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The Molson Company had budgeted production for the year as follows:

Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 5,700 lbs. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in materials. Budgeted purchases of raw materials in the second quarter would be:

Calculating Manufacturing Cycle Efficiency

Indy Company has the following data for one of its manufacturing plants:

Maximum units produced in a quarter (3-month period): 250,000 units
Actual units produced in a quarter (3-month period): 210,000 units
Productive hours in one quarter: 25,000 hours

The actual cycle time for Indy Company is 7.14 minutes, and the theoretical cycle time is 6 minutes.

Required:

1. Calculate the amount of processing time and the amount of nonprocessing time. If required, round your answers to two decimal places.

2. Calculate the MCE. If required, round your answer to nearest whole number.
%

Ian Mathews is a creator of board games. Ian will be selling his most recent game, Radical Rainbows, through his newly formed company, UPR, Inc. UPR was formed in June, 2018. Ian contributed $1,000 to UPR in exchange for 100% of UPR’s voting common stock. Ian has had unprecedented success with the first two games in his most recent game trilogy: unicorns, ponies and rainbows. Ian was looking to finance UPR’s initial production run of the third game, Radical Rainbows at a rate of 7.5% or less.   The best deal offered by several banks had an APR of 8%. That was more than Ian was willing to pay and he felt there were other sources of financing that were less expensive.

As he had done for the first two games in the series: Unstable Unicorns and Perplexed Ponies, Ian turned to Kickstarter to finance the cost of the first production run of Radical Rainbows. Normally, UPR will be selling Radical Rainbows for $50 per game. UPR offered to sell Radical Rainbows to its Kickstarter backers for $45 per game.   The Kickstarter campaign was completed in two days, and on June 1, 2018 UPR received $225,000 in exchange for a promise to deliver 5000 games to its Kickstarter backers on December 1, 2019.  

At a manufacturing cost of $30 per game, UPR will be able to produce 7500 units with the $225,000 raised in the Kickstarter campaign. The 7500 games would be ready for shipment on December 1, 2019.

On June 1, 2018, UPR’s bookkeeper made the following entry to record the receipt of cash:

On December 1, 2019, UPR was able to deliver the 5000 board games to its Kickstarter backers. UPR also sold and delivered the additional 2500 games to other customers for the normal retail price of $50 per game. UPR’s bookkeeper made the following entries to record these transactions:

UPR used the $126,000 in cash available to UPR in December, 2019 to manufacture another 4200 board games. Those games were in finished goods inventory at December 31, 2019 and were sold in January, 2020 for $50 per game

UPR’s Financial Statements at December 31, 2019 and 2018 as prepared by UPR’s bookkeeper showed the following:

*You can assume that the Cash, Inventory, Common Stock and Cost of Goods Sold amounts as shown in both the journal entries and financial statements are correct.

Your analysis of this problem will involve using ASC 606 - Revenue from Contracts with Customers. UPR adopted ASC 606 when Ian formed the company in 2018. UPR has applied ASC 606 incorrectly.

You can assume that a contract is in place and that only one performance obligation exists: the delivery of the board game to the customer. Thus, determining the Transaction Price is the issue that needs to be addressed. The principles for the determining transaction prices can be found in ASC Subtopic 606-10-32-2 through 606-10-32-27. You may also want to refer to the illustrations (examples) contained in ASC 606. A list of the illustrations can be found at ASC Subtopic 606-10-55-93.

QUESTIONS TO BE ANSWERED

You must answer the following questions:

What are the additional entries or correct entries required on the following dates? If the entries made by the bookkeeper are correct, indicate “Bookkeeper made correct entry”. Otherwise use the Journal Entry template to record your answer and then paste into your answer.:

June 1, 2018

December 31, 2018 Adjusting Journal Entry

December 1, 2019

Use the attached Excel Template, show the corrected comparative Balance Sheet and Income Statement at December 31, 2019 and December 31, 2018.   Paste the template into your answer

Using references to ASC 606 explain how your arrived at your answers in 1. And 2. Above.

From the point of view of a potential investor or lender to UPR, do the corrected financial statements or the original financial statements prepared by UPR’s bookkeeper better reflect the economics of UPR during its initial two years in business? Why?                   

Corrected Balance Sheet
12/31/2019 12/31/2018
Cash* $0 $126,000
Inventory - Work in Process* $0 $100,000
Inventory - Finished Goods* $126,000
Total Assets $126,000 $226,000

Deferred Revenue $0
Total Liabilities $0
Common Stock* $1,000 $1,000
Retained Earnings- Accumulated Deficit $125,000
Total Equity $126,000
Total Liablities and Equity $126,000

Corrected Income Statement
Revenues
Cost of Goods Sold $225,000 $0
Gross Profit
Expenses - Interest
Net Income

You can assume that the Cash, Inventory, Common Stock and Cost of Goods Sold amounts as shown in the financial statements are correct. Also, the Balance Sheet at 12/31/2019 as prepated by UPR's bookkeeperis correct.

