Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.50 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below:

The total cost of operating the company for the year is $353,000, which includes the following costs:

Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption Across Activities

Job support consists of receiving calls from potential customers at the home office, scheduling
jobs, billing, resolving issues, and so on.

Required:

1. Prepare the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

3. The company recently completed a 6 hundred square foot carpet-cleaning job at the Flying N ranch—a 51.00-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your intermediate and final answers to 2 decimal places.)

4. The revenue from the Flying N ranch was $135.00 (6 hundred square feet at $22.50 per hundred square feet). Prepare a report showing the margin from this job. (Round your intermediate calculations and final answers to 2 decimal places.)

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $23.25 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below:

The total cost of operating the company for the year is $349,000 which includes the following costs:

Resource consumption is distributed across the activities as follows:

Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Required:

1. Prepare the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools

3. The company recently completed a 800 square foot carpet-cleaning job at the Flying N Ranch—a 59-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system.

4. The revenue from the Flying N Ranch was $186.00 (800 square feet @ $23.25 per hundred square feet). Calculate the customer margin earned on this job.

13. Refer to the data set in the accompanying table. Assume that the paired sample data is a simple random sample and the differences have a distribution that is approximately normal. Use a significance level of 0.10 to test for a difference between the number of words spoken in a day by each member of 30 different couples.

Couple Male      Female

1              12320    11172

2              2410       1134

3              16390    9702

4              9550       9198

5              11360    10248

6              9450       3024

7              13310    19698

8              6670       6090

9              15090    9114

10           17650    11256

11           12730    14826

12           13050    12306

13           6980       2646

14           5860       3906

15           9410       3360

16           6960       7602

17           3270       630

18           6830       3570

19           7570       5922

20           12430    8568

21           6050       2730

22           8820       11886

23           13610    8946

24           11420    12810

25           6160       5880

26           7720       3864

27           2800       5922

28           14330    6426

29           6440       8400

30           8720       9198

In this example mu Subscript d is the mean value of the differences d for the population of all pairs of​ data, where each individual difference d is defined as the number of words spoken by a male minus the number of words spoken by a female in a couple. What are the null and alternative hypotheses for the hypothesis​ test?

Identify the test statistic.

T=

(Round to two decimal places as​ needed.)

Identify the​ P-value.

​P-value=____

​(Round to three decimal places as​ needed.)

Since the​ P-value is (less/greater) than the significance​ level, (fail to reject/reject) the null hypothesis. There (is/is not) sufficient evidence to support the claim that there is a difference between the number of words spoken in a day by each member of 30 different couples.

ABC Ltd is considering an investment of $210,000 in a project that will generate revenues of $400,000 at the end of the first year, $300,000 at the end of the second year and $600,000 at the end of the third year. The expenses of the project are as follows: $250,000 in the first year, $120,000 in the second year and $300,000 in the third year. Additional to the revenue and expenses Working Capital of $150,000 is needed throughout the project. The tax rate is 30%, and tax laws allow the investment to be depreciated over three years, even though the investment has a useful life of three years. Should ABC engage the investment with a required rate of return of 15% (assume all cash flows occur at the end of the year)? – Use both NPV and IRR calculations.

Consider an x distribution with standard deviation σ = 48.

(a) If specifications for a research project require the standard error of the corresponding x distribution to be 3, how large does the sample size need to be?
n =  

(b) If specifications for a research project require the standard error of the corresponding x distribution to be 1, how large does the sample size need to be?
n =

Suppose x has a distribution with μ = 27 and σ = 24.

(a) If a random sample of size n = 42 is drawn, find μ_x, σ_x and P(27 ≤ x ≤ 29). (Round σ_x to two decimal places and the probability to four decimal places.)

(b) If a random sample of size n = 62 is drawn, find μ_x, σ_x and P(27 ≤ x ≤ 29). (Round σ_x to two decimal places and the probability to four decimal places.)

(c) Why should you expect the probability of part (b) to be higher than that of part (a)? (Hint: Consider the standard deviations in parts (a) and (b).)
The standard deviation of part (b) is  ---Select--- the same as larger than smaller than part (a) because of the  ---Select--- larger same smaller sample size. Therefore, the distribution about μ_x is  ---Select--- wider the same narrower .

Nailed It! Construction (Nailed It! or the “Company”), an SEC registrant, is a construction company that manufactures commercial and residential buildings. On March 1, 2018, the Company entered into an agreement with a customer, Village Apartments, to construct a residential apartment building for a fixed price of $1.5 million. The Company estimates that it will incur costs of $1 million to complete construction of the apartment building. The apartment building will only transfer to Village Apartments once the construction of the entire building is complete. In addition, Village Apartments has various design requirements that would require Nailed It! to incur significant costs to rework the building prior to selling it to a customer other than Village Apartments. To construct the apartment building, Nailed It! acquires standard materials that it regularly uses in construction contracts for both residential and commercial buildings. These materials are used to manufacture generic component parts for inclusion in Village Apartments’ residential buildings. These standard materials remain interchangeable with other items until they are deployed in a Village Apartments building. The Company has made the following purchases and incurred the following costs throughout the construction progress: • As of June 30, 2018, in total, Nailed It! has purchased $75,000 of component parts. As of June 30, 2018, $25,000 of component parts remain in inventory and $50,000 have been integrated into the project. Further, Nailed It! has incurred $12,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended June 30, 2018. • During the three months ended September 30, 2018, Nailed It! purchased an additional $500,000 of component parts ($575,000 in total). Of the $575,000 of component parts, $325,000 remain in inventory and $200,000 have been integrated into the project during the three months ended September 30, 2018. During the three months ended September 30, 2018, Nailed It! incurred an additional $50,000 of direct costs to integrate the component parts into the Village Apartments construction project. • As of September 30, 2018, Nailed It! determined that the project was over budget and revised its cost estimate from $1 million to $1.25 million. • As of December 31 2018, the construction project was completed. During the three months ended December 31, 2018, Nailed It! purchased an additional $425,000 of generic component parts ($1 million in total). Of the $1 million component parts, $0 remain in inventory and $750,000 were integrated into the project during the three months ended December 31, 2018. Nailed It! has incurred $187,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended December 31, 2018If Village Apartments cancels the contract, Nailed It! will be entitled to reimbursement for costs incurred for work completed to date plus a margin of 20 percent, which is Copyright 2018 Deloitte Development LLC All Rights Reserved. Case 7: Nailed It! Construction Page 2 considered to be a reasonable margin. Nailed It! will not be reimbursed for any materials that have been purchased for use in the contract but have not yet been used and are still controlled by Nailed It!. Required: 1. Does the performance obligation meet any of the criteria or recognition of revenue over time? 2. How should the entity recognize revenue for the satisfaction of its performanceobligation? What amount of revenue should be recognized for the following periods: 2a. The three months ended June 30, 2018? 2b. The three months ended September 30, 2018? 2c. The three months ended December 31, 2018?

ABC Construction (ABC or the “Company”), an SEC registrant, is a construction company that manufactures commercial and residential buildings. On March 1, 2018, the Company entered into an agreement with a customer, Village Apartments, to construct a residential apartment building for a fixed price of $1.5 million. The Company estimates that it will incur costs of $1 million to complete construction of the apartment building. The apartment building will only transfer to Village Apartments once the construction of the entire building is complete. In addition, Village Apartments has various design requirements that would require ABC to incur significant costs to rework the building prior to selling it to a customer other than Village Apartments.  

To construct the apartment building, ABC acquires standard materials that it regularly uses in construction contracts for both residential and commercial buildings. These materials are used to manufacture generic component parts for inclusion in Village Apartments’ residential buildings. These standard materials remain interchangeable with other items until they are deployed in a Village Apartments building. The Company has made the following purchases and incurred the following costs throughout the construction progress:

• As of June 30, 2018, in total, ABC has purchased $75,000 of component parts. As of June 30, 2018, $25,000 of component parts remain in inventory and $50,000 have been integrated into the project. Further, ABC has incurred $12,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended June 30, 2018.

• During the three months ended September 30, 2018, ABC purchased an additional $500,000 of component parts ($575,000 in total). Of the $575,000 of component parts, $325,000 remain in inventory and $200,000 have been integrated into the project during the three months ended September 30, 2018. During the three months ended September 30, 2018, ABC incurred an additional $50,000 of direct costs to integrate the component parts into the Village Apartments construction project.

• As of September 30, 2018, ABC determined that the project was over budget and revised its cost estimate from $1 million to $1.25 million.

• As of December 3, 2018, the construction project was completed. During the three months ended December 31, 2018, ABC purchased an additional $425,000 of generic component parts ($1 million in total). Of the $1 million component parts, $0 remain in inventory and $750,000 were integrated into the project during the three months ended December 31, 2018. ABC has incurred $187,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended December 31, 2018.

