Uncle Sam Ltd has been operating for several years as a producer of canned vegetables. Uncle Sam imports most of its vegetables from Thailand and Vietnam. All overseas shipments to Uncle Sam are invoiced and require settlement in US dollars. Furthermore, Uncle Sam is required to pay for freight and insurance costs. The insurance covers the period from the day the goods are loaded onto the ship (i.e. Uncle Sam assumes ownership of the goods on the day the goods are loaded onto ships in the various Asian ports from where the produce is shipped) until the day they arrive in Uncle Sam’s warehouses in Australia. All shipments arrive in Australia within a 21-day period after loading onto a ship. All overseas suppliers are settled 30 days after the date of shipment.

Overseas suppliers now represent 70 per cent of accounts payable. Local and overseas suppliers are maintained in separate subsidiary ledgers within the accounting system.

The audit partner has identified that accounts payable is at risk of material misstatements.

Required:

1. Outline the two key reasons why accounts payable is at risk of material misstatement.
2. For each key reason outlined in (i), identity and explain the assertion most at risk.
3. For each assertion at risk outlined in (ii), describe one (1) substantive test of detail that is specifically responsive to the risk of material misstatement.

Assume that when an economy has a GDP of $500, Consumption is $550. The MPC is .75. Investment is 25. Government Spending equals $50. Begin the problem by completing Income/Consumption Schedule:

                                GDP=DI           Consumption                Investment                          Government

                                  $500                $550                                     $25                                      $50

                                    600              $550+75= 625                       $25                                      $50

                                    700              $625+75= 700                       $25                                      $50

                                    800              700+75= 775                          $25                                     $50

                                    900              775+75= 850                          $25                                     $50

                                  1000               850+75= 925                         $25                                    $50

                                  1100              925+75= 1000                        $25                                   $50

Graph the Consumption Function Line of Equilibrium (GDP=DI).

Add an Investment + Consumption line to the graph.

Add a Government Spending + Investment + Consumption line to the graph.

What is the multiplier? (Use the formula discussed in your text.)

What is the Break-Even level of Income? (Do not include Investment or Government Spending)

What is the Equilibrium level of Income? (Include Investment and Government Spending)

Overhead Variances, Four-Variance Analysis

Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 123,000 units requiring 492,000 direct labor hours. (Practical capacity is 512,000 hours.) Annual budgeted overhead costs total $816,720, of which $585,480 is fixed overhead. A total of 119,500 units using 490,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $261,100, and actual fixed overhead costs were $555,050.

Required:

1. Compute the fixed overhead spending and volume variances.

2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations

Overhead Variances, Four-Variance Analysis

Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 125,000 units requiring 500,000 direct labor hours. (Practical capacity is 520,000 hours.) Annual budgeted overhead costs total $830,000, of which $585,000 is fixed overhead. A total of 119,300 units using 498,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,000, and actual fixed overhead costs were $555,050.

Required:

1. Compute the fixed overhead spending and volume variances.

2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations

Overhead Variances, Four-Variance Analysis

Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 130,000 units requiring 520,000 direct labor hours. (Practical capacity is 540,000 hours.) Annual budgeted overhead costs total $842,400, of which $608,400 is fixed overhead. A total of 119,000 units using 518,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $261,900, and actual fixed overhead costs were $555,950.

Required:

1. Compute the fixed overhead spending and volume variances.

2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations

Overhead Variances, Four-Variance Analysis

Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 123,000 units requiring 492,000 direct labor hours. (Practical capacity is 512,000 hours.) Annual budgeted overhead costs total $811,800, of which $580,560 is fixed overhead. A total of 119,200 units using 490,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,100, and actual fixed overhead costs were $555,250.

Required:

1. Compute the fixed overhead spending and volume variances.

2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations

Overhead Variances, Four-Variance Analysis Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 129,000 units requiring 516,000 direct labor hours. (Practical capacity is 536,000 hours.) Annual budgeted overhead costs total $861,720, of which $608,880 is fixed overhead. A total of 119,300 units using 514,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $261,800, and actual fixed overhead costs were $556,250. Required: 1. Compute the fixed overhead spending and volume variances. Fixed Overhead Spending Variance $ 52,630 Favorable Fixed Overhead Volume Variance $ 45,784 Unfavorable 2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations Variable Overhead Spending Variance $ Unfavorable Variable Overhead Efficiency Variance $ Unfavorable

Overhead Variances, Four-Variance Analysis Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 129,000 units requiring 516,000 direct labor hours. (Practical capacity is 536,000 hours.) Annual budgeted overhead costs total $861,720, of which $608,880 is fixed overhead. A total of 119,300 units using 514,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $261,800, and actual fixed overhead costs were $556,250. Required: 1. Compute the fixed overhead spending and volume variances. Fixed Overhead Spending Variance $ 52,630 Favorable Fixed Overhead Volume Variance $ 45,784 Unfavorable 2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations Variable Overhead Spending Variance $ Unfavorable Variable Overhead Efficiency Variance $ Unfavorable

Overhead Variances, Four-Variance Analysis

Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 126,000 units requiring 504,000 direct labor hours. (Practical capacity is 524,000 hours.) Annual budgeted overhead costs total $821,520, of which $594,720 is fixed overhead. A total of 119,300 units using 502,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,300, and actual fixed overhead costs were $555,850.

Required:

1. Compute the fixed overhead spending and volume variances.

2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations