ABC Co. provides a company car to Danny. The cost of the car was $20,000 including HST. The car was driven for a total of 26,000 kilometres during 2020 and its operating costs for the year were $4,000. It was used by Danny for the whole year. He drove a total of 9,000 kilometres for personal purposes.

Instructions:

Calculate the Auto Benefit that Danny will include in his employment income by filling in the five (5) blanks below. Do not leave any blanks - if there is no value to input, enter "none" :

After evaluating Null Company’s manufacturing process, management decides to establish standards of 3 hours of direct labor per unit of product and $15 per hour for the labor rate. During October, the company uses 16,250 hours of direct labor at a $247,000 total cost to produce 5,600 units of product. In November, the company uses 22,000 hours of direct labor at a $335,500 total cost to produce 6,000 units of product.

1.Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months.

2.Interpret the October direct labor variances.

PERCENTAGE OF COMPLETION METHOD AttiK Construction Company currently has a long-term construction project. The project has a contract price of $130,000,000 with total estimated costs of $100,000,000. AttiK appropriately uses the percentage of completion method. After 2 years of construction, the following costs have been accumulated: Actual cost incurred, Year 1 $30,000,000 Total estimated costs remaining after Year 1 70,000,000 Actual cost incurred, Year 2 50,000,000 Total estimated cost remaining after Year 2 20,000,000 Determine the gross profit for each of the first 2 years of the construction contract.

Perfect Competition:

The Copy Center specializes in high-volume printing and color copying for small businesses. This is a fiercely competitive market. The following relation exists between output and total production costs:

(a) In the cost accounting literature, the sample regression coefficient corresponding to x_k is regarded as an estimate of the true marginal cost of output associated with the variable x_k. Find a point estimate of the true marginal cost associated with total machine hours per month. (Enter your answer to three decimal places.)

Also, find a 95% confidence interval estimate of the true marginal cost associated with total machine hours. (Round your answers to three decimal places.)

(b) Test the hypothesis that the true marginal cost of output associated with total production of paper is $1,000. (Hint: Realize that this is analogous to testing the regression coefficient for total production of paper is 1.0.) Use a 10% level of significance.

State the hypotheses to be tested.

a.H₀: β₁ ≠ 1.0
H_a: β₁ = 1.0

b.H₀: β₁ = 1.0
H_a: β₁ ≠ 1.0    

c.H₀: β₂ ≠ 1.0
H_a: β₂ = 1.0

d.H₀: β₀ = 1.0
H_a: β₀ ≠ 1.0

e.H₀: β₂ = 1.0
H_a: β₂ ≠ 1.0

(c)State the decision rule.

a.Reject H₀ if p < 0.10.
Do not reject H₀ if p ≥ 0.10.

b.Reject H₀ if p > 0.05.
Do not reject H₀ if p ≤ 0.05.    

c.Reject H₀ if p > 0.10.
Do not reject H₀ if p ≤ 0.10.

d.Reject H₀ if p < 0.05.
Do not reject H₀ if p ≥ 0.05.

(d)State your decision.

a.Reject the null hypothesis. The true marginal cost of output associated with total production of paper is not $1,000.

b.Reject the null hypothesis. The true marginal cost of output associated with total production of paper may be $1,000.    

c.Do not reject the null hypothesis. The true marginal cost of output associated with total production of paper may be $1,000.

d.Do not reject the null hypothesis. The true marginal cost of output associated with total production of paper is not $1,000.

Consider the following independent situations, all of which apply to audits of entities for the year ended 31 December 2019:

(i) In July 2019, Alpha Ltd started using a new general ledger software package. The Financial Controller is impressed with the new system, because management accounts are easily produced and allow detailed comparisons with budgets and prior-period figures across product lines and geographical areas. The conversion to the new system went smoothly. As it is a popular computer package, it required only minor modifications.

(ii) As part of a computer systems conversion in Beta Ltd, the position of Systems Administrator was created. This position is responsible for all systems maintenance, including data backups and modifications. These tasks were previously the responsibility of the Accountant.

(iii) Gamma Ltd is a large supermarket chain with outlets in all major cities in the country. In August 2019 Gamma Ltd contracted out its payroll data processing in each city to an independent computer service provider.

(iv) Delta Ltd is a long established firm which has been operating a hotel for over 10 years. During this time, it has adopted a conservative business strategy that has seen it produce adequate, though slightly unimpressive, results. A new CEO was appointed to run the firm from September 2019. He has already released his plans for renovating the hotel, despite not officially serving as CEO yet. You have also heard him discuss the implementation of a new marketing strategy to improve occupancy rates.

Required:

For each situation (i) to (iv) above.

(a) State whether Inherent Risk, Control Risk or Detection Risk have increased or decreased.

(b) Provide an explanation for your answer in (a)

1. A study was conducted to examine whether the perception of service quality at hotels differed by gender. Hotel guests were randomly selected to rate hotel service, and each rating was then transferred into a standardized score. By comparing the scores observed from the sample of male guests and the sample of female guests, researchers then wished to determine if there is evidence of a difference in average rating when awarded by males, μ ₁, and the average rating when awarded by females, μ ₂. A summary of the sampled guest scores are provided in the table below :

2. 
   i) Carry out a hypothesis test for a significant difference between the two population means, at significance level α = 0.05.
   The hypotheses being tested are:
   H ₀: μ ₁ - μ ₂ = 0
   H _a: μ ₁ - μ ₂ ≠ 0.
   Complete the test by filling in the blanks in the following:
   • An estimate of the difference in population means is .
   • Assuming the population standard deviations are equal, σ₁=σ₂, the pooled estimate, s_p, is  and the standard error is .
   • The distribution is  (examples: normal / t12 / chisquare4 / F5,6).