1) In this example, how might this new surcharge effect supply and demand?

United Parcel Service Inc. is adding “peak” surcharges for companies that have been inundating its delivery network with many more packages and oversize items during the coronavirus pandemic, an unprecedented move to manage a summer flood of shipments and higher costs. UPS typically imposes extra fees on merchants during the busy Christmas shopping season, but—for the first time in the e-commerce era—will add such surcharges starting May 31. The fees would apply to large online sellers like Amazon. com Inc. as well as traditional retailers like Target Corp. and Best Buy Co. that have shifted heavily to e-commerce as many stores have closed temporarily. Retailers will have to calculate whether to raise prices, absorb the added cost or a combination of the two. They can also try workarounds to avoid the fee by closely monitoring the amount and sizes of packages they ship with UPS, using another carrier or nudging customers to pick up online orders in stores. Delivery companies like FedEx Corp., UPS and the U.S. Postal Service are struggling with an unexpected increase in online shopping over the past 2½ months as consumers buy online everything from canned foods and toilet paper to office chairs and backyard pools. Digital sales at Target and Best Buy more than doubled in the most recent quarter. The added volumes are testing the limits of these delivery networks, which have been operating seven days a week. For FedEx and UPS, residential deliveries are also less profitable than bulk shipments to businesses, which have dried up as many offices and nonessential companies remain closed. UPS has said it recently has been delivering 70% of packages to homes, versus about 54% during all of 2019. It has taken on more of Amazon’s package volumes after FedEx cut ties with the online giant last year. FedEx recently limited the number of packages that about two dozen customers including Bed Bath & Beyond Inc., Nordstrom Inc. and Kohl’s Corp. could ship from their stores. Those companies had repurposed stores into fulfillment centers after they were forced to shut down temporarily. FedEx and UPS both have also imposed surcharges on international packages as a decline in passenger jets has cut into air cargo capacity. FedEx hasn’t added such fees on domestic shipments. Starting May 31, UPS is adding surcharges on customers whose weekly volume of shipments using its lower-priced service has blown through what they were shipping in February. The surcharge adds 30 cents on each package shipped under UPS Ground and SurePost, the service in which UPS drops packages at the Postal Service for delivery to homes. The added fee kicks in only on shippers that topped their average weekly volume in February by more than 25,000 packages. The average revenue per domestic package was $6.44 at UPS in the first quarter. Another surcharge adds $31.45 onto each large package shipped, which could hit items like desks, patio umbrellas and trampolines that have been popular online purchases during lockdowns across the U.S. as millions of people work from home, redecorate and try to entertain their children. That fee would apply to shippers after they ship more than 500 large packages in a week. Both surcharges will be in effect until further notice. A UPS spokesman said the company routinely adjusts prices to take into account changing market conditions and added costs. “The peak surcharges reflect the current dynamic market conditions and uncertainties caused by the coronavirus, which is impacting available capacity and market demand,” the spokesman said. The fees are likely to hit large shippers the most, rather than smaller business or occasional shippers. Target, for instance, said last week that its online order volume more than tripled in April compared with last year. It rose 141% during the three months that ended May 2. Amazon’s revenue rose 26% in the March quarter from a year ago, while its world-wide shipping costs rose 49%. Amazon is slowly returning to normal operations after the coronavirus-driven surge in demand upended its operations, prompting the company to limit shipments of nonessential items and slowed its shipping speeds. On Thursday, the Seattle company said it plans to keep most of the U.S. jobs it added to meet demand during March and April. “All of the large e-commerce shippers are going to get hit with this,” John Haber, CEO of supply-chain consulting firm Spend Management Experts. “A lot of them will try to negotiate it out, but there hasn’t been a lot of flexibility about not paying these peak surcharges.” Representatives for Amazon, Target and Best Buy didn’t immediately respond to requests for comment on the UPS surcharges.

The balance of Landy ​Corporation's accounts payable at the beginning of the most recent year was $ 50,000. At the end of the​ year, the accounts payable balance was $ 54,000. Landy's sales revenue for the year was $ 3,105,000​, while its cost of goods sold for the year was $ 1,508,000. Calculate Landy's ​days' payable outstanding​ (DPO) for the year. Assume inventory levels are constant throughout the year. If the credit terms from Landy's suppliers are​ n/30, how would you interpret Landy's ​DPO?

Match each statement below with the appropriate inventory costing method.

1. This inventory costing method shows cost of goods sold on the income statement at the most current inventory costs during a period of deflation

2. This inventory costing method results in the highest amount of income tax expense reported on the income statement during a period of deflation

3. This inventory costing method results in the highest amount paid to purchase inventory during a period of inflation

A house owner wants to maintain his house. What is the economic term for this desire? What enables a baker to obtain new shoes from a cobbler who doesn't need any baked goods?

Equilibrium prices will spontaneously establish themselves in a competitive market and will persist until things changes?

Which describes a price mechanism through which the government may correct a failing market?

Which is most likely to increase the supply of soldiers for an all-volunteer army?