

   Sales (3,000 units)   $150,000     
   Variable expenses   90,000     
   Contribution margin   60,000     
   Fixed expenses   48,000     
   Net operating income   $12,000     
Required:
a. What is the contribution margin per unit?
b. What is the contribution margin ratio?
c. What is the variable expense ratio?
d. If sales increase to 3,050 units, what would be the estimated increase in net operating income?
e. If sales decline to 2,900 units, what would be the estimated net operating income?
f. If the selling price increases by $4 per unit and the sales volume decreases by 200 units, what would be the estimated net operating income?
g. If the variable cost per unit increases by $5, spending on advertising increases by $3,000, and unit sales increase by 450 units, what would be the estimated net operating income?
h. What is the break-even point in unit sales?
i. What is the break-even point in dollar sales?
j. Estimate how many units must be sold to achieve a target profit of $54,000.
k. What is the margin of safety in dollars?
l. What is the margin of safety percentage?
m. What is the degree of operating leverage?
n. Using the degree of operating leverage, what is the estimated percent increase in net operating income of a 15% increase in sales?

Starr Company decides to establish a fund that it will use 5 years from now to replace an aging production facility. The company will make a $97,000 initial contribution to the fund and plans to make quarterly contributions of $48,000 beginning in three months. The fund earns 8%, compounded quarterly. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "Table Factor" to 4 decimal places and final answer to the nearest whole dollar.)

What will be the value of the fund 5 years from now?

You are a member of Arrow Company’s internal audit staff. A review of office practices indicates that an accounting assistant routinely makes arrangements with the bank for short-term notes payable and signs the notes.
Evaluate this practice. Would you recommend any changes?

Lackawanna Community College has three divisions: Liberal Arts, Sciences, and Business Administration. The college’s comptroller is trying to decide how to allocate the costs of the Admissions Department, the Registrar’s Department, and the Computer Services Department. The comptroller has compiled the following data for the year just ended.

Required:

1. Distribute the departmental costs to the college’s three divisions based on the allocation base given.
2. Choose the better allocation base for distributing the cost to the following departments:

1. Distribute the departmental costs to the college’s three divisions based on the allocation base given. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

2. Choose the better allocation base for distributing the cost to the following departments:

The following information relates to RED Co's postretirement health care benefits for the year 2019:

Defined post-retirement benefit obligation at January 1, 2019: $100,000

Plan assets, January 1, 2019: 50,000

Actual return on plan assets, 2019: 5,000

Service cost, 2019: 60,000

Plan funding during 2019: 20,000

Payments from plan to retirees during 2019: 8,000

Actuarial loss on defined post-retirement benefit obligation-2019 (end of year): 30,000

ABC Inc. follows IFRS. Discount rate is 10%

(a) Calculate the post-retirement benefit expense for 2019.

(b) Calculate the post-retirement benefit remeasurement gain or loss- other comprehensive income (OCI) for 2019.

(c) Determine the December 31, 2019 balance of the plan assets, the defined post-retirement benefit obligation, and the plan surplus or deficit.

(d) Determine the balance of the net post-retirement benefit liability/asset account on the December 31, 2019statement of financial position.

(e) Reconcile the plan surplus or deficit with the amount reported on the statement of financial position at December 31, 2019.

The quality of a company's earnings and sustainable income are both important to analysts and investors. Examine the difference between the quality of earnings for a company and sustainable income. Discuss the relevancy of pro forma statements to sustainable income and quality of earnings. As an investor assume you can select information related to either quality of earnings or sustainable income prior to making a decision to invest in a company. Identify your selection and support your response with an example.