Case 4-27.

Sharpton fabricators corporation manufactures a variety of parts for the automative industry. th company uses a jo order costing system with a plantwide predetermined overhead rate based on direct hours. On December 10, 2015, the company's controller made a preliminary estimates of the predetermined overhead rate for 2016. The new rate was based on the estimated total manufacturing overhead cost of $2,475,000 and the estimated 52,000 total direct labor - hours for 2016. Pretermined overhead rate = $2,475,000/ $2,000 hours = $47.60 per direct labor hour. The new predetermined overhead rate was communicated to top managers in a meeting on December 11. The rate did not cause any comment because it was within a few pennies of the overhead rate that had been used during 2015. One of the subject discussed at the meeting was a proposal by the manager to purchase an automated milling machine built by central robotics the president of sharpton fabricators, kevin reynolds, agreed to meet with the regional sales representative from central robotics to discuss proposal. one of the following meeting, Mr raynolds met with jay warner central robotics sales represntatives. the following took place

Reynolds: Larry winter, our production manager asked me to meet with you because he is interested in installing an automated milling machine, frankly, I am skeptical, you going to have to show me this isnt just another expenisve toy for larry's people to play with.

Warner: That should not be difficult Mr Reynolds. The automated mailiing machine has three major advantage. First, it is much faster than the manual method you are using.It can produce as fast as twice as many parts as per hour as your present milling machine. Second, it is much more flexible. there are some up front programming cost but once those have been incurred, almost no setup on the machine for standard operation. You just punch the code of the standard operation, load the machines hopper with raw material and the machine does the rest.

Reynolds : Yeah, but what about cost? having twice the capacity in the mailing machine area wont do us much good. That center is idle much of the time anyway.

Warner: I was getting there, the third advantage of the autoimated milling machine is lower cost. larry winters and i look over your present operations and we estimated that the automated equipment will eliminate the need for about 6,000 direct labor hours a year. What is your direct labor cost per hour.

Reynolds : The wage rate in the milling area avarage about $21 per hour. Fringe benefits raise that figure to about $30 per hour.

Warner : Dont forget the overhead

Reynolds : next year the overhead rate will be about $48 per hour

Warner : so including fringe benefit and overhead, the cost per direct labor hour is about $78

Reynolds: thats righ.

warner : Since you save 6,000 direct labor hours per year, the cost savings would amount to about $468,000 a year.

Reynlds: that's pretty impressive, but you arent giving away the equipment are you?

Warner : Several options are available, including leasing and outright purchase just for comprison purposes, our 60 - month lease plan would requoire payment of only $30,000 per year

Reynolds: sold! When can install the equipment?

Shortly after this meeting, Mr Raynolds informed the comapny controller of the decision to lease the new equipment, which would be installed over the christmas vacation period.The conroller realise that this decision would require a recomputation of the predetermined overhead rate for the year 2016 since the decision would affect both the manufacturing overhead and the direct labor hours for the year. after taking with both the production manager and the sales represntative from the centra robotic, .the controller discovered that in addition to the annual lease cost of $300,000, the new machine would also require a skilled technician/ programmer who would have to be hired at a cost of $45,000 per year to maintain and program the equipment. Both of these costs would be included in factory overhead. There would be no other changes in total manufacturing overhead cost, which is almost entirely fixed. The controller assumed that the new machine would result in a reduction of 6,000 direct labor-hours for the year from the levels that had initially been planned. When the revised predetermined overhead rate for the year 2016 was circulated among the company's top managers, there was considerable dismay.

Required:

1. Recompute the predetermined overhead rate assuming that the new machine will be installed. Explain why the new predetermined overhead rate is higher or lower than the rate that was originally estimated for the year 2016.

2. What effect (if any) would this new rate have on the cost of jobs that do not use the new automated milling machine

3 Why would managers be concerned about the new overhead rate?

4 After seeing the new predertermined overhead rate, the production manager admitted that he probably wouldn't be able to eliminate all of the 6,000 direct labor hours. He had been hoping to accomplish the reduction by not replacing workers who retire or quit, but that would not be possible. As a result, the real labor savings would be only about 2,000 hours - one worker. Given this additional information, evaluate the original decision to acquire the automated milling machine from central robotics.

