Your US based company exports drendels to the rest of the world. The world market for drendles is highly competitive (so competitive that changes in production in the US do not impact the world price). The current price of a drendle is €100/drendle. Company's cost fix is C(q) =50,000+50q+0.02q² in US dollars. If the exchange rate is $1.20/€ how much profit in US dollars does your firm make?

Standard Costing

Answer Approach Required (steps)

Mayfield Ltd manufactures a small part used in the automotive industry. You are the Management Accountant of the company and have been presented with the following information to allow you to prepare a performance report for the year ended 31st March 2020.

The budgeted level of production and sales for the year was 265,000 units and the standard manufacturing cost per unit was as follows;

                                                                                                €         

Direct materials 2.2 kg @ €11.50 each                                   25.30

Direct labour 2 hours @ €11 per hour                                   22

Variable manufacturing overhead 2hrs @ €13                        26                               

Fixed manufacturing overhead 2 hrs @ €14.50                       29                 

Standard manufacturing cost                                                  102.30

During the year, demand for the company’s product exceeded expectations. 280,000 units were manufactured and sold, generating sales revenue of €38,920,000. Shortly after establishing the standard costs for the year Kenny Ltd was forced to find a new supplier to meet its direct material requirements. Throughout the period the new supplier charged a price which was 10% in excess of the standard price. In total 600,000 kg was purchased and used. The company uses a Just-in-Time system so there were no closing stocks.

With regard to direct labour cost, while the actual rate paid to direct manufacturing employees was €0.20 per hour below standard rates, there were some labour efficiency problems encountered during the year. The employees reported difficulties handling the materials resulting in each unit taking 10% longer than the standard time.

Direct labour hours is the basis used by Kenny for allocating both variable and fixed manufacturing overheads to units of production. In the year ended 31st March 2020 the actual variable manufacturing overhead cost amounted to €8,069,000 and the fixed manufacturing overhead amounted to €9,240,000.

Requirements

1. Prepare the cost variances for Kenny Ltd for the year to 31st March 2020 in as much detail as the information given above permits.

After presenting the variances that you have calculated in part (a) above at a management meeting one of the management team expresses the view that while he ‘understands the reasons for the material and labour variances he is confused about the fixed and variable overhead variances’

2. Briefly interpret and explain the reasons for the variable and fixed overhead variances that you have calculated for the benefit of the management team.   
3. Calculate the actual gross profit earned by Kenny Ltd. for the year ended 31st March 2020.   
4. Write a short CEO brief discussing succinctly the benefits and problems with standard costing. Address the relevance of standard costing to the modern business environment.

Select one of the mergers and acquisitions below:

Sirius XM acquires Pandora.

The yet to be concluded merger of Sprint, T-Mobile, and Metro PCS.

The merger of Strayer University and Capella University.

For your chosen scenario, address the following in your discussion post: How are the concepts of economies of scope and economies of scale different?

How do they differ within the context of your chosen scenario?

What are the synergies that come from the economies of scope?

What are the synergies that come from the economies of scale?

Hong Kong Taxation

ABC Co. (the Company) is incorporated and carrying on a retailing business through various retail in the US and does not maintain any management or control in Hong Kong. To be in line with the group’s long-term strategy, the Company is considering expanding into the Hong Kong market. There are two expansion proposals:

Proposal 1: To set up a subsidiary in Hong Kong, which will buy the goods from the Company and sell them in Hong Kong via retail outlets. All transactions are conducted at arm’s length. Proposal 2: To set up a branch in Hong Kong (HK Branch) to liaise directly with the potential customers in Hong Kong. HK Branch will be responsible to negotiate with customers on the terms of purchase based on a set of prescribed policy from the Company. Customers’ orders will be accepted and signed by the HK Branch, following which goods will be shipped directly from the US to the buyers in Hong Kong. The Branch will remain as a cost center without making any profits.

Required:

(a) Based on the Inland Revenue Ordinance and Rules, discuss the circumstances in which a non-resident company can be assessable to profits tax in Hong Kong.

(b) For each of the two proposals described, discuss the Hong Kong profits tax implications for ABC Co., including whether ABC Co. would be considered as carrying on business in Hong Kong, and if so, how assessable profits could be determined. (Note: Transfer pricing issue is not required to be discussed.)

CC Inc. (the Company) is incorporated and carrying on a retailing business through various retail in the US and does not maintain any management or control in Hong Kong. To be in line with the group’s long-term strategy, the Company is considering expanding into the Hong Kong market. There are two expansion proposals:

Proposal 1: To set up a subsidiary in Hong Kong, which will buy the goods from the Company and sell them in Hong Kong via retail outlets. All transactions are conducted at arm’s length.

