Leighton Beridon owns "Jeemp Farms", located near Weimar, TX. The farm produces pecan trees and sod. He has so many orders from the Houston metropolitan area that he is able to sell all his inventory each year, but he is not netting as much as he has in past years. His daughter, Liesl Beridon, came home from college over Thanksgiving and mentioned ABC costing, which she learned about in her cost accounting class. Mr. Beridon does not really know what ABC costing is and is skeptical as to whether it would be right for his business. He has hired your company to educate him about ABC and whether or not he should use an ABC system. Over the next few weeks, you will work towards helping Mr. Beridon decide what is the best route for his company to take. Shortly after you get started, Mr. Beridon sends you an email stating that he feels he needs to discontinue the sod portion of his business and focus on his tree sector, as he can charge more per tree than he can charge for a foot of sod. He sends you an email stating, "I can charge so much more for a tree than a foot of grass. Therefore, I am planning on discontinuing the sod portion of the business immediately as I make so much more on the trees! I am going to plant all my sod acres with trees". Write a 700- to 1,050-word paper plan for your boss explaining how you will analyze Jeemp Farms. Include the following: Prepare an argument convincing him to hold off on his decision and see the results of your analysis first. As you have not had time to do any analysis yet, you need to convince Mr. Beridon to wait on whether to discontinue his sod business. Project potential benefits Mr. Beridon could gain from using an ABC system. Explain how ABC creates these benefits. Your team is planning on conducting an analysis of whether ABC would be beneficial to Mr. Beridon. Create a process for conducting this analysis. Include the following:

How could you apply the data in the company's general ledger?

Mexico Inc. has opened numerous restaurants near college campuses. Given below are student population in thousands (X) and annual revenue in millions at Taco Sell (Y) for various campuses.

a) Is this a time series or a causal relation case?

b) Please develop a regression equation for this case (write the equation clearly)

c) How good is the model (that is what can you say about the model given the r2 value)?

d) Now, the company is contemplating opening an outlet at IUP (current student population 10,000). Make a forecast of annual revenue at the IUP outlet of Taco Sell
.

Daniel Jones owns and managers Daniel's Restaurant, a 24-hour restaurant near a local hospital. Daniel employs 9 full-time employees and 16 part-time employees. He pays all of the full-time employees by check, the amounts determined by Daniel's bookkeeper, Gina. Daniel pays all of his part-time employees in currency. He computes their wages and withdraws the cash directly from his cash register.

Gina has repeatedly urged Daniel to pay all of his employees by check. But, as Daniel has told his friend who owns a similar business, "My part-time employees prefer the currency over a check. Also, I don't withhold or pay any taxes or worker's compensation insurance on those cash wages because they go totally unrecorded and unnoticed."

Questions -

1. What are the legal and ethical considerations regarding Daniel's handling of his payroll?

2. What are Gina's ethical responsibilities?

3. What are the implications for Daniel’s employees?

Also, cite a reference that you used to prepare your response.

Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and campers.

The following information is available about the new product:

a. An investment of $1,500,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment needed in the manufacturing process.

The company’s required rate of return is 10% on all investments.

b. A standard cost card has been prepared for the sleeping pad, as shown below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 6 yards $ 3.00 per yard $ 18.00 Direct labor 3.6 hours $ 6.00 per hour 21.60 Manufacturing overhead (20% variable) 3.6 hours $ 10.00 per hour 36.00 Total standard cost per pad $ 75.60

c. The only variable selling and administrative expense will be a sales commission of $6 per pad. The fixed selling and administrative expenses will be $2,749,800 per year.

d. Because the company manufactures many products, no more than 97,200 direct labor-hours per year can be devoted to production of the new sleeping pads. e. Manufacturing overhead costs are allocated to products on the basis of direct labor-hours.

Required: 1. Assume that the company uses the absorption approach to cost-plus pricing. a. Compute the markup percentage that the company needs on the pads to achieve a 10% return on investment (ROI) if it sells all of the pads it can produce. b. What selling price per sleeping pad will the company establish if it uses a markup percentage on absorption cost? (Round intermediate calculations and final answer to 2 decimal places.) c. Assume that the company is able to sell all of the pads that it can produce. Prepare an income statement for the first year of activity. Compute the company’s ROI based on the first year of activity. 2. After marketing the sleeping pads for several years, the company is experiencing a falloff in demand due to an economic recession. A large retail outlet will make a bulk purchase of pads if its label is sewn in and if an acceptable price can be worked out. What is the minimum acceptable price for this special order? (Round your answer to 2 decimal places.)

Assume you are the CFO of a company. Your analyst reports the following information (Use the following information for the remainder of the question):

• Current exchange rate is $1.16/€.

• Forward rate is $1.175/€.

• Expected final sales volume is 35,000. Worst case scenario is volume of 15,000. Best case scenario is volume of 50,000.

• Cost per student is €2000.

• Option premium is 2% of USD strike price.

• Option strike price is $1.165/€.