Case 4-27.

Sharpton Fabricators Corporation manufactures a variety of parts for the automotive industry. th company uses a job order costing system with a plant wide predetermined overhead rate based on direct hours. On December 10, 2015, the company's controller made preliminary estimates of the predetermined overhead rate for 2016. The new rate was based on the estimated total manufacturing overhead cost of $2,475,000 and the estimated 52,000 total direct labor - hours for 2016. Predetermined overhead rate = $2,475,000/ $2,000 hours = $47.60 per direct labor hour. The new predetermined overhead rate was communicated to top managers in a meeting on December 11. The rate did not cause any comment because it was within a few pennies of the overhead rate that had been used during 2015. One of the subjects discussed at the meeting was a proposal by the manager to purchase an automated milling machine built by central robotics the president of Sharpton fabricators, Kevin Reynolds, agreed to meet with the regional sales representative from central robotics to discuss proposal. One of the following meetings, Mr. Reynolds met with jay Warner central robotics sales representatives. The following took place

Reynolds: Larry winter, our production manager asked me to meet with you because he is interested in installing an automated milling machine, frankly, I am skeptical, you going to have to show me this isn’t just another expensive toy for Larry’s people to play with.

Warner: That should not be difficult Mr. Reynolds. The automated mailing machine has three major advantages. First, it is much faster than the manual method you are using. It can produce as fast as twice as many parts as per hour as your present milling machine. Second, it is much more flexible. There are some up front programming cost but once those have been incurred, almost no setup on the machine for standard operation. You just punch the code of the standard operation; load the machines hopper with raw material and the machine does the rest.

Reynolds: Yeah, but what about cost? Having twice the capacity in the mailing machine area won’t do us much good. That center is idle much of the time anyway.

Warner: I was getting there; the third advantage of the automated milling machine is lower cost. Larry winters and i look over your present operations and we estimated that the automated equipment will eliminate the need for about 6,000 direct labor hours a year. What is your direct labor cost per hour?

Reynolds: The wage rate in the milling area average about $21 per hour. Fringe benefits raise that figure to about $30 per hour.

Warner: Don’t forget the overhead

Reynolds: next year the overhead rate will be about $48 per hour

Warner: so including fringe benefit and overhead, the cost per direct labor hour is about $78

Reynolds: that’s right.

Warner: Since you save 6,000 direct labor hours per year, the cost savings would amount to about $468,000 a year.

Reynolds: that's pretty impressive, but you aren’t giving away the equipment are you?

Warner: Several options are available, including leasing and outright purchase just for comparison purposes, our 60 - month lease plan would require payment of only $30,000 per year

Reynolds: sold! When can install the equipment?

Shortly after this meeting, Mr. Reynolds informed the company controller of the decision to lease the new equipment, which would be installed over the Christmas vacation period. The controller realizes that this decision would require a recomputation of the predetermined overhead rate for the year 2016 since the decision would affect both the manufacturing overhead and the direct labor hours for the year. After taking with both the production manager and the sales representative from the central robotic, .the controller discovered that in addition to the annual lease cost of $300,000, the new machine would also require a skilled technician/ programmer who would have to be hired at a cost of $45,000 per year to maintain and program the equipment. Both of these costs would be included in factory overhead. There would be no other changes in total manufacturing overhead cost, which is almost entirely fixed. The controller assumed that the new machine would result in a reduction of 6,000 direct labor-hours for the year from the levels that had initially been planned. When the revised predetermined overhead rate for the year 2016 was circulated among the company's top managers, there was considerable dismay.

Required:

(1) Recompute the predetermined overhead rate assuming that the new machine will be installed. Explain why the new predetermined overhead rate is higher or lower than the rate that was originally estimated for the year 2016.

(2) What effect (if any) would this new rate have on the cost of jobs that do not use the new automated milling machine?

(3) Why would managers be concerned about the new overhead rate?

(4) After seeing the new predetermined overhead rate, the production manager admitted that he probably wouldn't be able to eliminate all of the 6,000 direct labor hours. He had been hoping to accomplish the reduction by not replacing workers who retire or quit, but that would not be possible. As a result, the real labor savings would be only about 2,000 hours - one worker. Given this additional information, evaluate the original decision to acquire the automated milling machine from central robotics.