Proposal 2: To set up a branch in Hong Kong (HK Branch) to liaise directly with the potential customers in Hong Kong. HK Branch will be responsible to negotiate with customers on the terms of purchase based on a set of prescribed policy from the Company. Customers’ orders will be accepted and signed by the HK Branch, following which goods will be shipped directly from the US to the buyers in Hong Kong. The Branch will remain as a cost center without making any profits.

Required:

(a) Based on the Inland Revenue Ordinance and Rules, discuss the circumstances in which a non-resident company can be assessable to profits tax in Hong Kong.

(b) For each of the two proposals described, discuss the Hong Kong profits tax implications for CC Inc., including whether CC Inc. would be considered as carrying on business in Hong Kong, and if so, how assessable profits could be determined. (Note: Transfer pricing issue is not required to be discussed.)

(Total for Question 4: 14 marks)

CC Inc. (the Company) is incorporated and carrying on a retailing business through various retailers in the US and does not maintain any management or control in Hong Kong. To be in line with the group’s long-term strategy, the Company is considering expanding into the Hong Kong market. There are two expansion proposals: Proposal 1: To set up a subsidiary in Hong Kong, which will buy the goods from the Company and sell them in Hong Kong via retail outlets. All transactions are conducted at arm’s length. Proposal 2: To set up a branch in Hong Kong (HK Branch) to liaise directly with the potential customers in Hong Kong. HK Branch will be responsible to negotiate with customers on the terms of purchase based on a set of prescribed policy from the Company. Customers’ orders will be accepted and signed by the HK Branch, following which goods will be shipped directly from the US to the buyers in Hong Kong. The Branch will remain as a cost centre without making any profits.

Required: (a) Based on the Inland Revenue Ordinance and Rules, discuss the circumstances in which a non-resident company can be assessable to profits tax in Hong Kong.

(b) For each of the two proposals described, discuss the Hong Kong profits tax implications for CC Inc., including whether CC Inc. would be considered as carrying on business in Hong Kong, and if so, how assessable profits could be determined. (Note: Transfer pricing issue is not required to be discussed.)

According to natural law theory, actions are right just because they are natural and wrong just because they are unnatural. The theory has a number of attractions. By grounding morality in human nature, the theory promises to explain both how morality could be objective and why morality applies only to human beings. The theory could also help us to understand the origins of morality and how we can come to have moral knowledge. If, through science, we come to understand our nature and its origin, then according to natural law theory, we will know everything we need to know about morality. If natural law theory is to be plausible, its defenders must specify exactly what sense of “human nature” is supposed to be morally relevant. On one understanding, human nature consists of whatever is innately human. Others take human nature to be whatever all or most humans have in common. Still others understand human nature to consist of whatever we were “designed” by nature to do. The problem for natural law theory is that none of these understandings of human nature seems to provide a sufficient basis for morality. Whether an action or character trait is morally good does not seem to depend on whether it is innate or acquired. The percentage of people who have a given trait does not seem particularly morally relevant, either—even if almost everyone were cruel, this would still not make cruelty morally admirable. Furthermore, on either of the two most common ways of understanding natural purposes, whether an action enables us to fulfill a natural purpose doesn’t seem to tell us whether that act is morally permissible or not. The term human nature can be understood in many ways. Even if we settle on one definition of human nature, however, it is far from obvious that everything natural is morally good, or vice versa. Given that natural laws merely tell us how things will behave whereas the function of moral laws is to tell us how we should behave, it should come as no surprise that nature does not tell us everything we’d like to know about morality.

"Suppose that 'human nature' consists of the set of innate characteristics that all (or most) humans share. Understood in this way, what does human nature tell us about morality? Is it always immoral to behave contrary to human nature?" Write 200 words.

University Car Wash built a deluxe car wash across the street from campus. The new machines cost $240,000 including installation. The company estimates that the equipment will have a residual value of $30,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows: Year Hours Used 1 2,600 2 2,100 3 2,200 4 1,800 5 1,600 6 1,700 1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.) 2. Prepare a depreciation schedule for six years using the double-declining-balance method. (Do not round your intermediate calculations.) 3. Prepare a depreciation schedule for six years using the activity-based method. (Round your "Depreciation Rate" to 2 decimal places and use this amount in all subsequent calculations.)

University Car Wash built a deluxe car wash across the street from campus. The new machines cost $261,000 including installation. The company estimates that the equipment will have a residual value of $27,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows: