Agnew Manufacturing produces and sells three models of a single product, Standard, Superior, and DeLuxe, in a local market and in a regional market. At the end of the first quarter of the current year, the following income statement (in thousands of dollars) has been prepared.

Management has expressed special concern with the regional market because of the extremely poor return on sales. This market was entered a year ago because of excess capacity. It was originally believed that the return on sales would improve with time, but after a year, no noticeable improvement can be seen from the results as reported in the preceding quarterly statement.

In attempting to decide whether to eliminate the regional market, the following information has been gathered.

All administrative costs and fixed manufacturing costs would not be affected by eliminating the regional market. Marketing costs that are not listed as variable are fixed for the period and separable by market. Fixed marketing costs assigned to the regional market would be saved if that market were eliminated.

Required:

a. Assuming there are no alternative uses for Agnew's present capacity, would you recommend dropping the regional market?

b. Prepare the quarterly income statement showing contribution margins by products. Do not allocate fixed costs to products.

c. It is believed that a new model can be ready for sale next year if Agnew decides to go ahead with continued research. The new product would replace DeLuxe and can be produced by simply converting equipment presently used in producing the DeLuxe model. This conversion will increase fixed costs by $117,000 per quarter. What must be the minimum contribution margin per quarter for the new model to make the changeover financially feasible?

8.         A variable cost

            a.   decreases in total with increases in volume

            b.   increases on a per-unit basis with increases in volume

            c.   increases in total with increases in volume

            d.   decreases on a per-unit basis with increases in volume

            e.   None of the above

9.   In standard costing, the upper and lower control limits are used to determine

            a.   the direction of the variance

            b.   the dollar amount of the variance

            c.   whether or not to investigate a variance

            d.   All of the above

            e.   None of the above

10. The direct materials usage variance is part of the performance evaluation of the

            a.   production manager

            b.   sales manager

            c.   purchasing agent

            d.   controller’s office

            e.   None of the above

11. Volume variances are generally the responsibility of the

            a.   purchasing agent

            b.   production manager

            c.   sales manager

            d.   controller’s office

            e.   None of the above

12. When using variable costing,

            a.   all fixed costs are deducted on the variable costing income statement

            b.   the total cost of goods sold is deducted on the variable costing income statement

            c.   the cost allocated to ending inventory consists of both fixed and variable costs

            d.   the total contribution margin on the variable costing income statement is based on units produced

            e.   None of the above

13. According to GAAP, if the ending balance in the overhead control account is considered immaterial,

            a.   it is closed to direct materials, work-in-process, and finished goods

            b.   it is closed to work-in-process, finished goods, and cost of goods sold

            c.   it is closed to finished goods and cost of goods sold

            d.   the total is closed to cost of goods sold

            e.   None of the above

14. According to the IMA’s Statement of Ethical Professional Practice, an accountant must “Disclose all relevant information that could reasonably be expected to influence an intended user's understanding of the reports, analyses, or recommendations.” This falls under the category of

            a.   Competence

            b.   Confidentiality

            c.   Integrity

            d.   Credibility

            e.   None of the above

15. The margin of safety is

            a.   the amount of revenue earned (or expected to be earned) above the break-even point

            b.   the amount of revenue earned (or expected to be earned) above total fixed costs

            c.   the amount of revenue earned (or expected to be earned) above total costs

            d.   the amount of revenue earned (or expected to be earned) above total variable costs

            e.   None of the above

Agnew Manufacturing produces and sells three models of a single product, Standard, Superior, and DeLuxe, in a local market and in a regional market. At the end of the first quarter of the current year, the following income statement (in thousands of dollars) has been prepared:

Management has expressed special concern with the regional market because of the extremely poor return on sales. This market was entered a year ago because of excess capacity. It was originally believed that the return on sales would improve with time, but after a year, no noticeable improvement can be seen from the results as reported in the preceding quarterly statement.

In attempting to decide whether to eliminate the regional market, the following information has been gathered:

All administrative costs and fixed manufacturing costs would not be affected by eliminating the regional market. Marketing costs that are not listed above as variable are fixed for the period and separable by market. Fixed marketing costs assigned to the regional market would be saved if that market were eliminated.

Required:

a. Assuming there are no alternative uses for Agnew’s present capacity, would you recommend dropping the regional market?

b. Prepare the quarterly income statement showing contribution margins by products. Do not allocate fixed costs to products. (Enter your answers in thousands.)

c. It is believed that a new model can be ready for sale next year if Agnew decides to go ahead with continued research. The new product would replace DeLuxe and can be produced by simply converting equipment presently used in producing the DeLuxe model. This conversion will increase fixed costs by $60,000 per quarter. What must be the minimum contribution margin per quarter for the new model to make the changeover financially feasible? (Enter your answers in thousands.)

The adjusted trial balance columns of the worksheet for Martinez Company are as follows.

(a)

Journalize the closing entries at April 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Review the attached benchmarking report. First calculate the Upper Quartile, 75% to 100%, Mid Quartile, 25% to 75%, and the Low Quartile, 0% to 25% for each line item. Then rank the 10 hospitals, from 1 to 10, based on each of the following, each line may have the hospitals ranked differently:

1. How many beds the hospitals have
2. Productivity-Unit of Service, UOS/Hours worked
3. Total Costs-Dollars/UOS
4. Salary Costs-Dollars/UOS
5. Supply Costs-Dollars/UOS
6. Revenue-Dollars/UOS

Pastina Company sells various types of pasta to grocery chains as private label brands. The company's reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below.

Information necessary to prepare the year-end adjusting entries appears below.

1. Depreciation on the office equipment for the year is $11,400.
2. Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $1,450.
3. On October 1, 2021, Pastina borrowed $52,800 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.
4. On March 1, 2021, the company lent a supplier $22,800 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022.
5. On April 1, 2021, the company paid an insurance company $8,800 for a one-year fire insurance policy. The entire $8,800 was debited to prepaid insurance.
6. $890 of supplies remained on hand at December 31, 2021.
7. A customer paid Pastina $3,400 in December for 1,450 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
8. On December 1, 2021, $2,400 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,200 per month. The entire amount was debited to prepaid rent.

. Prepare a post-closing trial balance

and prepare adjusted trial balance

TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual results. A recent variance report appears below:

After several months of using such variance reports, the owner has become frustrated. For example, she is quite confident that instructor wages were very tightly controlled in July, but the report shows an unfavorable variance.

The planning budget was developed using the following formulas, where q is the number of lessons sold:

Required:

2. Complete the flexible budget performance report for the school for July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Classify the costs below as: Product-Direct, Product-Indirect, or Period AND Variable cost, Fixed cost, or Mixed cost.   Below are budgeted income statements at different team levels, use the information to answer the questions below:

Using the above data and the high/low method, answer the following questions:

Determine the variable cost per unit

Determine the fixed cost

What is the cost equation?

Estimate the total cost for 20 teams

In addition to the above data, assume the company has the following sales. Answer the following questions

What is the revenue generated per team?

What is the per unit contribution margin?

What is the contribution margin ratio?

Compute break-even point in dollars and in units (round to the next whole number) for each of the three scenarios. Then, choose a scenario for your team.

If CAVALRY wants to have net income of $100.00 from this event, how many teams are needed?

If CAVALRY estimates 20 teams, determine the Margin of Safety in sales dollars.

Perform a sensitivity analysis to determine how an increase in team revenue of $500 would impact Net Income?

If the team revenue changed to $120 per team, and all other expenses remained the same as calculated in your cost equation, what is the new break-even in units?

If the variable costs changed to $50 per team (the fix costs remained the same as in your cost equation and team revenue remained at $100 per team), what is the new break-even in units?

If the fixed costs changed to $980, (variable expenses remained the same as in your cost equation, and sales price remained at $100 per team), what is the new break-even in units?

Since 1970, Super Rise, Inc., has provided maintenance services for elevators. On January 1, 2018, Super Rise obtains a contract to maintain an elevator in a 90-story building in New York City for 10 months and receives a fixed payment of $97,000. The contract specifies that Super Rise will receive an additional $48,500 at the end of the 10 months if there is no unexpected delay, stoppage, or accident during the year. Super Rise estimates variable consideration to be the most likely amount it will receive.

Required:
1. Assume that, because the building sees a constant flux of people throughout the day, Super Rise is allowed to access the elevators and related mechanical equipment only between 3am and 5am on any given day, which is insufficient to perform some of the more time-consuming repair work. As a result, Super Rise believes that unexpected delays are likely and that it will not earn the bonus. Prepare the journal entry Super Rise would record on January 1.
2. Assume instead that Super Rise knows at the inception of the contract that it will be given unlimited access to the elevators and related equipment each day, with the right to schedule repair sessions any time. When given these terms and conditions, Super Rise has never had any delays or accidents in the past. Prepare the journal entry Super Rise would record on January 31 to record one month of revenue.
3. Assume the same facts as requirement 1. In addition assume that, on May 31, Super Rise determines that it does not need to spend more than two hours on any given day to operate the elevator safely because the client’s elevator is relatively new. Therefore, Super Rise believes that unexpected delays are very unlikely. Prepare the journal entry Super Rise would record on May 31 to recognize May revenue and any necessary revision in its estimated bonus receivable.

Record any necessary entry on January 1.

Record any necessary entry on January 31 to record one month of revenue.

Record any necessary entry on May 31 to recognize May revenue and any necessary revision in its estimated bonus receivable.