Hi,

I need to distinguish between fixed costs and variable costs, but I have no idea where to even start. Could you please explain? Simple answer will suffice.

Thank you

26. If average labor productivity increases, then the same number of employed workers will always produce:

A) more total output. B) less total output. C) less output per person. D) more output per person.

27. When jobs are hard to find, profits are low, few wage increases are given, and many companies go out of business, the economy is most likely in a(n):

A) expansion.  B)recession.  C) boom.  D) shortage.

28. The rate at which prices in general are increasing is called:

A) the unemployment rate. B) the inflation rate.  C) the trade balance. D) the standard of living.

29.  A trade deficit occurs when:
A)   exports are less than imports.
B)   government revenue exceeds government spending.
C)   government spending exceeds government revenue.
D)   exports exceed imports.

30. Major macroeconomic issues include differences across countries in all of the following EXCEPT:

A) inflation rates B) economic growth rates C) unemployment rates  D) infant mortality rates

31. Macroeconomic issues include all of the following EXCEPT:

A) energy reserves B) productivity  C) economic growth  D) recessions and expansions

Case Background

A sole proprietor (the owner) has established a service business specializing in recruitment for businesses needing specialized Tool Industry staff. The trail balance at the end of the first three months of operations is provided below. Part of the service is to train people before they are placed with companies. The owner has asked, you, the accountant for HR, to prepare the answers to the questions below considering the notes provided.

Trial Balance

Notes

1. The owner issued a cheque for $2,000 for insurance for the next three month after discovering there was no insurance in place. The cheque has not been recorded as a reduction of cash to-date. There is no insurance expense for the first three months.

2. The equipment must be depreciated for three months. The equipment has a service life of 5 years and monthly depreciation is estimated to be $833 a month.

3. Recorded revenue of $5,000 is unearned and was an advance from a client. This revenue will be earned in the next three months.

4. Salaries of $15,000 were paid in the first three months. However, $1,000 of salaries should be accrued as employees earned these salaries but will not be paid until the 4th month.

5. The owner provided services of $2,500, which were not invoiced or billed to clients in the 3rd month but were earned in accordance with the Revenue Principle.

6. Interest expense (Debit) needs to be recorded at the end of three months. The amount is $750 and should be recorded as a liability in Interest Payable (Credit) on the balance sheet. None of the $50,000 note has been paid to lenders yet. This note will be paid back at the end of 5 years.

7. Supplies of $1,500 must be expensed to Cost of Goods Sold (i.e., moved out of inventory) and a new accrual of Accounts Payable should be established for $2,000 for supplies ordered at the end of the 3rd month, and not booked to-date.

Questions

1. Prepare an adjusted trial balance showing adjustments. Show the adjustments and add any new accounts required because of the adjustments. Calculate the current ratio, quick ratio and debt to equity (capital) ratio for the owner.

Asian Adventure Holidays offers a series of holiday packages aimed at families, seniors and corporate groups. The financial controller, Jack Tallis, is preparing for the annual board meeting and is concerned about the loss that the business sustained in the past year. He has examined the profits for each of the three departments of the business—family, seniors and corporate—and it seems that the corporate department is the source of the problem.

Jack has asked you to assist him to look more closely at the three packages offered by the corporate department to see which holiday packages are yielding profits and which are not. The three packages are to Thailand, Malaysia and Indonesia. The sales and direct costs of each corporate package for last year are as follows:

To calculate the profitability of each package, a proportion of the overhead costs of running the corporate department needs to be allocated to the three packages. Jack has suggested that these costs could be allocated to each package in proportion to actual sales revenue. For last year these overhead costs were as follows:

Required:

1. Calculate the profit per package and the total profitability of each of the three corporate packages.

2. Compare the profitability of the three corporate packages.

3. Do you consider that the allocation of the corporate department overhead to packages using actual sales revenue is appropriate? Can you suggest a better method?

4. Suggest what actions the company could take in regard to the three corporate packages.

A magazine provided overall customer satisfaction scores for AT&T, Sprint, T-Mobile, and Verizon cell-phone services in major metropolitan areas throughout the United States. The rating for each service reflects the overall customer satisfaction considering a variety of factors such as cost, connectivity problems, dropped calls, static interference, and customer support. A satisfaction scale from 0 to 100 was used with  indicating 0 completely dissatisfied and 100 indicating completely satisfied. The ratings for the four cell-phone services in 20 metropolitan areas are as shown.

a. Consider T-Mobile first. What is the median rating (to 1 decimal)?

b. Develop a five-number summary for the T-Mobile service.

c. Are there outliers for T-Mobile? Explain.

All ratings are between     and   .

- Select your answer -Yes, the data contain outliersNo, the data do not contain outliersItem 9

d. Repeat parts (b) and (c) for the other three cell-phone services.

Are there outliers for AT&T? Explain.

Limits for AT&T(to 1 decimal)     and  

- Select your answer -Yes, the data contain outliersNo, the data do not contain outliersItem 27

Are there outliers for Sprint? Explain.

Limits for Sprint(to 2 decimals)     and  

- Select your answer -Yes, the data contain outliersNo, the data do not contain outliersItem 30

Are there outliers for Verizon? Explain.

Limits for Verizon(to 2 decimals)     and  

- Select your answer -Yes, the data contain outliersNo, the data do not contain outliersItem 33

e. Which of the following box plots accurately displays the data set?

- Select your answer -Box plot #1Box plot #2Box plot #3Box plot #4Item 34

Which service did the magazine recommend as being best in terms of overall customer satisfaction?

- Select your answer -AT&TSprintT-MobileVerizonItem 35

Discuss what a comparison of the box plots tells about the four services.

