Over the past several years, decommissioned U.S. warships have been turned into artificial reefs in the ocean by towing them out to sea and sinking them. The thinking was that sinking the ship would conveniently dispose of it while providing an artificial reef environment for aquatic life. In reality, some of the sunken ships have released toxins into the ocean and have been costly to decontaminate. In the late 1990s, at least two international conventions have made it all but impossible to export used warships for salvage without removing all military equipment, conducting a complete cleanup and cutting the ship into such comparatively small pieces as to make the entire exercise relatively expensive.
The new environmental regulations have made disposal of ships an expensive project. The United States has hundreds of mothballed warships, presenting an extremely expensive problem for military authorities and the government. Now the U.S. government is taking bids to instead dismantle and recycle ships that have recently been decommissioned (but have not been sunk yet.)
Assume that a recently decommissioned aircraft carrier, the USS Blaze, is estimated to contain 40 tons of recyclable materials able to be sold for approximately $32.8 million. About 90% of the value in old ships is the metals, including steel, copper, copper alloys, and lead that can be removed, sold for remelting, and reformed into new metal products. There are also some high-value metals; such as, nickel alloys, stainless steel, and titanium that can be found in some parts of all warships but may be present is such small quantities that recovery and resale may not be cost effective. The low bid for dismantling and transporting the ship materials to appropriate facilities is $34.5 million. Recycling and dismantling the ship would create about 500 jobs for about a year on the West Coast area. This geographic area has been experiencing record-high unemployment rates in recent years.
As an alternative, reefing these ships would create new habitats for underwater life and can be done using newer environmentally safe methods. These new artificial reefs would enhance fishery resources and facilitate the access and utilization by recreational and commercial fishermen. Artificial reefs can also increase tourism by attracting sport divers for recreational purposes. Academic organizations may be interested in using the site to study fish and other marine life which may open the door for more funding from these research activities. Research has shown that a new reef will attract 60,000 – 70,000 divers and add more than 10 million to the local tourism industry. Research has also shown that artificial reefs can substantially increase the population of reef-associated species. Within months the G. B. Church artificial reef in British Columbia had hundreds of encrusted individuals on its hull and within 2.5 years had seen an increase of nearly 100 species.
Reefing the ship would cost an estimated 800K (or $0.8 million) which includes cleaning of the vessel of toxics, oils and greases, PCB containing electrical and electronic equipment and other readily removable PCB containing equipment, local towing and docking, preparation (unspecified) and other incidental overhead items, insurance, and making the vessels safe for divers (diverizing). There will also be yearly maintenance costs in perpetuity.
1. Is it more financially advantageous to sink the ship or to dismantle and recycle it? Show your calculations. (Worth 4 pts.)
Recycling=$32,800,000
Dismantle and transport=$34,500,000
Reefing the ship= $800,000
To dismantle and recycle the ship would cost, 34,500,000-32,800,000=$1,700,000, while sinking/reefing the ship would cost $800,000. This means that it would be more financially advantageous to sink or reef the ship because it would save a total of $900,000.
2. From a sustainability standpoint, what should be done with the decommissioned aircraft carrier? (Worth 4 pts.)
3. List some of the other quantitative and qualitative factors that should enter into this analysis. (Worth 10 pts.)
4. As a taxpayer(s), which action would you prefer (sink or recycle)? Defend your answer. (Worth 4 pts.)
In: Accounting
The following data regarding purchases and sales of a commodity
were taken from the related perpetual inventory account:
| June 1 | Balance | 25 units at $60 |
| 6 | Sale | 20 units |
| 8 | Purchase | 20 units at $61 |
| 16 | Sale | 10 units |
| 20 | Purchase | 20 units at $62 |
| 23 | Sale | 25 units |
| 30 | Purchase | 15 units at $63 |
Calculate the cost of the ending inventory at June 30, using (a) the first-in, first-out (FIFO) method and (b) the last-in, first-out (LIFO) method. Identify the quantity, unit price, and total cost of each lot in the inventory.
(a) First-In, First-Out (FIFO):
| Date: June | Quantity | Unit Price | Total cost | |
| units at | $ | $ | ||
| units at | $ | |||
| BLANK | Total | $ | ||
(b) Last-In, First-Out (LIFO):
Date: June | quantity | unit price | total cost of each lot | |
| units at | $ | $ | ||
| units at | $ | |||
| units at | $ | |||
| BLANK | Total | $ | ||
In: Accounting
6. Each Isocost line demonstrates ______.
Write the general equation of an Isocost line.
the set of combinations of goods and services i.e., outputs that yield different total costs
labor costs in the short run
the set of combinations of labor and capital that yield the same total costs
combination of L and K that yield multiple total costs
7. If the quantity demanded of capital does not change by a large amount when the price of capital increases by a large amount, we say that the demand elasticity of capital is ______.
elastic
cross-elastic
inelastic
none of the above
8. When the long-run average cost curve is u-shaped, the marginal cost curve will bisect (intersect) the average cost curve at __________________.
its maximum
its minimum
its average value
none of the above
9. Average cost in the long-run is defined as _____.
TVC/Q
TC/Q
TVC + TFC/Q
none of the above
10. Economies of scale is a characteristic of production where ______.
average costs increase as output increases
total cost decreases as output increases
average cost decreases as output increases
average cost decreases as output decreases
11. Which of the following factors of production is more likely to be fixed in the short run?
The number of workers.
Changes in electricity consumed.
The location of a manufacturing plant.
The amount of materials used.
12. If a company has $1000 in variable costs and $200 in fixed costs when it produces 200 units of output and sells the units for $20 per unit, average total costs would equal ______.
$10
$6
$50
$60
13. Economies of scope occur when the total cost of producing given quantities of two goods in the same firm is ______.
more than the total cost of producing those quantities in two single product firms
more than the average cost of producing those quantities in the same firm
less than the average cost of producing those quantities in the same firm
less than the total costs of producing those quantities in two single product firms
14. Does this firm experience economies or diseconomies of scale? What type of returns to scale does this firm experience? Show your work that justifies your response.
Q = ∛L
In: Economics
Valley Company’s adjusted trial balance on August 31, 2017, its fiscal year-end, follows.
| Debit | Credit | ||||||
| Merchandise inventory | $ | 41,000 | |||||
| Other (noninventory) assets | 130,400 | ||||||
| Total liabilities | $ | 25,000 | |||||
| Common stock | 10,000 | ||||||
| Retained earnings | 94,550 | ||||||
| Dividends | 8,000 | ||||||
| Sales | 225,600 | ||||||
| Sales discounts | 2,250 | ||||||
| Sales returns and allowances | 12,000 | ||||||
| Cost of goods sold | 74,500 | ||||||
| Sales salaries expense | 32,000 | ||||||
| Rent expense—Selling space | 8,000 | ||||||
| Store supplies expense | 1,500 | ||||||
| Advertising expense | 13,000 | ||||||
| Office salaries expense | 28,500 | ||||||
| Rent expense—Office space | 3,600 | ||||||
| Office supplies expense | 400 | ||||||
| Totals | $ | 355,150 | $ | 355,150 | |||
On August 31, 2016, merchandise inventory was $25,400.
Supplementary records of merchandising activities for the year
ended August 31, 2017, reveal the following itemized costs.
| Invoice cost of merchandise purchases | $ | 92,000 |
| Purchases discounts received | 2,000 | |
| Purchases returns and allowances | 4,500 | |
| Costs of transportation-in | 4,600 | |
Required:
2. Compute the company’s total cost of
merchandise purchased for the year.
3. Prepare a multiple-step income statement that
includes separate categories for net sales, cost of goods sold,
selling expenses, and general and administrative expenses.
4. Prepare a single-step income statement that
includes these expense categories: cost of goods sold, selling
expenses, and general and administrative expenses.
Compute the company’s total cost of merchandise purchased for the year.
|
|||||||||||||
Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.
|
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In: Accounting
Problem 9-56 Activity-Based Costing and Predetermined Overhead Rates (LO 9-3, 5, 6)
Cain Components manufactures and distributes various plumbing products used in homes and other buildings. Over time, the production staff has noticed that products they considered easy to make were difficult to sell at margins considered reasonable, while products that seemed to take a lot of staff time were selling well despite recent price increases. A summer intern has suggested that the cost system might be providing misleading information.
The controller decided that a good summer project for the intern would be to develop, in one self-contained area of the plant, an alternative cost system with which to compare the current system. The intern identified the following cost pools and, after discussion with some plant personnel, appropriate cost drivers for each pool. There were:
|
Cost Pools |
Costs |
Activity Drivers |
|
|
Receiving |
$ |
660,000 |
Direct material cost |
|
Manufacturing |
6,500,000 |
Machine-hours |
|
|
Machine setup |
1,210,000 |
Production runs |
|
|
Shipping |
$ |
1,225,000 |
Units shipped |
In this particular area, Cain produces two of its many products: Standard and Deluxe. The following are data for production for the latest full year of operations:
|
Products |
||||||
|
Standard |
Deluxe |
|||||
|
Total direct material costs |
$ |
265,000 |
$ |
175,000 |
||
|
Total direct labor costs |
$ |
690,000 |
$ |
290,000 |
||
|
Total machine-hours |
150,000 |
100,000 |
||||
|
Total number of setups |
85 |
135 |
||||
|
Total pounds of material |
18,000 |
9,000 |
||||
|
Total direct labor-hours |
8,000 |
5,000 |
||||
|
Number of units produced and shipped |
25,000 |
10,000 |
||||
Required:
a. The current cost accounting system charges overhead to products based on machine-hours.What unit product costs will be reported for the two products if the current cost system continues to be used? (Do not round intermediate calculations.)