The test statistic has value TS=  .
Testing at significance level α = 0.05, the rejection region is:
less than  and greater than  (3 dec places).
There  (is evidence/is no evidence) to reject the null hypothesis, H ₀ of no difference between the two population means, μ ₁ and μ ₂.

ii) Estimate the difference in population means by calculating a 95% confidence interval.
The difference between the population means, the mean of population 1, μ ₁, minus the mean of population 2, μ ₂, is estimated to be between________  and__________ .

Exercise 7.4 Recording sales made for cash and on account, with 8 percent sales tax, and sales returns.

LO 7-1 Record the following transactions of Fashion Park in a general journal. F

ashion Park must charge 8 percent sales tax on all sales.

DATE TRANSACTIONS 2019

April 2 Sold merchandise for cash, $2,500 plus sales tax.

April 3 The customer purchasing merchandise for cash on April 2 returned $250 of the merchandise; provided a cash refund to the customer.

April 4 Sold merchandise on credit to Jordan Clark; issued Sales Slip 908 for $1,050 plus tax, terms n/30.

April 6 Accepted return of damaged merchandise from Jordan Clark; issued Credit Memorandum 302 for $150 plus tax.

The original sale was made on Sales Slip 908 of April 4.

April 30 Received payment on account from Jordan Clark in payment of her purchase of April 4, less the return on April 6.

1

Journal Entry

Sold merchandise for cash, $2,500 plus sales tax.

2

The customer purchasing merchandise for cash on April 2 returned $250 of the merchandise; provided a cash refund to the customer.

3

Sold merchandise on credit to Jordan Clark; issued Sales Slip 908 for $1,050 plus tax, terms n/30.

4

Accepted return of damaged merchandise from Jordan Clark; issued Credit Memorandum 302 for $150 plus tax. The original sale was made on Sales Slip 908 of April 4.

5

Received payment on account from Jordan Clark in payment of her purchase of April 4, less the return on April 6.

1. Consider the problem of two polluting sources in the region, each of which generated 10 units of pollution for a total of 20 units released into the environment. The government determined that emissions must be reduced by 12 units across the region to achieve the ”socially desirable level of pollution”. Each firm faces different abatement cost conditions modelled as follows: for Polluter 1, marginal abatement cost is MAC₁ = 2.6Q₁, while the total abatement cost is TAC1 = 1.3(Q1)². For Polluter 2, marginal abatement cost is MAC2 = 0.52Q₂, while the total abatement cost is TAC2 = 0.26(Q2)², where Q₁ is the amount of pollution controlled (abated) by Polluter 1, and Q₂ is the amount of pollution controlled (abated) by Polluter 2.

(a) What is the cost effective abatement allocation across polluting sources? What is the total cost to achieve this goal?

(b) Assume that the government implements the 12-units standard uniformly, requiring each polluter to abate by 6 units. What is the total cost to achieve this goal? Is it more / less than the total cost from part a)? Comment on your findings.

Consider now other possible policies like a tradable emission permits (TEP’s) system and an emission tax as ways to achieve the cap of 8 units of emissions.

(c) Assume that the government imposes emission charge set at $4 for each polluter. Show how each firm responses to tax. Does $4 unit tax achieve the 12-unit abatement standard? If not, is $4 unit tax too high or too low? Discuss.

(d) Assume that the government decides to issue permits rather than impose tax. It issues 8 permits, each of which allows the bearer to emit 1 unit of pollution. The government allocates 4 permits to each polluter.

i. If the permits system does not allow for trading, what would be each firm’s response - cost, abatement required to this allocation?

ii. Assume now that trading is allowed and that two firms agree on the purchase and sale of permit at a price of $8.00. What would be each firm’s response - cost, abatement required, revenue to this price?

iii. Does the outcome from part (ii) represent the cost effective solution? If yes - why? If not, describe what happens next.

Problem 2-18B Cost behavior and averaging

Chris Quill asks you to analyze the operating cost of his lawn services business. He has bought the needed equipment with a cash payment of $90,000. Upon your recommendation, he agrees to adopt straight-line depreciation. The equipment has an expected life of four years and no salvage value. Mr. Quill pays his workers $20 per lawn service. Material costs, including fertilizer, pesticide, and supplies, are expected to be $10 per lawn service.

Required

Determine the total cost of equipment depreciation and the average cost of equipment depreciation per lawn service, assuming that Mr. Quill provides 40, 50, or 60 lawn services during one month. Is the cost of equipment a fixed or a variable cost?

Determine the total expected cost of labor and the average expected cost of labor per lawn service, assuming that Mr. Quill provides 40, 50, or 60 lawn services during one month. Is the cost of labor a fixed or a variable cost?

Determine the total expected cost of materials and the average expected cost of materials per lawn service, assuming that Mr. Quill provides 40, 50, or 60 lawn services during one month. Is the cost of fertilizer, pesticide, and supplies a fixed or a variable cost?

Determine the total expected cost per lawn service, assuming that Mr. Quill provides 40, 50, or 60 lawn services during one month.

Determine the average expected cost per lawn service, assuming that Mr. Quill provides 40, 50, or 60 lawn services during one month. Why does the cost per unit decrease as the number of lawn services increases?

If Mr. Quill tells you that he prices his services at 30 percent above cost, would you assume that he means average or actual cost? Why?