Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows:

Barley Hopp had the following actual results last year:

Required:
1 & 2. Prepare the journal entries to record the direct materials, direct labor and related variances for Barley Hopp. Assume the company purchases direct materials as needed and does not maintain any ending inventories. (Do not round your intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1. Record the entry for direct materials costs and variances.

Options: No journal entry required, Cash or Accounts Payable, Cost of Goods Sold, Direct Labor Efficiency Vaiance, Direct Labor Rate Variance, Direct Materials Price Variance, Direct Materials Quantity Variance, Fixed Overhead Spending Variance, Fixed Overhead Volume Variance, Raw Materials Inventory, Variable Overhead Efficiency Variance, Variable Overhead Rate Variance.

2. Record the entry for direct labor costs and variance

Options: No journal entry required, Cash or Accounts Payable, Cost of Goods Sold, Direct Labor Efficiency Vaiance, Direct Labor Rate Variance, Direct Materials Price Variance, Direct Materials Quantity Variance, Fixed Overhead Spending Variance, Fixed Overhead Volume Variance, Raw Materials Inventory, Variable Overhead Efficiency Variance, Variable Overhead Rate Variance.

Camarillo Manufacturing Company was established to manufacture two types of pipe fittings, XL1 and XL2. The manufacturing process involves molding the fittings and then smoothing them.
The firm was initially capitalized with $500,000 as an S Corporation. The firm purchased equipment for $450,000 with cash of $125,000 and a note payable of $325,000. It also acquired furniture for $120,000 with cash of $60,000 and a note payable of $60,000. Management is now preparing the master budget for the first year of operations.

Sales Budget
Management expects to meet established market prices for its pipe fittings of $50 for XL1 and $40 for XL2. Sales representatives have estimated that total sales of XL1 fittings will be 4,500 units and sales of XL2 will be 12,000 units.

Production Budget
Management has expressed a desire to have 1,000 units of XL1 and 3,000 units of XL2 in ending inventory.

Material Acquisition Budget
The firm’s industrial engineer has prepared standards that call for 0.6 pounds of material per XL1 casting and 0.4 pounds per XL2 casting. Both products require the same material. Management also desires to end the period with 2,000 pounds of material in raw materials inventory. The purchasing agent anticipates that the metal can be purchased at an average cost of $4 per pound.

Direct Labor Budget
The standards for a unit of XL1 call for 0.5 hours of direct labor in Molding and 0.3 hours in Smoothing. The standards for a unit of XL2 call for 0.4 hours in Molding and 0.2 hours in Smoothing. Management’s anticipated average cost for labor is $15 per hour.

Factory Overhead Budget
Service Department 1 handles personnel matters. The firm anticipates having 12 factory employees and expects the variable costs to operate the personnel department to average $1,000 per employee. The cost of this department is allocated to other departments on the assumption that there will be three employees in the maintenance department, five employees in the molding department, and four employees in the smoothing department. The personnel department’s fixed costs are estimated to be $15,000 and will be allocated on a lump sum basis at $3,000 to maintenance, $6,000 to molding and $6,000 to smoothing.

The maintenance department is budgeted to make 100 service calls during the period, 60 calls for the molding department and 40 calls for the smoothing department. The maintenance manager estimates that it will cost an average of $150 in variable costs per service call. The fixed costs of $14,000 are thought to benefit the two production departments equally.

The molding department is expected to incur $29,000 in variable overhead and $42,000 in fixed overhead. The smoothing department is expected to have $32,000 in variable overhead and $8,000 in fixed overhead.

Management has decided to allocated 60% of the fixed overhead cost of molding to XL1 and 40% to XL2 and split the fixed smoothing costs evenly between the two products. Variable costs will be allocated based on direct labor hours.

Selling and Administration Expenses Budget
Budgeted selling and administration expenses are $126,400. This includes sales commissions at 10% of sales or $56,400; administration salaries of $30,000; advertising of $6,000; supplies of $2,000 and interest of $32,000.

Budgeting Cash Receipts and Disbursements
Sales are presumed to be $100,000 in the first quarter; $160,000 in the second quarter; $220,000 in the third quarter and $225,000 in the fourth quarter. Seventy percent of sales will be paid for in the quarter in which they are made and thirty percent will be paid in the quarter following the sale. Production will be spread uniformly over the year. The firm will pay for materials, supplies, and labor in the quarter the cost is incurred. Utilities will be paid one month after incurred. Half the property tax is aid in the first and third quarters. The first payment for a new company is not made until the third quarter. Sales commissions are paid in the quarter a sale is made. Other selling and administration costs are incurred and paid uniformly. Finally, the firm makes note payments of $30,000 per quarter which consists of $22,000 of principal repayment and $8,000 of interest. Total Costs include depreciation of $27,000; $21,000 for equipment and $6,000 for the furniture.

Additional Information

Sales by Quarter:
1st $100,000
2nd 160,000
3rd 220,000
4th 225,000

Budgeted Selling & Administration Expenses:

Required
Prepare the following budgets:
  Factory overhead budget

Process Costing – Packaging Department (Refer to Information 9)

Direct materials are added 90% at the beginning of the process and the remaining 10% are added when the cereal is 50% complete with the packaging process. Direct labor and overhead are added evenly throughout the process at the completion rate of the cereals.

Table 8 – Unit and cost information (Do not attempt to complete this table; it is for information only)

Added during Qtr. 1:

Direct Materials -- $9,733

Direct Labor – 790 hours @ $11.00 per hour

Overhead – OH is applied based on predetermined OH rate and actual DL hours

1. Determine the number of units completed during quarter 1.

(Formula to be used: Beginning WIP + Transferred in = Units completed + Ending WIP)

4,000+38,231= units completed + 4,200

Units completed = 38,031 units

2. Compute the equivalent units using the weighted average method.

(Formula: Equivalent units = physical units x percentage of completion)

3. Compute the cost per equivalent unit using the weighted average method.

4. Compute the cost of goods transferred to finished goods inventory

Costs of goods transferred = number of completed goods x total equivalent costs per unit

5. Compute the ending balance in WIP, Packaging

An overhead budget shows the expected cost of all production costs:

a.other than fixed overhead items.

b.other than direct materials and direct labor.

c.including selling and administrative expenses.

d.including direct materials and direct labor.

To create a meaningful performance report, _____.

a.actual costs and prior period costs must be compared at the same level of activity

b.actual costs and expected costs must be compared at two different levels of activity

c.actual costs and expected costs must be compared at the same level of activity

d.actual costs and prior period costs must be compared at two different levels of activity

Which of the following formulas is used to compute units to be produced while preparing a production budget?

a.Units to Be Produced = Expected Units Sales + Units in Desired Ending Inventory – Units in Beginning Inventory

b.Units to Be Produced = Expected Production Units – Ending Inventory Units + Beginning Inventory Units

c.Units to Be Produced = Expected Production Units + Ending Inventory Units – Beginning Inventory Units

d.Units to Be Produced = Expected Units Sales + Units in Desired Ending Inventory + Units in Beginning Inventory

The actual and budgeted costs for Synergy Inc.'s actual level of activity are as follows:

Calculate the flexible budget variance.

a.$160F

b.$1,240U

c.$1,080U

d.$90F

_____ is an example of a monetary incentive used to control a manager's tendency to shirk and waste resources.

a.Job enrichment

b.A recognition program

c.Increased responsibility

d.A promotion

Which of the following is true of an after-the-fact flexible budget?

a.It allows managers to develop financial results for a number of potential scenarios.

b.It is used to compute what the costs should be for the level of output that actually occurred.

c.It allows managers to see what costs will be for different levels of activity, thus helping in planning.

d.It is a budget created in advance that is based on a particular level of activity.

A(n) _____ is a financial budget.

a.production budget

b.budget for capital expenditures

c.overhead budget

d.budgeted income statement

Which of the following is a key feature of an ideal budget?

a.Participative budgeting

b.Single measure of performance

c.One time feedback on performance

d.Only monetary incentives

Excellent Corp. expects the following total sales for the coming year:

From past experience, Excellent Corp. expects that, on average, 20% of total sales are cash and 80% of total sales are on credit. Of the credit sales, Excellent Corp. expects that 80% will be paid in cash during the quarter of sale, and the remaining 20% will be paid in the following quarter. The balance in Accounts Receivable as of the last quarter of the prior year was $1,500. This will be collected in cash during the first quarter of the coming year. Calculate the total amount of cash receipts from sales expected in Quarter 1 of the coming year.

a.$8,400

b.$4,000

c.$9,900

d.$6,400

_____ budgets detail the inflows and outflows of cash.

a.Operating

b.Sales

c.Capital

d.Financial

_____ budgets describe the income-generating activities of a firm: sales, production, and finished goods inventories.

a.Financial

b.Operating

c.Cash

d.Capital

Assume that the salespeople of Excellent Corp. are paid 4% of sales as commission. The level of sales is $200,000 for this month, and the only fixed selling costs are $30,000. Excellent's budgeted selling costs for this month are:

a.$38,000.

b.$48,000.

c.$22,000.

d.$30,000.

Game where someone goes first - What is backward induction

One-period game , Multi-period game - differences

What is the principal agent problem?

Negative / positive externalities.

Public goods, private goods, club goods, common goods

Tragedy of the commons

Under-funded, Free rider

A. According to John Maynard Keynes,

1. the demand for money in a country is determined entirely by that nation’s central bank.

2. the supply of money in a country is determined by the overall wealth of the citizens of that country.

3. the interest rate adjusts to balance the supply of, and demand for, money.

4. the interest rate adjusts to balance the supply of, and demand for, goods and services.

B. While a television news reporter might state that “Today the Fed raised the federal funds rate from 1 percent to 1.25 percent,” a more precise account of the Fed’s action would be as follows:

1. “Today the Fed told its bond traders to conduct open­market operations in such a way that the equilibrium federal funds rate would increase to 1.25 percent.”

2. “Today the Fed raised the discount rate by a quarter of a percentage point, and this action will force the federal funds rate to rise by the same amount.”

3. “Today the Fed took steps to increase the money supply by an amount that is sufficient to increase the federal funds rate to 1.25 percent.”

4. “Today the Fed took a step toward expanding aggregate demand, and this was done by raising the federal funds rate to 1.25 percent.”

C. Refer to the graph above, if the current interest rate is 2 percent,

1. there is an excess supply of money.

2. people will sell more bonds, which drives interest rates up.

3. as the money market moves to equilibrium, people will buy more goods.

4. All of the above are correct.

D. Suppose that the Federal reserve is concerned about the effects of falling stock prices on the economy. What could it do?

1. buy bonds to raise the interest rate

2. buy bonds to lower the interest rate

3. sell bonds to raise the interest rate

4. sell bonds to lower the interest rate

E. The economy is in recession. Shifting the AD curve rightward by $200 billion would end the recession. Which of the following statements is correct?

1. If MPC = 0.8 and there is no crowding out, the Congress needs to increase G by $160 billion to end the recession.

2. If MPC = 0.8 and there is no crowding out, the Congress needs to increase G by $40 billion to end the recession.

3.. If MPC = 0.8 and there is crowding out, the Congress needs to increase G by a smaller amount than when there is no crowding out.

4. If MPC = 0.8 and there is crowding out, the Congress needs to increase G by the same amount than when there is no crowding out.

F. In 1986, OPEC countries increased their production of oil. This caused

1. the price level to rise.

2. aggregate supply to shift right.

3. unemployment to rise.

4. None of the above is correct.

G. Suppose the economy is in long-run equilibrium. If there is a sharp decline in government purchases combined with a significant increase in immigration of skilled workers, then in the short run,

1. real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same.

2. the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected.

3. the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.

4. the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.

H. Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run

1. the price level will rise and real GDP will fall.

2. the price level will fall and real GDP will rise.

3. the price level and real GDP will both stay the same.

4. All of the above are possible.

I. If the Fed conducts open-market sales, which of the following quantities increase(s)?

1. interest rates, prices, and investment spending

2. interest rates and prices, but not investment spending

3. interest rates and investment, but not prices

4. interest rates, but not investment or prices

J. A tax cut shifts aggregate demand (Note here we are asking for the theoretical case)

1. by more than the amount of the tax cut.

2. by the same amount as the tax cut.

3. by less than the tax cut.

4. None of the above is necessarily correct.

Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for DVD players are as follows:

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

a. Determine the cost of the goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for DVD players are as follows:

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

a. Determine the cost of the goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for DVD players are as follows:

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

a. Determine the cost of the goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is shown below: Beech Corporation Balance Sheet June 30 Assets Cash $ 94,000 Accounts receivable 145,000 Inventory 59,400 Plant and equipment, net of depreciation 222,000 Total assets $ 520,400 Liabilities and Stockholders’ Equity Accounts payable $ 83,000 Common stock 331,000 Retained earnings 106,400 Total liabilities and stockholders’ equity $ 520,400 Beech’s managers have made the following additional assumptions and estimates: Estimated sales for July, August, September, and October will be $330,000, $350,000, $340,000, and $360,000, respectively. All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 45% in the month of sale and 55% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. Each month’s ending inventory must equal 20% of the cost of next month’s sales. The cost of goods sold is 60% of sales. The company pays for 30% of its merchandise purchases in the month of the purchase and the remaining 70% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. Monthly selling and administrative expenses are always $42,000. Each month $6,000 of this total amount is depreciation expense and the remaining $36,000 relates to expenses that are paid in the month they are incurred. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required:

1. Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

2-b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30. 3. Prepare an income statement for the quarter ended September 30. 4. Prepare a balance sheet as of September 30.

3. Prepare an income statement for the quarter ended September 30.

4. Prepare a balance sheet as of September 30.