Budget Preparation Westport Company is preparing its master budget for May. Use the estimates

provided to determine the amounts necessary for each of the following requirements. (Estimates may

be related to more than one requirement.)

a. What should total sales revenue be if territories E and W estimate sales of 50,000 and 100,000

units, respectively, and the unit selling price is $27?

b. If the beginning finished goods inventory is an estimated 7,000 units and the desired ending in-

ventory is 6,000 units, how many units should be produced?

c. What dollar amount of material should be purchased at $2 per pound if each unit of product re-

quires 2.5 pounds and beginning and ending materials inventories should be 13,500 and 12,000

pounds, respectively?

d. How much direct labor cost should be incurred if each unit produced requires 0.5 hours at an

hourly rate of $11?

e. How much manufacturing overhead should be incurred if fixed manufacturing overhead is

$45,000 and variable manufacturing overhead is $1.30 per direct labor hour?

In the various sales and service industries, the satisfaction of the customer is paramount to the success of a product and company. Share at least two dominant factors for a company to consider in order to earn the satisfaction of the customer and keep the customers satisfied.

The company Furniture A/S produces a very well known chair which is sold all over Europe.

Would it be legal for the company to set recommended sales prices that are in fact binding to its customers?

ABC Company is preparing to launch a new product. They are considering three different product designs and will select only the one product that yields the highest revenue. A feasibility study suggest that product development, regardless of which of the three products is selected, will cost $1,250,000 initially, which includes all design, testing, set-up and initial operating costs. Annual operating cost, once the selected product is placed into production, will cost $125,000 and the net revenue for the first year is projected to be $450,000. Both the project costs and revenues are independent of the option selected. Market analysis for each of the three products suggest that subsequent revenues, i.e. the revenues received at the end of each year starting in year 2, will differ as described below

•  Design 1: The revenue will increases by $75,000 per year.

•  Design 2: Revenues will remain the same for the next two years (i.e. years 2 and

  3) and then will increase by 10% each year, over the previous year, in each

  subsequent year.

•  Design 3: Revenues will increase in years 2 through 4 by 10% per year, then in

  years five through seven, revenues will be $300,000, $225,000, and 150,000 per year, respectively.

• If the product’s life is 7 years and the market interest rate is 8% per year, which of the threeproduct designs should ABC Company launch? To answer this question compare the future values of the cash flows for each of the three designs over the first seven years.

The following transactions occurred during the month of October, 2019 at the Tree Company. The balance sheet for the Tree Company at September 30, 2019 was as follows: Balance Sheet Assets ---------------------------------------Liabilities Cash $ 4,500 ---------------- Accounts payable $ 16,000 Accounts receivable 24,000 -------- Notes payable 30,000 Supplies on hand 8,000 ---------------- Wages & salaries payable 5,000 Equipment 51,000 ----------------Invested capital 50,000 Truck 20,000 --------------------- Retained earnings 6,500 TOTAL $107,500 ----------- $107,500 According to the Chart of Accounts at Tree Company, the following accounts besides those listed in the balance sheet above are available: Advertising expense Bonus expense Bonus payable Decline in value of equipment (expense) Decline in value of truck (expense) Insurance expense Interest expense Prepaid insurance Rent expense Service revenue Supplies expense Utilities expense Wage and salaries expense Record the opening balances in the appropriate T-accounts, and then make the entries required to record the following: a) Mr. Tree, the owner, invested an additional $20,000 in the business. b) Rent in the amount of $7000 was paid in cash for the month of October. c) Supplies were purchase on credit at a cost of $3000. d) Credit customers were sent invoices totaling $23,000 for services rendered during the month. e) Cash customers paid $10,000 for services rendered to them during October (Note: Total of credit and cash sales was $33,000). f) Cash in the amount of $17,000 was received from customers for services rendered in previous months. g) A six-month insurance policy, with coverage beginning on October 1, 2001, was purchased for $3000 in cash. h) The invoice from the utility company in the amount of $3800 was received and paid. i) The accountant for Tree estimated that the truck declined in value by $1000 and that the equipment declined in value by $2500 during October. j) Additional equipment to be used in the service activity was purchased on credit at a price of $7500. k) Wages and salaries earned by employees for the month totaled $13,000. l) Total cash payment of wages and salaries during the month was $12,000, including $5000 that was payable at the beginning of the month. m) Invoices from suppliers for supplies and equipment received in previous months were paid in the amount of $14,500. n) A count and valuation of supplies on hand at the end of the month revealed an end of month balance of $6500. o) Tree Company paid $5500 to the bank from which the company was borrowing: $5000 in principal repayment and $500 interest. p) Advertising for the month totaled $1750, paid in cash. q) In return for extra services that the general manager rendered to the company during October, Mr. Tree agreed that the company would pay a bonus to the general manager equal to 10 percent of Octobers’ sales; this bonus is to be paid on November 10. Prepare an income statement for the month of October and a balance sheet as of October 31, 2019.