If Village Apartments cancels the contract, ABC will be entitled to reimbursement for costs incurred for work completed to date plus a margin of 20 percent, which is considered to be a reasonable margin. ABC will not be reimbursed for any materials that have been purchased for use in the contract but have not yet been used and are still controlled by ABC.

Required:

1. Does the performance obligation meet any of the criteria or recognition of revenue over time?

2. How should the entity recognize revenue for the satisfaction of its performance obligation? What amount of revenue should be recognized for the following periods:  

2a. The three months ended June 30, 2018?

2b. The three months ended September 30, 2018?  

2c. The three months ended December 31, 2018?

ABC Construction (ABC or the “Company”), an SEC registrant, is a construction company that manufactures commercial and residential buildings. On March 1, 2018, the Company entered into an agreement with a customer, Village Apartments, to construct a residential apartment building for a fixed price of $1.5 million. The Company estimates that it will incur costs of $1 million to complete construction of the apartment building. The apartment building will only transfer to Village Apartments once the construction of the entire building is complete. In addition, Village Apartments has various design requirements that would require ABC to incur significant costs to rework the building prior to selling it to a customer other than Village Apartments.

To construct the apartment building, ABC acquires standard materials that it regularly uses in construction contracts for both residential and commercial buildings. These materials are used to manufacture generic component parts for inclusion in Village Apartments’ residential buildings. These standard materials remain interchangeable with other items until they are deployed in a Village Apartments building. The Company has made the following purchases and incurred the following costs throughout the construction progress:

• As of June 30, 2018, in total, ABC has purchased $75,000 of component parts. As of June 30, 2018, $25,000 of component parts remain in inventory and $50,000 have been integrated into the project. Further, ABC has incurred $12,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended June 30, 2018.

• During the three months ended September 30, 2018, ABC purchased an additional $500,000 of component parts ($575,000 in total). Of the $575,000 of component parts, $325,000 remain in inventory and $200,000 have been integrated into the project during the three months ended September 30, 2018. During the three months ended September 30, 2018, ABC incurred an additional $50,000 of direct costs to integrate the component parts into the Village Apartments construction project.

• As of September 30, 2018, ABC determined that the project was over budget and revised its cost estimate from $1 million to $1.25 million.

• As of December 3, 2018, the construction project was completed. During the three months ended December 31, 2018, ABC purchased an additional $425,000 of generic component parts ($1 million in total). Of the $1 million component parts, $0 remain in inventory and $750,000 were integrated into the project during the three months ended December 31, 2018. ABC has incurred $187,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended December 31, 2018.

If Village Apartments cancels the contract, ABC will be entitled to reimbursement for costs incurred for work completed to date plus a margin of 20 percent, which is considered to be a reasonable margin. ABC will not be reimbursed for any materials that have been purchased for use in the contract but have not yet been used and are still controlled by ABC.

Required:

1. Does the performance obligation meet any of the criteria or recognition of revenue over time?

2. How should the entity recognize revenue for the satisfaction of its performance obligation? What amount of revenue should be recognized for the following periods:

2a. The three months ended June 30, 2018?

2b. The three months ended September 30, 2018?

2c. The three months ended December 31, 2018?

Nailed It! Construction (Nailed It! or the “Company”), an SEC registrant, is a construction company that manufactures commercial and residential buildings. On March 1, 20X1, the Company entered into an agreement with a customer, Village Apartments, to construct a residential apartment building for a fixed price of $1.5 million. The Company estimates that it will incur costs of $1 million to complete construction of the apartment building. The apartment building will only transfer to Village Apartments once the construction of the entire building is complete. In addition, Village Apartments has various design requirements that would require Nailed It! to incur significant costs to rework the building prior to selling it to a customer other than Village Apartments.

