Prem Narayan, a graduate student in engineering, to market a radical new speaker he had designed for automobile sound systems, founded Acoustic Concepts, Inc. Prem established the company’s headquarters into rented quarters in a nearby industrial park. He hired a receptionist, an accountant, a sales manager, and a small sales staff to sell the speakers to retail stores. Prem asked his accountant, Bob Luchinni, to prepare several cost-volume-profit analyses, using the information shown below.

Sales price for one speaker set................................................... $250 Variable manufacturing cost for each speaker set (direct
materials) ................................................................................... $150 Fixed expenses per month (rent, salaries of receptionist, sales

people, accountant, and Prem)................................................... $35,000 Number of speaker sets sold per month..................................... 400

Prem and other management personnel are considering the use of higher-quality components, which would increase variable costs by $10 per speaker. However, the sales manager predicts that the higher overall quality would increase sales to 480 speaker sets per month. Should the higher quality components be used?

The sales manager believes that by reducing the selling price of speakers by $20, and also by increasing the advertising budget by $15,000 per month, that sales will increase to 600 speaker sets per month. Should the changes be made?

The sales manager would like to place the sales staff on a commission basis of $15 per speaker sold, rather than on flat salaries that now total $6,000 per month. The sales manager is confident that the change will increase monthly sales to 460 speaker sets per month. Should the change be made?

Suppose Acoustic Concepts has an opportunity to make a bulk sale of 150 speakers to a wholesaler, if an acceptable price can be worked out. The sale would not disturb the company’s regular sales, nor would if affect fixed operating costs per month. What price should be quoted to the wholesaler if Acoustic Concepts wants to increase its monthly profits by $3,000?

 C.M.=contribution margin, S.P.=sales price, V.C.=variable cost, F.C.=fixed cost

 C.M. per unit = S.P. per unit – V.C. per unit

 The break even point is the point at which the total contribution margin equals fixed costs.

 Break even units sold = F.C. / C.M. Per unit

 Break even sales dollars = F.C. / C.M. Percentage

 C.M. Percentage = C.M. per unit / S.P. per unit, or C.M. (total) / Sales (total)

The Palace Theater opened on April 1. All facilities were completed on March 31. At this time, the ledger showed No. 101 Cash $6,000, No. 140 Land $12,000, No. 145 Buildings (concession stand, projection room, ticket booth, and screen) $8,000, No. 157 Equipment $6,000, No. 201 Accounts Payable $2,000, No. 275 Mortgage Payable $10,000, and No. 311 Common Stock $20,000. During April, the following events and transactions occurred.

In addition to the accounts identified above, the chart of accounts shows No. 112 Accounts Receivable, No. 136 Prepaid Rent, No. 400 Service Revenue, No. 429 Rent Revenue, No. 610 Advertising Expense, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense.

A. Enter the beginning balances in the ledger as of April 1

b.Journalize the April transactions. Palace records admission revenue as service revenue, rental of the concession stand as rent revenue, and film rental expense as rent expense.

c.Post the April journal entries to the ledger.

d.Prepare a trial balance on April 30, 2017.

Some of the costs vary with the number of productions, some with the number of performances, and some are fixed and depend on neither the number of productions nor the number of performances.On the other hand, the wages of the actors, directors, stagehands, ticket booth personnel, and ushers vary with the number of performances. The greater the number of performances, the higher the wage costs will be. Similarly, the costs of renting the hall and printing the programs will vary with the number of performances. Administrative expenses are more difficult to analyze, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% depend on the number of productions staged, and the remaining 10% depend on the number of performances. After the beginning of the year, the board of directors of the theater authorized expanding the theater’s program to seven productions and a total of 168 performances. Not surprisingly, actual costs were considerably higher than the costs from the planning budget.

Required:

1. Prepare a flexible budget performance report for the year that shows both spending variances and activity variances. (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.)

NOTE: THIS IS FOR MY LEGAL ENVIRONMENT CLASS

11. In June, Daniels contracted with Lefkowitz to build a stone path leading from the road to his vacation home. Daniels asked him to complete the job within 11 (eleven) months. Explain whether Lefkowitz and Daniels must enter in a written agreement for such a contract to be enforceable.

12. The hotel workers union of Metropolis strikes in spite of a no-strike clause, causing several conventions to be canceled. Restaurant owners in Metropolis want to sue the hotel workers union for their loss of business caused by the canceled conventions. Will the restaurant owners win their suit?

At year-end (December 31), Chan Company estimates its bad debts as 0.5% of its annual credit sales of $975,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $580 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.

Prepare the journal entries for these transactions.

• Record the estimated bad debts expense.
• Wrote off P. Park's account as uncollectible.
• Reinstated Park's previously written off account.
• Record the cash received on account.

A 20 month old child recently fell seven stories from a balcony of the Pompano Beach, Florida Quality Inn. The child survived the fall. The plaintiff charged that the corroded railing gave way on the balcony. Experts have said that salty sea air can rapidly eat through the metal railings that line thousands of hotel balconies in South Florida beachfront hotels. Warnings had been placed in all of the guestrooms advising people to stay away from the railings and to supervise their children.

Basis of action of plaintiff against the hotel.

a. What are the specific legal basis for seeking damages?

a)In order to determine the average price of hotel rooms in Atlanta. Using a 0.1 level of significance, we would like to test whether or not the average room price is significantly different from $110. The population standard deviation is known to be $16. A sample of 64 hotels was selected. The p-value associated with the test statistic (z) is calculated and it is 0.03. We conclude that the average price of hotel rooms in Atlanta is NOT significantly different from $110. (Enter 1 if the conclusion is correct. Enter 0 if the conclusion is wrong.)

b)In order to determine the average price of hotel rooms in Atlanta. Using a 0.1 level of significance, we would like to test whether or not the average room price is significantly different from $110. The population standard deviation is known to be $16. A sample of 64 hotels was selected. The test statistic (z) is calculated and it is -1.45. We conclude that the average price of hotel rooms in Atlanta is NOT significantly different from $110. (Enter 1 if the conclusion is correct. Enter 0 if the conclusion is wrong.)

C)A sample of 28 account balances of a credit company was taken to test whether the mean of all account balances is significantly greater than $1,150. Using the sample standard deviation, the test statistic (t) was calculated to be $1.93. We use a 0.05 level of significance. Assume the population of account balances is normally distributed and the population standard deviation is unknown to us.We conclude that the mean of all account balances is significantly greater than $1,150. (Enter 1 if the conclusion is correct. Enter 0 if the conclusion is wrong.)