Financial Accounting for MBAs 7th Edition. P5-48 (page 5-43)

Target Corporation reported total sales of $73,785 million in 2015, $72,618 million in 2014, and $71,279 million in 2013. In 2015, cost of sales was $51,997 million.

The revenue recognition footnote from Target’s 2015 annual report includes the following:

• Our retail stores generally record revenue at the point of sale.
• Digital channel sales include shipping revenue and are recorded upon delivery to the guest.
• Total revenues do not include sales tax because we are a pass-through conduit for collecting and remitting sales taxes.
• Generally, guests may return national brand merchandise within 90 days of purchase and owned and exclusive brands within one year of purchase. Revenues are recognized net of expected returns, which we estimate using historical return patterns as a percentage of sales.
• Revenue from gift card sales is recognized upon gift card redemption. Our gift cards do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as “breakage.” Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions and was not material in any period presented.
• Guests receive a 5 percent discount on virtually all purchases and receive free shipping at Tar-get.com when they use their REDcard. These discounts associated with loyalty programs are included as reductions in sales in our Consolidated Statements of Operations and were $1,067 million, $943 million, and $833 million in 2015, 2014, and 2013, respectively

Gift Card Information: $millions

Gift card balance May 1..................$198

New gift cards sold..........................148

Gift cards redeemed.......................(172)

Gift card balance May 31................$174

1. Use the financial statement effects template to record retail sales of $1,000 in a state with a sales-tax rate of 8%. For this question, assume 10% of all merchandise sold is returned within 90 days.

2. Use the financial statement effects template to record the following transaction: On March 4, an internet customer places an order for $2,000 and pays online with a credit card (which is equivalent to cash for accounting purposes). The goods are shipped from the warehouse on March 6, and FedEx confirms delivery on March 7. Ignore shipping costs, sales tax, and returns.

3. Use the financial statement effects template to record the gift card activity during May. Ignore sales tax and returns. Details are on page 1.

4. Determine the amount of revenue Target collected from customers who used their loyalty card (REDcard™) for 2013 to 2015. What proportion of total revenues comes from REDcard™ customers each year? Does the loyalty program seem to be working? Explain.

• Preparing sandwiches

• Baking bread and cookies

• Making sure that shelves and displays are organized and attractive

• Working at the cash register

• Assisting customers with their questions about merchandise

• Providing efficient service

• Helping customers during checkout

Employees are expected to be helpful, friendly, and fun. The company emphasizes good quality customer service to build customer loyalty.

If you were designing a performance management system for this company, what would it look like? Assuming that the company is interested in providing feedback to employees on a regular basis but also in tying pay to performance, propose a performance management system for the company. Please make sure that your answer includes specific details such as the forms to be used and the criteria with which performance will be measured.

Following are selected transaction of Danica Company for 2016 and 2017.

2016

December 13 Accepted a $16,000, 45-day, 8% note dated December 13 in granting Miranda Lee a time extension on her past-due account receivable.

Dec 31 Prepaid an adjusting entry to record the accured interest on the Lee note

2017.

Jan 27 Received Lee's payment for principal and interest on the note dated December 13.

March 3 Accepted a $10,000, 6%, 90-day note dated March 3 in granting a time extension on the past-due account receivable of Tomas Company.

March 7 Accepted a $8,000, 30-day, 6% note dated March 17 in granting H. Cheng a time extension on his past-due account receivable

April 16 H. Cheng dishonored his note when presented for payment

May 1 Wrote off the H. Cheng account against the Allowance for Doubtful Accounts.

June 1 Received the Tomas payment for principal and interest on the note dated March 3.

Complete the table to calculate the interests amounts and use those calculated values to prepare your journal entries

(Do not round intermediate calculations. use 360 days a year)

M Lee Note-Complete the table to calculate the interest amounts. (Total through maturity- Amount Accrued at December 31-Interest Recognized January 27)

Tomas Co Note and H. Cheng Note

Complete the table to calculate the interest amount on Both companies. (Principal, Rate %, Time, Total Interest) Then use the calculated values to prepare your journal entries. PLEASE SHOW YOUR WORK

You are consulting with the manager of an Accounts Receivable department of a large manufacturing company. The manager is concerned that some of the customer accounts are not being paid promptly under the current payment terms. The current payment terms specify 14 days for receipt of payment of all bills. Since the manager did not have any hard evidence, you suggested that the manager collect some data that could then be analyzed.

Based on your advice, the manager collects a stratified random sample over a typical 2-month period (a random sample of each week’s records for each day the company was open for business, including Saturday).

Conduct the appropriate analysis and present your findings and conclusions as well as your recommendations to the Accounts Receivable manager below.

Week 1

14 13 11 14 13 19

Week 2

12 18 13 16 15 17

Week 3

15 16 18 16 13 26

Week 4

27 25 23 26 23

Week 5

21 12 14 15 13 11

Week 6

14 19 19 18 14 19

Week 7

18 22 20 23 24 22

Week 8

28 26 25 27 29