1. Using the above information

a) What is the total projected costs (for all three scenarios) in dollars at the current exchange rate?

b) What are the total costs (for all three scenarios) if you use a forward contract to hedge?

c) What is the total option premium for each scenario?

2. As the CFO, you decided not to hedge. Assuming expected final sales volume is 35,000, what are your total costs

a) if the exchange rate remains at $1.16/€? Let’s call this the baseline scenario.

b) if the exchange rate will be $1.25/€? How does this compare to the baseline case?

c) if the exchange rate will be $1.11/€? How does this compare to the baseline case?

3. As the CFO, you decided to hedge using forward contracts. Assuming expected final sales volume is 35,000 and forward rate is $1.175/€. What are your total benefit/cost and the percentage benefit/cost from hedging (compared to no hedging)

a) if the exchange rate remains at $1.16/€?

b) if the exchange rate will be $1.25/€?

c) if the exchange rate will be $1.11/€?

4. As the CFO, you decided to hedge using option contracts. What type of option is suitable for this case (call option or put option)? Why?

5. As the CFO, you decided to hedge using option contracts. What are your total benefit/cost and the percentage benefit/cost from hedging (compared to no hedging)

a) if the exchange rate remains at $1.16/€?

b) if the exchange rate will be $1.25/€?

c) if the exchange rate will be $1.11/€?

6. What is the most profitable strategy for expected final sales volume is 35,000 and for the worst-case scenario volume of 15,000 (no hedge, forward contract, or option contract)

a) if the exchange rate remains at $1.16/€?

b) if the exchange rate will be $1.25/€?

c) if the exchange rate will be $1.11/€?

d) What is the overall best strategy? Why?

DataPoint Engineering is considering the purchase of a new piece of equipment for $205,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $210,000 in nondepreciable working capital. Seventy-two thousand dollars of this investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Use Table 12–11, Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

The tax rate is 25 percent. The cost of capital must be computed based on the following:

a. Determine the annual depreciation schedule. (Do not round intermediate calculations. Round your depreciation base and annual depreciation answers to the nearest whole dollar. Round your percentage depreciation answers to 3 decimal places.)

b. Determine the annual cash flow for each year. Be sure to include the recovered working capital in Year 6. (Do not round intermediate calculations and round your answers to 2 decimal places.)

c. Determine the weighted average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

d-1. Determine the net present value. (Use the WACC from part c rounded to 2 decimal places as a percent as the cost of capital (e.g., 12.34%). Do not round any other intermediate calculations. Round your answer to 2 decimal places.)

d-2. Should DataPoint purchase the new equipment?
  

• Yes

• No

On December 1, 2018. John and Patty Driver formed corporation called Susquehanna Equipment Rentals. The new corporation was able to begin operations immediately by purchasing the assets and taking over the location of Rent-it, an equipment rental company that was going out of business. The newly formed company uses the following accounts:On December 1, 2018. John and Patty Driver formed corporation called Susquehanna Equipment Rentals. The new corporation was able to begin operations immediately by purchasing the assets and taking over the location of Rent-it, an equipment rental company that was going out of business. The newly formed company uses the following accounts:

The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December, the corporation entered into the following transactions:

Dec. 1 Issued to John and Patty Driver 20,000 shares of capital stock in exchange for a total of $200,000 cash.

Dec. 1 Purchased for $240,000 all of the equipment formerly owned by Rent- It. Paid $140,000 cash and issued a one-year note payable for $100.000.

Dec. 1 Paid $12,000 to Shapiro Realty as three months' advance rent on the rental yard and office formerly occupied by Rent-it.

Dec. 4 Purchased office supplies on account from Modern Office Co. for $1,000. The payment is due in 30 days (These supplies are expected to last for several months: debit the Office Supplies asset account.)

Dec. 8 Received $8,000 cash as advance payment on equipment rental from McNamer Construction Company. (Credit Unearned Rental Fees)

Dec. 12 Paid salaries for the first two weeks in December in the amount of $5,200.

Dec. 15 Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $18.000, of which $12,000 was received in cash.

Dec. 17 Purchased on account from Earth Movers, Inc., $600 in parts needed to repair a rental tractor. Payment is due in 10 days.

Dec. 23 Collected $2,000 of the accounts receivable recorded on Dec. 15.

Dec. 23 Mission Landscaping rented a backhoe at a price of $250 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.

Dec. 26 Paid biweekly salaries of $5,200.

Dec. 27 Paid the account payable to Earth Movers, Inc. in the amount of $600.

Dec. 28 A dividend was declared for 10 cents per share, payable on January 15, 2019.

Dec. 29 Susquehanna Equipment Rentals was named, along with Mission     Landscaping and Collier Construction, as a co-defendant in a $25.000 lawsuit filed on behalf of Kevin Davenport. Mission Landscaping had      left the rented back-hoe in a fenced construction site owned by Collier Construction. After working hours on December 26, Davenport      had climbed the fence to play on parked construction equipment. While      playing on the backhoe. he fell and broke his arm. The extent of the company's legal and financial responsibility for this accident. if    any, cannot be determined at this time. (Note: This event does not      require a journal entry at this time, but may require disclosure in      notes accompanying the statements.)

Dec. 29 Purchased a 12-mouth public-liabi1ity insurance policy for $9,600. This policy protects the company against liability for injuries and property damage caused by its equipment. However, the policy goes     into effect on January 1, 2019, and affords no coverage for the    injuries sustained by Kevin Davenport on December 26.

Dec. 31 Received a bill from Universal Utilities for the month of    December, $700. Payment is due in 30 days.

Dec. 31 Equipment rental fees earned during the second half of December amounted to $20,000, of which $15,600 was received in cash.

Data for Adjusting Entries

a. The advance payment of rent on December 1 covered a period of three months.

b. The annual interest rate on the note payable to Rent-It is 6 percent.

c. The rental equipment is being depreciated by the straight-line method over a period of eight years.

d. Office supplies on hand at December 31 are estimated at $600.

e. During December, the company earned $3,700 of the rental fees paid in advance by McNamer Construction Co. on December S.

f As of December 31, six days' rent on the backhoe rented to Mission Landscaping on December 23 has been earned.

g. Salaries earned by employees since the last payroll date (December 26) amounted to S1,400 at month-end.

h. It is estimated that the company is subject to a combined federal and state income tax rate of 40 percent of income before income taxes     (total revenue minus all expenses other than income taxes). These    taxes will be payable in 2019.

Instructions

a. Perform the following steps of the accounting cycle for the month of December:

1. Journalize (Prepare the Journal entries) the December transactions. Do not record adjusting entries at this point.

2. Post (Create T-accounts) the December transactions to the appropriate ledger accounts.

3. Prepare the unadjusted trial balance

4. Prepare the necessary adjusting entries for December.

5. Post (Create T-accounts) the December adjusting entries to the appropriate ledger accounts.

6. Prepare the adjusted trial balance.

b. Prepare an income statement and statement of retained earnings for the year ended December 31, and a balance sheet (in report form) as of December 31.

c. Prepare required disclosures to accompany the December 31 financial statements. Your solution should include a separate note addressing each of the following areas: (1) depreciation policy. (2) maturity dates of major liabilities, and (3) potential liability due to    pending litigation.

d. Prepare closing entries and post to ledger accounts.

e. Prepare an after-closing trial balance as of December 31.

f. During December, this company's cash balance has fallen from $200,000 to $65,000. Does it appear headed for insolvency in the near future? Explain your reasoning.

g. Would it be ethical for Patty Driver to maintain, the accounting records for this company, or must they be maintained by someone who is independent of the organization?

Clear windows manufacturers windows for the home building industry. The window frames are produced in the frame division. The frames are then transferred to the glass division, where the glass and hardware are installed. The company's best selling product is a 1×1.2 metre, double-paned window. The standard cost of the window is detailed as follows;

The frame Division can also sell frames directly to custom home builders, who install the glass and hardware. The sales price for a frame is 240. The glass division sells its finished windows for $570.

Required:

1. Assume that there is no spare capacity in the frame division.

a) Use the general rule to calculate the transfer price for window frames.

b) Calculate the transfer price if it is based on standard variable cost with a 10 per cent markup.

2. Assume that there is spare capacity in the frame division.

a) Use the general rule to calculate the transfer price for window frames

b) Expalin why your answers to requirements 1(a) and b(a) differ

c) Suppose that the predetermined fixed Overhead rate in the frame division is 125% of direct Labour. Calculate the transfer price if it is based on standard on absorption cost plus a 10 per cent markup.

d) Assume the transfer price established in requirement 2(c) is used. The glass division has been approached by the management of a commercial construction company with a special order for 1000 windows at $465 each. For the perspective of Clear windows as a whole, should the special order be accepted or rejected? Explain your answer.

Mf  Limited, a bespoke furniture manufacturing entity based in South Africa, is looking to diversify its market by entering the European and American markets.

In order to gain a foothold in the new markets, Mf Limited can either produce the furniture in South Africa and export it, or acquire existing businesses in Europe and America. In order to decide between these two options, the company engaged an international consultancy firm at a cost of R800 000.

Research by the consultancy firm suggested that the export route was less risky, especially considering the company’s plans to try out the international market for an initial five-year period before making a longer-term decision. In order to export the furniture, the company will need to ramp up production in South Africa.

This will need the company to expand its production capacity through building a new factory and acquiring new machinery. Construction of the factory will cost the company R18 million while the new machinery will cost the company R6.5 million to purchase and R500 000 to transport and install. The company expects additional after-tax operating cash flows from the new markets to be R6 million per annum, stated in current prices.

The cash flows are expected to increase in line with inflation. The expected annual inflation rate is 6%. The factory and machinery are expected to have after-tax salvage values of R10 million and R1 million, respectively (stated in current prices). The company’s nominal cost of capital is 12%.

Calculate the net present value (NPV) and internal rate of return (IRR) of the expansion project TO SHOW IF EXPANSION PROJECT IS VALID, TO WHAT TYPES OF EXCHANGE RATE RISK WILL HE BE EXPOSED