Facts (Problems 1-4)

On December 27, 2017, Mint Company placed an order to purchase merchandise on account from a seller, Lemon, Inc. Lemon’s listed catalog price for the merchandise is $13,000. Lemon’s historical cost for these items is $4,000. Mint has been a customer of Lemon’s for years and was able to negotiate these terms: (i) a 7% trade discount and (ii) payment terms of 2/10, n/30. The goods were shipped by Lemon FOB shipping point on December 30, 2017 and arrived at Mint’s facility on January 5, 2018. At the time of shipment, Lemon paid $700 in shipping costs. On January 6, Mint returned $2,000 worth of merchandise to Lemon, which had an original cost to Lemon of $615. Mint paid Lemon in full on January 7.

Show all of your work and calculations, and make sure you answer all parts of the question.

Required:

1. Prepare the seller’s (Lemon) entries for the sale, return, and collection of payment in the following format:

Date: MM/DD/YY

Dr. Account………...XX

     Cr. Account…………...XX

2. Prepare the buyer’s (Mint) entries for the purchase, return, and payment to Lemon in the following format:

            Date: MM/DD/YY

Dr. Account………...XX

     Cr. Account…………...XX

3. Assume all facts are the same, except the shipping terms are FOB destination. Prepare the seller’s (Lemon) entry for the sale in the following format:

Date: MM/DD/YY

Dr. Account………...XX

     Cr. Account…………...XX

4. Assume all facts are the same, except the shipping terms are FOB destination. Prepare the buyer’s (Mint) entry for the sale in the following format:

Date: MM/DD/YY

Dr. Account………...XX

     Cr. Account…………...XX

5. Explain the difference between a purchase discount and a trade discount.

Facts (Problems 6-7):

On June 29, 2019 Hulu Company placed an order to purchase 10,000 units of “This is Us” Merchandise from the seller The Big Three Company. Unit price for the merchandise was $4.50 while The Big Three company originally paid a cost of $3.00.

As The Big Three Company was trying to attract more customers and expand, it began its promotion of providing a discount of 15% to any customers that order 10,000 units or more with an additional discount of 2/10, n/30. Both companies use the gross method for purchases and discounts. On July 2, 2019 The Big Three Company shipped the merchandise on F.O.B. Shipping Point, and the merchandise arrived on July 10th. Shipping cost of $3,000 was pre-paid by The Big Three Company. On July 11th, Hulu paid off the balance after returning 500 units.

6. Choose either Hulu or The Big Three and prepare all the journal entries related to this transaction from the chosen company’s perspective in the following format:

Date: MM/DD/YY

Dr. Account………...XX

     Cr. Account…………...XX

7. Using the same facts as in problem #6, prepare a single-step income statement.

Efficiency analysis)  The Brenmar Sales Company had a gross profit margin​ (gross

profitsdivided by÷​sales) Of 27 percent and sales of 9.1 million last year. 

71percent of the​ firm's sales are on​ credit, and the remainder are cash sales. ​Brenmar's current assets equal $1.5 ​million, its current liabilities equal $ 297,700 and it has $ 107,200 in cash plus marketable securities.

a. If​ Brenmar's accounts receivable equal $562,500​, what is its average collection​ period?

b. If Brenmar reduces its average collection period to 15 ​days, what will be its new level of accounts​ receivable?

c.  ​Brenmar's inventory turnover ratio is 9.6 times. What is the level of​ Brenmar's inventories?

Suppose your company needs to raise $18 million and you want to issue 27-year bonds for this purpose. Assume the required return on your bond issue will be 5 percent, and you're evaluating two issue alternatives: a 5 percent semiannual coupon bond and a zero coupon bond. Your company's tax rate is 31 percent.

a. You will need to issue ............. of the coupon bonds to raise the $18 million. You will need to issue ................ of the zeroes to raise the $18 million.

(Round your answers to the nearest whole number. (e.g., 32))

b. In 27 years, your company's repayment will be $ .............. if you issue the coupon bonds. If you issue the zeroes, your company's repayment will be $ ..................