To construct the apartment building, Nailed It! acquires standard materials that it regularly uses in construction contracts for both residential and commercial buildings. These materials are used to manufacture generic component parts for inclusion in Village Apartments’ residential buildings. These standard materials remain interchangeable with other items until they are deployed in a Village Apartments building. The Company has made the following purchases and incurred the following costs throughout the construction progress:

• As of June 30, 20X1, in total, Nailed It! has purchased $75,000 of component parts. As of June 30, 20X1, $25,000 of component parts remain in inventory and $50,000 have been integrated into the project. Further, Nailed It! has incurred $12,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended June 30, 20X1.
• During the three months ended September 30, 20X1, Nailed It! purchased an additional $500,000 of component parts ($575,000 in total). Of the $575,000 of component parts, $325,000 remain in inventory and $200,000 have been integrated into the project during the three months ended September 30, 20X1. During the three months ended September 30, 20X1, Nailed It! incurred an additional $50,000 of direct costs to integrate the component parts into the Village Apartments construction project.
• As of September 30, 20X1, Nailed It! determined that the project was over budget and revised its cost estimate from $1 million to $1.25 million.
• As of December 31 20X1, the construction project was completed. During the three months ended December 31, 20X1, Nailed It! purchased an additional $425,000 of generic component parts ($1 million in total). Of the $1 million component parts, $0 remain in inventory and $750,000 were integrated into the project during the three months ended December 31, 20X1. Nailed It! has incurred $187,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended December 31, 20X1.

If Village Apartments cancels the contract, Nailed It! will be entitled to reimbursement for costs incurred for work completed to date plus a margin of 20 percent, which is Case 7: Nailed It! Construction Page 2 Copyright 2018 Deloitte Development LLC All Rights Reserved. considered to be a reasonable margin. Nailed It! will not be reimbursed for any materials that have been purchased for use in the contract but have not yet been used and are still controlled by Nailed It!.

Required:

1. Does the performance obligation meet any of the criteria for recognition of revenue over time?
2. How should the entity recognize revenue for the satisfaction of its performance obligation? What amount of revenue should be recognized for the following periods:

• The three months ended June 30, 20X1?
• The three months ended September 30, 20X1?
• The three months ended December 31, 20X1?

Nailed It! Construction (Nailed It! or the “Company”), an SEC registrant, is a construction company that manufactures commercial and residential buildings. On March 1, 20X1, the Company entered into an agreement with a customer, Village Apartments, to construct a residential apartment building for a fixed price of $1.5 million. The Company estimates that it will incur costs of $1 million to complete construction of the apartment building. The apartment building will only transfer to Village Apartments once the construction of the entire building is complete. In addition, Village Apartments has various design requirements that would require Nailed It! to incur significant costs to rework the building prior to selling it to a customer other than Village Apartments.

To construct the apartment building, Nailed It! acquires standard materials that it regularly uses in construction contracts for both residential and commercial buildings. These materials are used to manufacture generic component parts for inclusion in Village Apartments’ residential buildings. These standard materials remain interchangeable with other items until they are deployed in a Village Apartments building. The Company has made the following purchases and incurred the following costs throughout the construction progress:

• As of June 30, 20X1, in total, Nailed It! has purchased $75,000 of component parts. As of June 30, 20X1, $25,000 of component parts remain in inventory and $50,000 have been integrated into the project. Further, Nailed It! has incurred $12,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended June 30, 20X1.

• During the three months ended September 30, 20X1, Nailed It! purchased an additional $500,000 of component parts ($575,000 in total). Of the $575,000 of component parts, $325,000 remain in inventory and $200,000 have been integrated into the project during the three months ended September 30, 20X1. During the three months ended September 30, 20X1, Nailed It! incurred an additional $50,000 of direct costs to integrate the component parts into the Village Apartments construction project.

• As of September 30, 20X1, Nailed It! determined that the project was over budget and revised its cost estimate from $1 million to $1.25 million.

• As of December 31 20X1, the construction project was completed. During the three months ended December 31, 20X1, Nailed It! purchased an additional $425,000 of generic component parts ($1 million in total). Of the $1 million component parts, $0 remain in inventory and $750,000 were integrated into the project during the three months ended December 31, 20X1. Nailed It! has incurred $187,500 of direct costs to integrate the component parts into the Village Apartments construction project during the three months ended December 31, 20X1.

If Village Apartments cancels the contract, Nailed It! will be entitled to reimbursement for costs incurred for work completed to date plus a margin of 20 percent, which is considered to be a reasonable margin. Nailed It! will not be reimbursed for any materials that have been purchased for use in the contract but have not yet been used and are still controlled by Nailed It!.

Required: (using the appropriate sections of ASC 606)

1. Does the performance obligation meet any of the criteria or recognition of revenue over time?

2. How should the entity recognize revenue for the satisfaction of its performance obligation? What amount of revenue should be recognized for the following periods:

2a. The three months ended June 30, 20X1?

2b. The three months ended September 30, 20X1?

2c. The three months ended December 31, 20X1?