I do not understand question number three. However, I belive the answers to questions number 1 and 2 are already on chegg I just need clarification with how to do question number 3. PLEASE HELP

Q. 1.    Prepare a budgeted income statement for Premium Grade Ovenware for 2007 if the engineers’ redesign efforts had worked as originally planned. Use these assumptions:

First quarter sales of 1,500,000 units will be achieved each quarter in 2007.

The selling price for 2007 will remain 10% below the price charged from 2002-2006, and there were no sales price increases during the 2002-2006 period.

Variable cost of goods sold averaged about $5.55 per unit of ovenware from 2002-2006.

Variable production costs will be reduced by 35% due to the new design.

The fixed cost of production in 2006 contained one-time, increased costs (about $4,000,000) for the design changes. For 2007, fixed costs are expected to be about 3.5% higher than 2005.

Marketing costs contain both fixed and variable elements, however, it is budgeted based on spending 7% of expected sales revenue.

Other fixed costs are expected to increase about 2.5% over 2006.

Would the product manager have met his profit target of 25% return on sales in 2007 for the product line with the redesign?

Q. 2.    Prepare the budgeted 2007 income statement for Premium Grade Ovenware that the production, quality, and product managers considered when they discussed the first option available to them.

a.   Under that option, shipment would be delayed and about one third of the year’s sales of 6,000,000 units would be lost.

Product would be sold at the 10% price reduction but produced under the old cost structure for six months (variable production costs of $5.55 per unit). After the six months the variable cost savings of 35% would be achieved.

Assume that recycling the current production would add $500,000 to the fixed production costs originally budgeted for 2007. In addition, the product line will incur an additional $2,000,000 in design engineering to solve the problem within a 6-month period (this will involve the use of overtime and consultants).

Other cost items would stay as originally budgeted for 2007.

What would the product line’s profit be under this alternative? What would the return on sales for the product line be?

Q. 3.     The production, quality and product managers considered their second option to be producing and selling flawed units for 6 months while engineers corrected the problem. Under this option, the company would not disclose the problem and hope for the best. Perhaps none of the product claims would involve any injury; only product replacement would be required at a cost of about $12 per unit.

a.    Adjust the 2007 budget for an assumed defect rate of .25% for 6 months production. (Note this is a defect rate in addition to the normal rate faced in each year, 2002-2006, which is already accounted for in marketing cost.)

b.   Adjust the fixed production cost for 2007 for an additional $2,000,000 in design engineering to solve the problem within a 6-month period. (This will involve the use of overtime and consultants).

What would the budgeted profit and return on sales be if option two were selected?

If the engineer’s redesign efforts had worked originally, the Budgeted Income Statement for Premium Grade Overnware in 2007 would have been:

Since the budgeted profit target is 33.66%, the product manager met his profit target of 25% return on sales in 2007 for the product line with the redesign.

The production, quality, and product managers used this budgeted income statement to consider the first option that was given:

2)

Famous Failures in Finance: Shady Trading at Enron Before it was known for its financial problems, Enron, a utility firm operating pipelines and shipping natural gas, had become famous as a business pioneer, blazing new trails in the market for trading risk. In the 1980s the price of natural gas was deregulated, which meant that its price could go down and up, exposing producers and consumers to risks. Enron decided to exploit new opportunities in the commodities business by trading natural gas futures. The natural gas futures that traded on the New York Mercantile Exchange did not take into account regional discrepancies in gas prices. Enron filled this void by agreeing to deliver natural gas to any location in the United States at any time. In addition to trading natural gas and other energy contracts, in the late 1990s Enron began trading weather derivatives for which no underlying commodities existed. These were just bets on the weather. Its weather-derivatives transactions were worth an estimated $3.5 billion in the United States alone. Thanks to its near-monopoly position in derivatives products, Enron’s trading business was initially highly profitable. At one point, the company offered more than 1,800 different contracts for 16 product categories, ranging from oil and natural gas to weather derivatives, broadband services, and emissions rights, and it earned 90% of its revenues from trading derivatives. And unlike traditional commodity and futures exchanges and brokers, Enron’s online commodity and derivative business was not subject to federal regulations. However, Enron eventually lost its unique position as the energy business started to mature. When other firms entered the online derivatives-trading business, they competed by charging lower commissions and exploiting the same regional price discrepancies that had been Enron’s bread and butter. Enron’s trading operations became less profitable. To find new markets and products, the company expanded into areas such as water, foreign power sources, telecommunications, and broadband services. The farther it moved from its core businesses of supplying gas, the more money Enron lost. The company sought to hide those losses by entering into more risky and bizarre financial contracts. When financial institutions began to realize that Enron was essentially a shell game, they withdrew their credit. At that point, despite rosy assurances from its founder and CEO Ken Lay, Enron went into a death spiral that ended in bankruptcy on December 2, 2001. In July 2004 Lay was indicted on 11 counts of securities fraud and related charges. He was found guilty on May 25, 2006, of all but one of the counts. Each count carried a maximum 5- to 10-year sentence and legal experts said Lay could face 20 to 30 years in prison. However, about three and a half months before his scheduled sentencing, Ken Lay died on July 5, 2006, while vacationing in Snowmass, Colorado. On October 17, 2006, as a result of his death, the federal district court judge who presided over the case vacated Lay’s conviction.

Please answer the questions.

Critical Thinking Questions: Could the Enron debacle have been prevented? If so, what actions should have been taken by auditors, regulators, and lawmakers? Please respond to the above questions.

The Superstar Corporation, one of US merchandisers (Non-publicly Corporation), Provides merchandising goods for specific customers. The company’s fiscal year ends on December 31. For the year ended December 31, 2019, the company collected $1,300,000 from regular customers and paid out $650,000 for various operating expenses (not including income taxes and restructuring costs). The following information also is available.

Partial balance sheet information:

12/31/19 12/31/18

Accounting receivable 120,000 95,000

Accounts payable (for operating expenses) 50,000 65,000

Unearned Revenue                             180,000            150,000

Additional facts:

1. Partial Information selected from “inventory-Finished Goods”

Beginning Balance:       1500@$200

Current purchase: Jan 15    500@ $150

               Mar 30   200@ $250

               June15   500@$ 210

               Oct 15   200@$ 250

Current sales:    Feb 28   1200 units

               May 1    600 units

The business always take the Perpetual Inventory System, Weighted-Average cost flow assumption. No remeasuring for ending inventory.

2. Depreciation expense for 2019 totaled $70,000;
3. There were no bad debt write offs during the year.
4. During the year, the company incurred a loss of $100,000 from hurricane damage to one of its buildings. The loss is material and the event is considered to be unusual, but frequent.
5. Oct 1, 2019, the board of director of Superstar declared closing a division and related 120 employees will be laid off after 4 months. There has a terminating compensation required minimum 2 year retention period. Also, Average $20,000 each one will be compensated for meeting this requirement. Only 2/3 of total employees of this division reach this standard.
6. The company bank interest totaled $50,000 and bond interest expense incurred $20,000.

The company’s income tax rate is 30% on all items of income or loss.

Required: (Show all computations)

Prepare a multiple-step, accrual-based income statement for 2019.

1. Rebates and discounts

On March 1, Martin Company sold and delivered goods to Shannon Inc. for $300,000 on account. Shannon Company has been a customer for more than 10 years and has earned a 3% rebate on the overall purchase. Prepare the journal entry to recognize revenue. The journal entry for the cost of goods sold is not required.

2. Commissions, consignee/agent perspective

Royal vacations, a high-end vacation agent, sells tickets for all-inclusive European vacations to various customers. The company sells a $10,000 package and will receive a commission of 4% of the total price. Royal vacations must also remit the sales price to European Destinations, Company. Prepare the journal entry to record the receipt of cash and remittance and revenue recognized the agent.

Because of high tuition costs at state and private universities, enrollments at community colleges have increased dramatically in recent years. The following data show the enrollment (in thousands) for Jefferson Community College for the nine most recent years.

Click on the datafile logo to reference the data.

QUESTION 5

The majority of conflicts of interest frauds are involved in purchasing or sales schemes.

QUESTION 6

The Foreign Corrupt Practices Act is a state law in Massachusetts that prohibits conflicts of interest.

QUESTION 7

The Foreign Corrupt Practices Act requires publicly traded corporations to keep accurate books and records and adopt a system of internal controls.

QUESTION 8

Under the Foreign Corrupt Practices Act, the Congress can seek civil penalties of up to $5,000,000 for corporate entities and up to $1,000,000 for individuals who violate the law.

QUESTION 9

Collusion is a secret agreement between two or more people for a fraudulent, illegal, or deceitful purpose such as subverting the internal controls of their employer.

QUESTION 10

A slush fund is a noncompany account into which company money is deposited and from which bribes (illegally) may be paid.

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.80 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below:

The total cost of operating the company for the year is $345,000 which includes the following costs:

Resource consumption is distributed across the activities as follows:

Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Required:

1. Prepare the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. The company recently completed a 400 square foot carpet-cleaning job at the Flying N Ranch—a 58-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system.

4. The revenue from the Flying N Ranch was $91.20 (400 square feet @ $22.80 per hundred square feet). Calculate the customer margin earned on this job.

Collect information on the budgets of each of Netherland and Malaysia for the 15 years from 2004 and 2018. You need to collect information on the major components of revenue and expenses with smaller items put into the category “others”. Determine whether the country or federal budget was in surplus or deficit in each of the years.

English Company billed its customers a total of $1,785,000 for the month of November. The total includes a 5% state sales tax.Instructions(a) Determine the proper amount of revenue to report for the month.(b) Prepare the general journal entry to record the revenue and related liabilities for the month.(c) Assume English does separate revenue from sales tax and the revenue for the month of November is $1,600,000. Prepare the general journal entry to record the revenue and related liabilities for the month.