Using the AD-AS model show what will happen to the equilibrium level of output Y and the level of prices P if

a. There is an increase in oil prices.

b. The government raises taxes.

c. There is an increase in oil prices and the government increases spending to fight a recession.

Q6. In July of 2016, Zeon, LLC entered into an agreement with Marz, Inc. to:

 make Marz its exclusive Power Tool supplier for Zeon and its member stores for four years;

 "aggressively and regularly" advertise and promote Marz's products;

 dedicate on average at least 12 lineal feet of shelf space to Marz products in its member stores; and

 purchase $25 million in Power Tools during the term of the agreement

Given Zeon’s volume purchase commitment, Marz agreed to pay Zeon $2 million as an "unearned advance allowance." Marz paid this to Zeon by check, and agreed to pay Zeon another $200,000 on the first, second, and third anniversaries of the agreement, provided that Marz was satisfied with Zeon's warehouse distribution arrangement. The contract refers to the total $2.6 million in payments as the "Zeon Allowance" and contains the following clause: Upon termination of this Agreement, Zeon will reimburse Marz on a pro-rated basis for any portion of the Zeon Allowance advanced to Zeon but not earned due to the failure by Zeon to purchase at least $25 million in Power Tools. During Zeon 2016 tax year, Marz paid the first $200,000 to Zeon. Zeon, LLC could not resell enough Power Tools to meet the minimum volume the contract called for, so it terminated the arrangement in October of 2017. Zeon’s termination letter acknowledged its obligation to pay back a pro-rated portion of the Zeon Allowance, and it repaid $1,461,857 to Marz in December. Zeon accounted for the up front cash as a liability at the time it received the cash. As Zeon purchased the goods for which it had the volume obligations, it subtracted pro rata portions of the advance cash discounts from what it paid. This had the effect of reducing the cost of goods sold (and increasing the taxable profits from sales) by the amount of the cash advances attributable to the goods sold.

Discuss Zeon’s inventory accounting practice.

Multiple-Step Income Statement

On March 31, 20Y9, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture store, are as follows:

a. Prepare a multiple-step income statement for the fiscal year ended March 31, 20Y9.

2.  

Beginning inventory, purchases, and sales for an inventory item are as follows:

Assuming a perpetual inventory system and the first-in, first-out method:

a. Determine the cost of the goods sold for the September 30 sale.
$

b. Determine the inventory on September 30.
$

3.

Asset turnover ratio

Financial statement data for years ended December 31, 20Y3 and 20Y2, for Edison Company follow:

The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed.

Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation:

The decision variables are Q_j, the amount of item j to order. The model is:

In the objective function, the first term is the annual cost of goods, the second is the annual ordering cost (D_j/Q_j is the number of orders), and the last term is the annual inventory holding cost (Q_j/2 is the average amount of inventory).

Set up a spreadsheet model for the following data:

W = 5,000

i = 0.2

Solve the problem using Excel Solver. Hint: You will need to start with decision variable values that are greater than 0 for Solver to find a solution.

If required, round your answers to two decimal places.

Optimal Solution:

Q₁ = _______

Q₂ = _______

Q₃ = _______

If required, round your answer to the nearest dollar. Do not round intermediate calculations.

Total cost = $________

The following transactions occurred over the months of September to December at Nicole’s Getaway Spa (NGS). September Sold spa merchandise to Ashley Welch Beauty for $2,150 on account; the cost of these goods to NGS was $1,040. October Sold merchandise to Kelly Fast Nail Gallery for $590 on account; the cost of these goods to NGS was $270. November Sold merchandise to Raea Gooding Wellness for $440 on account; the cost of these goods to NGS was $260. December Received $1,410 from Ashley Welch Beauty for payment on its account. Required: 1. Prepare journal entries for each of the transactions. Assume a perpetual inventory system. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 2. Estimate the Allowance for Doubtful Accounts required at December 31, assuming the only receivables outstanding at December 31 arise from the transactions listed above. NGS uses the aging of accounts receivable method with the following uncollectible rates: one month, 3%; two months, 5%; three months, 20%; more than three months, 30%. 3. The Allowance for Doubtful Accounts balance was $54 (credit) before the end-of-period adjusting entry is made. Prepare the journal entry to account for the Bad Debt Expense. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 4. Assume the end of the previous year showed net accounts receivable of $870, and net sales for the current year are $9,700. Calculate the accounts receivable turnover ratio. (Do not round intermediate calculations. Round your answer to 1 decimal place.) 5. Audrey’s Mineral Spa has an accounts receivable turnover ratio of 12.0 times. How does NGS compare to this competitor?

The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed.

Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation:

The decision variables are Q_j, the amount of item j to order. The model is:

In the objective function, the first term is the annual cost of goods, the second is the annual ordering cost (D_j/Q_j is the number of orders), and the last term is the annual inventory holding cost (Q_j/2 is the average amount of inventory).

Set up a spreadsheet model for the following data:

W = $21,000

i = 0.3

Solve the problem using Excel Solver. Hint: You will need to start with decision variable values that are greater than 0 for Solver to find a solution.

If required, round your answers to two decimal places.

Optimal Solution:

Q₁ =  

Q₂ =  

Q₃ =  

If required, round your answer to the nearest dollar. Do not round intermediate calculations.

Total cost = $

The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed.

Suppose we relax the first assumption and allow for multiple items that are independent except for a restriction on the amount of space available to store the products. The following model describes this situation:

The decision variables are Q_j, the amount of item j to order. The model is:

In the objective function, the first term is the annual cost of goods, the second is the annual ordering cost (D_j/Q_j is the number of orders), and the last term is the annual inventory holding cost (Q_j/2 is the average amount of inventory).

Set up a spreadsheet model for the following data:

W = $21,000

i = 0.3

Solve the problem using Excel Solver. Hint: You will need to start with decision variable values that are greater than 0 for Solver to find a solution.

If required, round your answers to two decimal places.

Optimal Solution:

Q₁ =  

Q₂ =  

Q₃ =  

If required, round your answer to the nearest dollar. Do not round intermediate calculations.

Total cost = $

Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below:

The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional
information is available for your use:

a. The breakdown of the selling and administrative expenses is as follows:

*Allocated on the basis of sales dollars.

*Allocated on the basis of sales dollars.

b. The lease on the building housing the North Store can be broken with no penalty.

c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed.

d. The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $11,000 per quarter. The general manager of the North Store would be retained at her normal salary of $12,000 per quarter. All other employees in the store would be discharged.

e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person’s salary is $4,700 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete.

f. The company’s employment taxes are 15% of salaries.

g. One-third of the insurance in the North Store is on the store’s fixtures.

h. The “General office salaries” and “General office—other” relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person’s compensation is $6,000 per quarter.

Required:

1. Prepare a schedule showing the change in revenues and expenses and the impact on the company’s overall net operating income that would result if the North Store were closed. (Any losses/ reductions should be indicated by a minus sign.)

2. Based on your computations in (1) above, what recommendation would you make to the management of Superior Markets, Inc.?

3. Assume that if the North Store were closed, at least one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. The East Store has enough capacity to handle the increased sales. You may assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in that store.

a. Calculate the net advantage of closing the North Store. (Any losses should be indicated by a minus sign.)

b. What recommendation would you make to the management of Superior Markets, Inc.?

Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Superior Markets, Inc. Income Statement For the Quarter Ended September 30 Total North Store South Store East Store Sales $ 3,000,000 $ 720,000 $ 1,200,000 $ 1,080,000 Cost of goods sold 1,657,200 403,200 660,000 594,000 Gross margin 1,342,800 316,800 540,000 486,000 Selling and administrative expenses: Selling expenses: 817,000 231,400 315,000 270,600 Administrative expenses 383,000 106,000 150,900 126,100 Total expenses 1,200,000 337,400 465,900 396,700 Net operating income (loss) $ 142,800 $ (20,600 ) $ 74,100 $ 89,300 The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional information is available for your use: a. The breakdown of the selling and administrative expenses is as follows: Total North Store South Store East Store Selling expenses: Sales salaries $ 239,000 $ 70,000 $ 89,000 $ 80,000 Direct advertising 187,000 51,000 72,000 64,000 General advertising* 45,000 10,800 18,000 16,200 Store rent 300,000 85,000 120,000 95,000 Depreciation of store fixtures 16,000 4,600 6,000 5,400 Delivery salaries 21,000 7,000 7,000 7,000 Depreciation of delivery equipment 9,000 3,000 3,000 3,000 Total selling expenses $ 817,000 $ 231,400 $ 315,000 $ 270,600 *Allocated on the basis of sales dollars. Total North Store South Store East Store Administrative expenses: Store management salaries $ 70,000 $ 21,000 $ 30,000 $ 19,000 General office salaries* 50,000 12,000 20,000 18,000 Insurance on fixtures and inventory 25,000 7,500 9,000 8,500 Utilities 106,000 31,000 40,000 35,000 Employment taxes 57,000 16,500 21,900 18,600 General office —other* 75,000 18,000 30,000 27,000 Total administrative expenses $ 383,000 $ 106,000 $ 150,900 $ 126,100 *Allocated on the basis of sales dollars. b. The lease on the building housing the North Store can be broken with no penalty. c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed. d. The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $11,000 per quarter. The general manager of the North Store would be retained at her normal salary of $12,000 per quarter. All other employees in the store would be discharged. e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person’s salary is $4,000 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete. f. The company’s employment taxes are 15% of salaries. g. One-third of the insurance in the North Store is on the store’s fixtures. h. The “General office salaries” and “General office—other” relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person’s compensation is $6,000 per quarter. Required: 1. Prepare a schedule showing the change in revenues and expenses and the impact on the company’s overall net operating income that would result if the North Store were closed. (Any losses/ reductions should be indicated by a minus sign.) 2. Based on your computations in (1) above, what recommendation would you make to the management of Superior Markets, Inc.? The North Store should be closed. The North Store should not be closed. 3. Assume that if the North Store were closed, at least one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. The East Store has enough capacity to handle the increased sales. You may assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in that store. a. Calculate the net advantage of closing the North Store. (Any losses should be indicated by a minus sign.) b. What recommendation would you make to the management of Superior Markets, Inc.? The North Store should be closed. The North Store should not be closed.

Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below:

The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional
information is available for your use:

a. The breakdown of the selling and administrative expenses is as follows:

*Allocated on the basis of sales dollars.

*Allocated on the basis of sales dollars.

b. The lease on the building housing the North Store can be broken with no penalty.

c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed.

d. The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $11,000 per quarter. The general manager of the North Store would be retained at her normal salary of $12,000 per quarter. All other employees in the store would be discharged.

e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person’s salary is $4,000 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete.

f. The company’s employment taxes are 15% of salaries.

g. One-third of the insurance in the North Store is on the store’s fixtures.

h. The “General office salaries” and “General office—other” relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person’s compensation is $6,000 per quarter.

Required:

1. Prepare a schedule showing the change in revenues and expenses and the impact on the company’s overall net operating income that would result if the North Store were closed. (Any losses/ reductions should be indicated by a minus sign.)

2. Based on your computations in (1) above, what recommendation would you make to the management of Superior Markets, Inc.?

3. Assume that if the North Store were closed, at least one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. The East Store has enough capacity to handle the increased sales. You may assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in that store.

a. Calculate the net advantage of closing the North Store. (Any losses should be indicated by a minus sign.)

b. What recommendation would you make to the management of Superior Markets, Inc.?