(Do not include the dollar sign ($). Do not round your intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))

c. Your aftertax cash outflow for the first year will be $ ................. if you issue the coupon bonds, and a cash inflow of $ ....................if you issue the zeroes.

(Do not include the dollar signs ($). Do not round your intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))

Pls try to answer with Excel.

Suppose your company needs to raise $18 million and you want to issue 27-year bonds for this purpose. Assume the required return on your bond issue will be 5 percent, and you're evaluating two issue alternatives: a 5 percent semiannual coupon bond and a zero-coupon bond. Your company's tax rate is 31 percent.

a. You will need to issue 18.000 of the coupon bonds to raise the $18 million. You will need to issue.........of the zeroes to raise the $18 million. (Round your answers to the nearest whole number. (e.g., 32))

b. In 27 years, your company's repayment will be $........... if you issue the coupon bonds. (Do not include the dollar sign ($).)

If you issue the zeroes, your company's repayment will be $...................... (Do not include the dollar sign ($). Do not round your intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))

c. Your after-tax cash outflow for the first year will be $621.000 if you issue the coupon bonds, and a cash inflow of $ ............... if you issue the zeroes. (Do not include the dollar signs ($). Do not round your intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))

>> If numbers already given, then that means that these are the correct answers already. Everywhere with "............" are numbers that are still missing and need to be solved.

On March 1, Jefferson Company collected a $750 deposit for services to be performed on March 15. Jefferson completed the project on March 15, as agreed. What adjusting entry would Jefferson make on March 15, related to this transaction?

a.Debit Cash: $750, credit Revenue: $750

b.Debit Unearned Revenue: $750, credit Revenue: $750.

c. Debit Revenue: $750, credit Cash: $750.

d. Debit Revenue: $750, credit Unearned Revenue: $750.

Lafayette Corporation is a leading manufacturer of sports apparel, shoes, and equipment. The company’s 2021 financial statements contain the following information ($ in millions):

A note disclosed that the allowance for doubtful accounts had a balance of $23 million and $47 million at the end of 2021 and 2020, respectively. Bad debt expense for 2021 was $44 million. Assume that all sales are made on a credit basis.

Required

1. What is the amount of gross (total) accounts receivable due from customers at the end of 2021 and 2020?
2. Record the summary journal entry for Sales Revenue for 2021.
3. Record the journal entry to recognize Bad Debt Expense for 2021.
4. Write-offs of Accounts Receivable:
   1. What is the amount of bad debt write-offs during 2021?
   2. Record the journal entry for the bad debt write-offs for 2021.
5. Collections of Accounts Receivable:
   1. Analyze changes in the gross accounts receivable account to calculate the amount of cash received from customers during 2021.
   2. Record a summary journal entry to record collections of all receivables for 2021.

**** Only Need answers for questions g and h****

Suppose that, in the absence of insurance, the daily demand for visits to a clinic is given by Qd = 200 – 0.5P, where c is the coinsurance rate and P is the price charged by the clinic.

a) Calculate the quantity demanded when P is $100.

b) Calculate daily revenues when P is $100.

Now assume that customers pay a coinsurance rate, c. You will need to modify the demand function to account for the coinsurance.

c) Calculate the quantity demanded when P is $100 and the coinsurance rate is 0.4.

d) Calculate the daily revenue for the values given in (c).

e) Calculate the quantity demanded when P is $100 and the coinsurance rate is 0.8.

f) Calculate the daily revenue for the values given in (e).

Assume the clinic’s daily capacity is 100 customers.

g) Calculate the price the clinic should set to exactly use its entire capacity when there is no coinsurance (i.e., the co-coverage rate is 1).

h) Calculate the price the clinic should set to exactly use its entire capacity when there is a coinsurance rate of 0.8

Answers:

1. 150
2. 15000
3. 110
4. 11000
5. 70
6. 7000

3.Yahoo said people who subscribe to the download service on a monthly basis will see their memberships increase from $6.99 per month to $11.99 per month. Portal company Yahoo Inc. ( Nasdaq: YHOO - news) informed customers of its subscription music download service that it will increase pricing for users who transfer their tunes onto portable devices or CDs. Explain yahoo’s pricing strategy