Inventory Costing Methods

Morrison Inc. reported the following information for the month of May:

During May, Morrison sold 137 units. The company uses a periodic inventory system.

Required:

What is the value of ending inventory and cost of goods sold for May under the following assumptions.

(1)Janice made a $6,000 contribution to her traditional IRA account. Her employer, Worldwide publishing, offers a 401k that Janice contributes to.

(2)Sale of LMN publically traded stock on 8/15/2019 for $11,000 (originally purchased for $4,000 on 1/15/2015)

(3)Sale of QRS publically traded stock on 10/15/2019 for $2,000 (originally purchased for $6,000 on 12/15/2018)

(4)Sale of a boat on 5/15/2019 for $10,000 used for personal recreation (originally purchased for $20,000 on 6/15/2014)

(5)Janice inherited publically traded stock worth $30,000 from a deceased uncle on September 30, 2019

(6)Immediately after receiving this stock, Janice sold it for $30,000. This stock was originally purchased by his uncle on January 15th, 2016 for $23,000

Prepare the 2019 Federal income tax return for Janice Morgan. It is required that you submit both the (1) tax return and a (2) brief explanation for each line item on the return.

A multiple choice test has 27 questions with four choices each. The examinee gets 3 for each right asnwer and -1 for each wrong answer. If the examinee decided to randonly choose all the asnwers, what is her expecteed score?

A) 0

B) 1

C) 9

D) -3

11-27 (Objectives 11-3 , 11-4) The following are misstatements that can occur in the sales and collection cycle:

A customer number on a sales invoice was transposed and, as a result, charged to the wrong customer. By the time the error was found, the original customer was no longer in business.

A former computer operator, who is now a programmer, entered information for a fictitious sales return and ran it through the computer system at night. When the money came in, he took it and deposited it in his own account.

A nonexistent part number was included in the description of goods on a shipping document. Therefore, no charge was made for those goods.

A customer order was filled and shipped to a former customer, which had already filed for bankruptcy.

The sales manager approved the price of goods ordered by a customer, but he wrote down the wrong price.

A computer operator picked up a computer-based data file for sales of the wrong week and processed them through the system a second time.

For a sale, a data entry operator erroneously failed to enter the information for the salesman’s department. As a result, the salesman received no commission for that sale.

Several remittance advices were batched together for inputting. The cash receipts clerk stopped for coffee, set them on a box, and failed to deliver them to the data input personnel.

Required

Identify the transaction-related management assertion(s) to which the misstatement pertains.

Identify one automated control that would have likely prevented each misstatement

3-27. The Georgeville city government provides a wide variety of services to the community. Among
them is the protection provided by the police force. In order to provide that force, it spends $3 million
on salaries, $200,000 on vehicle costs, and $300,000 on supplies.
The police force expects to have 7,000 measurable actions, consisting of 1,000 arrests, 4,000 traffic
citations, and 2,000 responses to emergency calls. It has noted that the average cost for each one of these
actions is $429 if you simply divide the $3 million department cost by the 7,000 specific individual
actions. Some have argued that it is not cost-effective to give out traffic tickets since the $429 cost per
ticket exceeds the fine collected. The Georgeville Police Department is considering adopting a
performance budget. The performance areas would be arrests, citations, and emergency responses.
The Police Department believes that activities related to making arrests consume 30 percent of salaries
and 40 percent of supplies. Traffic citations consume 30 percent of salaries and 10 percent of supplies.
Emergency response takes up 15 percent of salaries and 25 percent of supplies. Additionally, it performs
many other activities that collectively take up 25 percent of salaries and 25 percent of supplies. The
Police Department also estimates that its vehicles are used 25 percent for arrests, 30 percent for
citations, andand 5 percent for emergency responses. How much money is budgeted for each arrest,
citation, and emergency response? Regardless of your answer, assume that the cost per traffic citation
exceeds the average fine collected. Should the police cease issuing citations? Why?

Given that the density of air at 0.987 bar and 27°C is 1.146 kg m⁻³, calculate the mole fraction and partial pressure of nitrogen and oxygen assuming the following conditions.

(a) air consists only of these two gases
mole fraction nitrogen
  
mole fraction oxygen
  
partial pressure nitrogen
  bar
partial pressure oxygen
  bar

(b) air also contains 1.0 mole percent Ar
mole fraction nitrogen
  
mole fraction oxygen
  
partial pressure nitrogen
  bar
partial pressure oxygen
  bar
partial pressure argon
  bar

(a)   The partnership of Hanly, Ide, and Jen was dissolved. By August 1, 2006, all assets had been converted into cash and all partnership liabilities were paid. The partnership balance sheet on August 1, 2006 (with partner residual profit and loss sharing percentages) was as follows:

Cash   $   50,000       Hanly, capital(30%)   $   4,000
               Ide, capital(20%)       (60,000)
               Jen, capital(50%)       106,000
Total assets   $   50,000       Total equity   $   50,000

The value of partners' personal assets and liabilities on August 1, 2006 were as follows:
       Hanly       Ide       Jen
Personal assets   $   74,000   $   120,000   $   56,000
Personal liabilities       72,000       80,000       60,000
                      
(a)   Required:

Prepare the final statement of partnership liquidation.