- Select your answer -AT&T’sSprint’sT-Mobile’sVerizon’sItem 36  lowest rating is better than the highest - Select your answer -AT&T and SprintAT&T and VerizonSprint and VerizonT-Mobile and VerizonItem 37  ratings and is better than of the - Select your answer -AT&TSprintT-MobileVerizonItem 38 ratings. - Select your answer -AT&TSprintT-MobileVerizonItem 39  shows the lowest customer satisfaction ratings among the four services.

Question 5 (Total of 24 marks)

Hit-and-Miss Airlines are considering providing a new daily service between two cities. The aircraft has a maximum capacity of 200 passengers and each flight incurs a fixed cost of $27,000 regardless of the number of passangers. In addition, a cost is also incurred of $75 per passanger to cover such things as catering, booking, baggage handling.

The company is thinking of charging $225 per ticket. How many passengers will the airline need on each flight to break even? Find the break-even point algebraically and illustrate it using an EXCEL graph. Attach the printout or copy your EXCEL graph into your assignment submission. Based on your analysis, will Hit-and-Miss realize a profit or a loss if 160 seats are sold for a particular flight? Explain briefly.

EXCEL Instructions: Create a column called Number of Passengers and in that column enter values from 0 to 200 in increments of 20. Then create two more columns, one for Total Cost and another for Total Revenue. Enter appropriate formulae in EXCEL to obtain the total cost and total revenue corresponding to each value in the Number of Passengers column. Highlight the resulting three sets of numbers and go to the Chart Wizard to obtain the graph. Make sure that your graph has been labelled appropriately (i.e. title, axis labels, legend). Please refer to Topic 3 in the EXCEL Booklet for further instructions on entering formulae and graphing in EXCEL.

Grant’s Graphics has a December 31 year end. Grant’s Graphics records adjusting entries on an annual basis.

Prepare the adjusting journal entries based on the following information. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

1. Preparation of financial statements

Using the Adjusted Trial Balance shown below, prepare the company’s:

(a)   Income Statement

(b)   Statement of Retained Earnings

(c)    Balance Sheet

by completing the tables provided on the following pages.

#2   Below is a series of accounts for the Whitman Company, numbered for identification. Following the accounts is a series of transactions. For each transaction, indicate the account(s) that should be debited and credited in the required journal entry(s) by entering the appropriate account number(s) to the right of each transaction.

Hints:   Transactions B, C, D each have only one debit and one credit.

              Transaction A had 2 debits and 2 credits.

            Transaction E has one debit and three credits.

3  

On Jan 1, Bike Mart had a beginning inventory of 20 bicycles which it purchased for $350 each.

During January, the company purchases four more bicycles for $400 each. None were sold in January.

On February 15, the company purchases five more bicycles for $450 each.

Between February 16 and 28, Bike Mart sells 10 of these bicycles.

a.) Calculate Bike Mart’s Ending Inventory Balance (in dollars) at the end of February and Cost of Goods Sold through February using the FIFO Method. (show all work.)

b.) Calculate Bike Mart’s Ending Inventory Balance (in dollars) at the end of February and Cost of Goods Sold through February using the Weighted Average Method. (show all work.)

c.) At the end of February, will Bike Mart’s Net Income (profits) on its Income Statement be higher if it uses the FIFO or Weighted Average Inventory Method? Why?

QUESTION 2

1. VF is a small accounting firm supporting wealthy individuals in their preparation of annual income tax statements. Every December, VF sends out a short survey to their customers, asking for the information required for preparing the tax statements. Based on 24 years of experience, VF categorizes their cases into the following groups:

   • Group 1 (new customers, easy): 25 percent of cases

   • Group 2 (new customers, complex): 20 percent of cases

   • Group 3 (repeat customers, easy): 30 percent of cases

   • Group 4 (repeat customers, complex): 25 percent of cases

   Here, “easy” versus “complex” refers to the complexity of the customer’s earning situation. In order to prepare the income tax statement, VF needs to complete the following set of activities. Processing times (and even which activities need to be carried out) depend on which group a tax statement falls into. All of the following processing times are expressed in minutes per income tax statement.  

   Group	Filing	Initial Meeting	Preparation	Senior Accountant Review	Writing
   1	20	30	120	20	50
   2	40	90	300	60	80
   3	20	No	150	5	60
   4	40	No	200	30	60

   The activities are carried out by the following three persons:

   • Administrative support person: filing and writing.

   • Senior accountant (who is also the owner): initial meeting, review by senior accountant.

   • Junior accountant: preparation.

   Assume that all three persons work eight hours per day and 22 days a month. For the following questions, assume the product mix as described above. Assume that there are 50 income tax statements arriving each month.

g. Due to the recent regulation change, the writing stage now takes 30 minutes longer for all cases, what is the new implied utilization rate for the administrative support person? Round your answer to the nearest whole number and ignore the percentage sign. For example, if your answer is 0.45 or 45%, fill in 45; if your answer is 0.76 or 76%, fill in 76.

Your answer is .

Eco State Sdn. Bhd. (ECOS) operates a chain of retail outlets. The Board of Directors decides not to buy the public liability insurance to cover the cost of compensation claims made against ECOS for injury or damage to its customers. The board of directors chooses to self-insure against potentially insignificant losses. ECOS expects to pay RM500,000 a year in respect of minor accidents to its customers. ECOS files a suit against its business partner for breach of contract. The company’s lawyers advise that a favourable settlement is highly probable. ECOS has had a number of these significant lawsuits in the past three years.

1. Discuss the accounting treatment for the above events in accordance with IAS 37/ MFRS 137 Provisions, Contingent Liabilities and Contingent Assets.