| Standard | Deluxe | |
| Direct costs | ||
| Ovrhead | ||
| Total costs | ||
| Number of units | ||
| Unit Cost |
b. The intern suggests an ABC system using the cost drivers identified above. What unit product costs will be reported for the two products if the ABC system is used? (Do not round intermediate calculations.)
| Standard | Deluxe | |
| Direct Costs | ||
| Overhead: | ||
| Receiving | ||
| Manufacturing | ||
| Machine Setup | ||
| Shipping | ||
| Total costs | ||
| Number of units | ||
| Unit cost |
In: Accounting
Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year
|
Molding |
Fabrication |
Total |
|||
|
Machine-hours |
20,000 |
30,000 |
50,000 |
||
|
Fixed manufacturing overhead costs |
$ |
700,000 |
$ |
210,000 |
$ 910,000 |
|
Variable manufacturing overhead cost per machine-hour |
$ |
3.00 |
$ |
1.00 |
|
During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:
|
Job D-70: |
Molding |
Fabrication |
Total |
|||
|
Direct materials cost |
$ |
375,000 |
$ |
325,000 |
$ |
700,000 |
|
Direct labor cost |
$ |
200,000 |
$ |
160,000 |
$ |
360,000 |
|
Machine-hours |
14,000 |
6,000 |
20,000 |
|||
|
Job C-200: |
Molding |
Fabrication |
Total |
|||
|
Direct materials cost |
$ |
300,000 |
$ |
250,000 |
$ |
550,000 |
|
Direct labor cost |
$ |
175,000 |
$ |
225,000 |
$ |
400,000 |
|
Machine-hours |
6,000 |
24,000 |
30,000 |
|||
Delph had no underapplied or overapplied manufacturing overhead during the year.
2.Assume Delph uses departmental predetermined overhead rates based on machine-hours.
a. Compute the departmental predetermined overhead rates.
b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.
c. If Delph establishes bid prices that are 150% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?
d. What is Delph’s cost of goods sold for the year?
Compute the departmental predetermined overhead rates.
|
|||||||||||
Compute the total manufacturing cost assigned to Job D-70 and Job C-200.
|
If Delph establishes bid prices that are 150% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?
|
What is Delph’s cost of goods sold for the year?
|
·
In: Accounting
In: Accounting
The following information is for the standard and actual costs for the Happy Corporation.
Standard Costs:
Budgeted units of production - 16,000 (80% of capacity)
Standard labor hours per unit - 4
Standard labor rate - $26 per hour
Standard material per unit - 8 lbs.
Standard material cost - $ 12 per pound
Standard variable overhead rate - $15 per labor hour
Budgeted fixed overhead - $640,000
Fixed overhead rate is based on budgeted labor hours at 80% capacity.
Actual Cost:
Actual production - 16,500 units
Actual material purchased and used - 130,000 pounds
Actual total material cost - $1,600,000
Actual labor - 65,000 hours
Actual total labor costs - $1,700,000
Actual variable overhead - $1,000,000
Actual fixed overhead - $640,000
Actual variable overhead - $1,000,000
Determine: (a) the quantity variance, price variance, and total direct materials cost variance; (b) the time variance, rate variance, and total direct labor costvariance; and (c) the volume variance, controllable variance, and total factory overhead cost variance.
In: Accounting
Allocating Joint Costs Using the Constant Gross Margin Method
A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process. Each production run costs $12,800. None of the products can be sold at split-off, but must be processed further. Information on one batch of the three products is as follows:
Product |
Gallons | Further Processing Cost per Gallon |
Eventual
Market Price per Gallon |
| L-Ten | 3,600 | $0.50 | $2.00 |
| Triol | 4,000 | 1.00 | 5.00 |
| Pioze | 2,400 | 1.50 | 6.00 |
Required:
1. Calculate the total revenue, total costs, and total gross profit the company will earn on the sale of L-Ten, Triol, and Pioze.
| Total Revenue | $ |
| Total Costs | $ |
| Total Gross Profit | $ |
2. Allocate the joint cost to L-Ten, Triol, and Pioze using the constant gross margin percentage method. Round the gross margin percentage to four decimal places and round all other computations to the nearest dollar.
| Joint Cost | |
| Product | Allocation |
| L-Ten | $ |
| Triol | |
| Pioze | |
| Total | $ |
(Note: The joint cost allocation does not equal due to rounding.)
In: Accounting
In: Accounting