In 2004 David Lee started Lee Manufacturing, a company dedicated to manufacturing simple yet efficient gas barbecues. The barbecues are made of aluminum and stainless steel and are priced at the middle of the market. David’s goal has always been to make a barbecue that cooks great food. This means, good quality parts, simple construction, even heat, no hot or cold spots, and a barbecue that will hold temperature from the lowest setting to the highest setting. David’s motto is “high quality for a fair price”. The company offers four basic grill sizes (models) and several options and accessories that can be added on to each model. Lee’s barbecues have been well received. Revenue and profits have grown steadily.

Based on the recommendation from his sales and marketing department Mr. Lee is considering broadening his product line by adding a new product line of Lee charcoal barbecues. These barbecues would be ideal for those cooks that like that distinct charcoal flavor or the nostalgia of barbecuing the old fashioned way. Mr. Lee has asked his sales and marketing team to come up with a sales forecast for units and pricing. He has also asked his manufacturing team to come up with alternatives for the production of the charcoal barbecues including what equipment is needed and what the projected costs would be.

The sales and marketing team hired Advanced Marketing Consultants to conduct a market survey. The total cost for this consulting was $37,500. The initial model would be a mid-sized kettle barbecue. Eventually, two more models would be added, a smaller version ideal for camping or apartment patios and a larger model for the serious cooks.

Based on the survey and their own experience the sales and marketing team has provided a sales forecast. The suggested price of the initial barbecue is $46.90 per barbecue. They would be sold to retailers with a suggested retail price of $69.95. This would provide retailers with a target margin of 33%. The barbecues would be sold by the company’s existing sales force to its existing customer base. Unit sales are forecast at 2,500 in year 1, 5,000 in year 2, 6,500 in year 3, 8,000 in year 4, and then increasing by 1,000 each year thereafter. Sales and marketing expenses are expected to be 10% of total revenue.

The production team forecasts that the fixed costs needed for the charcoal barbecue production line will be $65,000 per year. Variable costs for materials (sheet aluminum, grills, handles wheels, etc.) is expected to be $15.50 per unit. The variable labor costs will vary based on what equipment will be purchased.

There are two brands of equipment that could be purchased to manufacture the lids and bowls of the barbecue. The first is made by the Strong Metal Equipment company. The second is made by the Precision Industrial company.

The Strong brand is more expensive, but higher quality and more efficient. It will cost $125,000 plus an additional $9,000 for shipping and installation. The equipment would be depreciated to zero over 5 years using straight line depreciation. It is expected that the equipment would last for 8 years at which time it would be sold then for $27,500. Maintenance of the Strong equipment would cost $5,000 per year. Since the Strong equipment is more efficient the variable labor cost would be $9.00 per barbecue.

The Precision brand is less expensive. It will cost $95,000 plus an additional $8,000 for shipping and installation. The equipment would be depreciated to zero over 5 years using straight line depreciation. It is expected that the equipment would last for 8 years and would then be sold for $22,000. Maintenance of the Precision equipment would cost $8,000 per year. The variable labor cost with the Precision brand equipment would be $9.75 per barbecue.

The increase in working capital (accounts receivable and inventory) is expected to be $35,000 at the beginning of the project and will be the same for both machines. The company’s cost of capital is 14% and its tax rate is 40%. Since Mr. Lee’s production team believes that both brands of equipment will last for eight years David wants this analyzed as an eight year project.

David has always believed in buying quality so he is leaning towards the Strong brand equipment. But after hearing that you have learned about capital budgeting in your Finance class at UVU he wants to take advantage of your expertise. David has asked you to analyze his choices and give him some advice on which option would provide the best financial outcome for Lee Manufacturing.

Prepare an analysis and professional report for Mr. Lee. The report should be professionally written and include a letter (single spaced), plus attached schedules. The letter should explain what analytical techniques you are using, why you are using those techniques, what the results show, what you would recommend to Mr. Lee and why. Make sure that the letter is well organized and professionally written. Also make sure that the letter includes the following:

1. The cash flows associated with the different equipment brands for each year of the project.

2. The PB period, Discounted PB, IRR, MIRR, and NPV for the two alternatives.

3. Your recommendation of which brand of equipment should be purchased.

4. Attach to your letter schedules that show your analysis and your work. Ideally you will submit two files. A Word file with your letter and an Excel file with your analysis.

1. Match the following situations with the correct test statistic distribution. Provide the correct test statistic you would use (or what type of test). Provide an explanation as to why this is the correct distribution or test. (2 points)

John from One Source Credit is trying to decide how many machines to buy. The processing time is 7.5 minutes per customer. One machine will have total fixed costs of $5,300 per day, two machines will have total fixed costs of $9,800 per day. Variable costs are $40 per customer, revenue is $80 per customer.

1. Determine the break-even point for one machine. a. 89 Customers per Day b. 133 Customers per Day c. 128 Customers per Day

2. Determine the break-even point for two machines. a. 223 Customers per Day b. 89 Customers per Day c. 245 Customers per day

3. If estimated demand is 260 customers per day and he wants a capacity cushion of 10%, how many machines would John need? Assume 12 hours per day operating time. a. One Machine b. Two Machines c. Three Machines

4. Lucy is analyzing her cookie production line. She knows that her Maximum Capacity is 140,000 cookies per day, and her Utilization Rate is 71%.. What is the Average Output of the production line? a. 197,183 b. 94,900 c. 99,400

5. If she wants to increase her effective capacity, she should: a. Have her employees take longer coffee breaks. b. Purchase more specialized equipment if there is cost justification to do so. c. Lobby for increased government regulation