9-21 Variable and absorption costing, explaining operating-income differences. Nascar Motors assembles and sells motor vehicles and uses standard costing. Actual data relating to April and May 2017 are as follows:

   April May

Unit Data:

Beginning Inventory 0    150

Production    500    400

sales 350    520

Variable Costs

Manufacturing cost per unit produced    $10,000 $10,000

Operating cost per unit sold 3000    3000

Fixed Costs

Manufacturing Costs    $2,000,000    $2,000,000

Operating Costs    600,000    600,000

9.5-31 Full Alternative Text

The selling price per vehicle is $24,000. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 500 units. There are no price, efficiency, or spending variances. Any production-volume variance is written off to cost of goods sold in the month in which it occurs.

Prepare April and May 2017 income statements for Nascar Motors under (a) variable costing and (b) absorption costing.

Prepare a numerical reconciliation and explanation of the difference between operating income for each month under variable costing and absorption costing.

Question 4

Which of the following will cause the AD to decrease?

1. A rise in consumer confidence
2. A rise in business confidence
3. A decline in government spending
4. An increase in exports

Question 5

If we assume that the supply of oil gets interrupted and as a result the price of oil doubles, what would that do in the short-run?

1. The short-run aggregate supply function will decrease, causing the economy to experience a reduction in the level of output and a rise in the price level.
2. The aggregate demand will decrease, causing the economy to experience a rise in the price level and a decline in the level of output.
3. The long-run aggregate supply will increase, causing the price level to decrease and the output level to increase.
4. The aggregate demand will increase, causing the price level to increase and the output level to decrease.

Question 6

An appreciation of the US dollar would make US exports more expensive overseas and foreign goods cheaper in the US, resulting in a decline in the US aggregate demand.

1. True
2. False

Question 7

Long-run aggregate supply function assumes that all prices are fully flexible.

1. True
2. False

Question 8

Short-run aggregate supply assumes that all prices are fully flexible.

1. True
2. False

Refer to the following article: Trentmann, Nina, "Danish Insulin Maker Novo Nordisk Cuts Jobs, Shifts R&D Spending; CFO says R&D savings will be reinvested in artificial intelligence, cloud services and automation technologies," Wall Street Journal, 01 Nov 2018 (Online). Drawing from what you have learned in this course as well as any other sources, provide a well labeled and clearly articulated answer -- with explanation and proper references -- to the following:

• • Using the accounting terminology used to date in this course, what kind (or classification) of costs are research and development costs, and where do they usually fit in a profit and loss (or income) statement?
  • Are research and development costs ever included in costs of goods manufactured? If not, why not? If so, to what extent and under what circumstances?
  • Why would it make sense to avoid the complete automation of cash management and accounts receivable tasks (i.e. to continue to use humans for some tasks(? Explain.
• Where appropriate, properly cite any readings, specific pages from any secondary source, or other sources that contributed to or that support your explanation.

The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017:

To prepare a master budget for April, May, and June of 2017, management gathers the following information:
Sales for March total 20,100 units. Forecasted sales in units are as follows: April, 20,100; May, 18,900; June, 19,700; and July, 20,100. Sales of 246,000 units are forecasted for the entire year. The product’s selling price is $27.50 per unit and its total product cost is $23.30 per unit.

Company policy calls for a given month’s ending raw materials inventory to equal 50% of the next month’s materials requirements. The March 31 raw materials inventory is 4,815 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,600 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.

Company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s expected unit sales. The March 31 finished goods inventory is 14,070 units, which complies with the policy.

Each finished unit requires 0.50 hours of direct labor at a rate of $21 per hour.

Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.00 per direct labor hour. Depreciation of $25,440 per month is treated as fixed factory overhead.

Sales representatives’ commissions are 6% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,600.

Monthly general and administrative expenses include $18,000 administrative salaries and 0.5% monthly interest on the long-term note payable.

The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).

All raw materials purchases are on credit, and no payables arise from any other transactions. One month’s raw materials purchases are fully paid in the next month.

The minimum ending cash balance for all months is $46,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.

Dividends of $16,000 are to be declared and paid in May.

No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 40% in the quarter and paid in the third calendar quarter.

Equipment purchases of $136,000 are budgeted for the last day of June.

Required:
Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. (Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.):

1. Sales budget.
2. Production budget.
3. Raw materials budget.
4. Direct labor budget.
5. Factory overhead budget.
6. Selling expense budget.
7. General and administrative expense budget.
8. Cash budget.
9. Budgeted income statement for the entire second quarter (not for each month separately).
10. Budgeted balance sheet.

PERT/CPM Model 5. During the Corona-Quarantine, Emily decides to teach her kids how to bake cookies. She wants to take the opportunity to practice her own PERT/CPM project management skills as well. So, she lists out the activities that are required to bake two batches of cookies including the predecessors (if any) for each activity and the optimistic, most probable, and pessimistic time (in minutes) it takes to complete each activity; especially since she knows that everything can take longer when working with children. Some of the timings are fixed (e.g. baking or cooling times) so you will see that she has the same values for the optimistic, most probable, and pessimistic times.

a. Create the network diagram and create the activity schedule.

b. Identify which activities have slack time.

c. What is the probability that Emily is able to successfully finish and put away both batches of cookies within 54 minutes?

On February 2nd, 2017, Apple (AAPL) Corporation issued a senior, unsecured bond with a maturity in 2047. The coupon rate on the new bond is 4.25% fixed paying semi-annual interest on February 9th and August 9th. At the time of issue the bond received a AA+ rating from Standard & Poor's and Aa1 rating from Moody's. The amount raised through this bond issue was $1 billion. In the first quarter of 2017, Apple saw a net income growth rate of 4.88% reflecting a new profit margin of 20.85%. In May 2017, Apple announced an increase in share buy backs from $175 billion to $210 billion and 10.5% dividend increase from $0.57 to $0.63. The bond does not have any protective covenants. The call feature is structured in such a way making a call not very likely at this time.

a-1: If today, a bondholder's required rate of return for Apple's bond is 5.15%, find the intrinsic value for the bond. Show your calculator keystroke variables used to solve for the intrinsic value.

a-2: Given the information in part a, would this bond sell at a discount or a premium?  Explain your answer.

a-3: If Apple's bond is today quoted at 89, should the investor purchase the bond today?  Explain your answer.

b-1: If today, a different bondholder's required rate of return for Apple's bond is 3.15%, find the intrinsic value for the bond. Show your calculator keystroke variables used to solve for the intrinsic value.

b-2: Given the information in part b, would this bond sell at a discount or a premium?  Explain your answer.  

b-3: If Apple's bond is today quoted at 118.4, should the investor purchase the bond today?  Explain your answer.

c. Which required rate of return (5.15% or 3.15%) is most likely to be a correct required rate of return in today's bond market?  Justify your answer.

For a B2C product, the smartphone is one we all have some familiarity with. When they were in their infancy around 2006-2007 the concept was great but there was a debate on the different platforms. Windows and Blackberry were early to the market. Blackberry’s success with an application based operating system quite possibly gave Google and Apple the idea for their platforms. As far as forecasting goes in this market it depends on what stage the product is in. During development they would have used the Delphi tactic, of sorts, with different groups working to solve different conflicting issues (Merchant, 2017). To build up the hype of the first IPhone launch they showed a demo of what it was (Vogelstein, 2017). The Apple in and of itself is a leverage in the forecasting. Once initially launched with projections they were easily able to see the true demand. Over the course of the many versions from 2007 to now, they have had practice and hard data that helps them in the analytical factors to forecasting.

In B2B transactions the forecasts are a little more accurate as both businesses want to anticipate need and inventory. So unless one of the companies is launching something like the IPhone analytical data and time-series analysis are used. Expert opinions can be used but they should be only one variable input into the decision equation. For instance, Procter & Gamble could forecast that their sales will be such and such for the quarter. The forecast would be pretty accurate given a small margin of deviation. The company has a history of selling Tide that is older than most of us alive today. So when they have a forecast a supplier in the chain could rely on their forecast and plan accordingly. As far as what forecast method is the best in the P&G example, I would have to say it would be purely quantitative data that would predict future sales and needs.

Please respond in 100-150 words

which of the following statement is false?

a. Earlier homo erectus populations had a small cranial capacity than later population.

b. homo erectus did not develop tools

c. homo erectus appears to have been less encephalized than homo sapiens

d. homo erectus was most likely the first hominid to live outside of africa

e. thick cranial and postcranial bones characterize most homo erectus specimens.

21. Neandertal brain size:

a. was smaller, on average , than that of modern humans

b. was larger, on average , than that of modern humans

c.average about 2500 cm3

d. was smaller, on average , than that of homo erectus

e. average about 975 cm3

Exercise 6-1 Computing unit and inventory costs under absorption costing LO P1

Trio Company reports the following information for the current year, which is its first year of operations.

Exercise 6-4 Variable costing income statement LO P2

Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,075 kayaks and sold 825. at a price of $1,075 each. At this first year-end, the company reported the following income statement information using absorption costing.
  

Additional Information

Product cost per kayak totals $425, which consists of $325 in variable production cost and $100 in fixed production cost—the latter amount is based on $107,500 of fixed production costs allocated to the 1,075 kayaks produced.

The $220,000 in selling and administrative expense consists of $75,000 that is variable and $145,000 that is fixed.

Required

1. Prepare an income statement for the current year under variable costing.

36) Gabby Company operates under a perpetual inventory system. It began operations on March 1, 20X9, and had the following transactions affecting inventory during March, 20X9.

March 1 Purchase 500 units @ $5.00 $2,500

March 5 Sale 200 units

March 10 Purchase 300 units @ $5.20 $1,560

March 15 Sale 320 units

March 20 Purchase 400 units @ $5.40 $2,160

March 25 Sale 230 units

Determine the cost of goods sold for the month of March, 20X9 and the ending inventory balance at March 31, 20X9. Assume the company uses the first-in-first-out (FIFO) cost flow assumption.

37) Gabby Company operates under a perpetual inventory system. It began operations on March 1, 20X9, and had the following transactions affecting inventory during March, 20X9.

March 1 Purchase 500 units @ $5.00$2,500

March 5 Sale 200 units

March 10 Purchase 300 units @ $5.20 $1,560

March 15 Sale 320 units

March 20 Purchase 400 units @ $5.40 $2,160

March 25 Sale 230 units

Assume the company is trying to decide between the periodic method and the perpetual method. Gabby has decided to use the last-in-first-out cost flow assumption. Determine the cost of goods sold for the month of March, 20X9 and the ending inventory balance at March 31, 20X9, using both the perpetual method and the periodic method.