Question: BETHESDA MINING COMPANY Bethesda Mining is a midsized coal mining company with 20 mines located i... BETHESDA MINING COMPANY Bethesda Mining is a midsized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep mines as well as strip mines. Most of the coal mined is sold under contract, with excess production sold on the spot market. The coal mining industry, especially high-sulfur coal operations such as Bethesda, has been hard-hit by environmental regulations. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for high-sulfur coal. Bethesda has just been approached by Mid-Ohio Electric Company with a request to supply coal for its electric generators for the next four years. Bethesda Mining does not have enough excess capacity at its existing mines to guarantee the contract. The company is considering opening a strip mine in Ohio on 5,000 acres of land purchased 10 years ago for $5 million. Based on a recent appraisal, the company feels it could receive $5.5 million on an aftertax basis if it sold the land today. Strip mining is a process where the layers of topsoil above a coal vein are removed and the exposed coal is removed. Some time ago, the company would simply remove the coal and leave the land in an unusable condition. Changes in mining regulations now force a company to reclaim the land; that is, when the mining is completed, the land must be restored to near its original condition. The land can then be used for other purposes. Because it is currently operating at full capacity, Bethesda will need to purchase additional necessary equipment, which will cost $85 million. The equipment will be depreciated on a seven-year MACRS schedule. The contract runs for only four years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 60 percent of its initial purchase price in four years. However, Bethesda plans to open another strip mine at that time and will use the equipment at the new mine. The contract calls for the delivery of 500,000 tons of coal per year at a price of $82 per ton. Bethesda Mining feels that coal production will be 620,000 tons, 680,000 tons, 730,000 tons, and 590,000 tons, respectively, over the next four years. The excess production will be sold in the spot market at an average of $76 per ton. Variable costs amount to $31 per ton, and fixed costs are $4,100,000 per year. The mine will require a net working capital investment of 5 percent of sales. The NWC will be built up in the year prior to the sales. Bethesda will be responsible for reclaiming the land at termination of the mining. This will occur in Year 5. The company uses an outside company for reclamation of all the company's strip mines. It is estimated the cost of reclamation will be $2.7 million. In order to get the necessary permits for the strip mine, the company agreed to donate the land after reclamation to the state for use as a public park and recreation area. This will occur in Year 6 and result in a charitable expense deduction of $6 million. Bethesda faces a 38 percent tax rate and has a 12 percent required return on new strip mine projects. Assume that a loss in any year will result in a tax credit. You have been approached by the president of the company with a request to analyze the project. Calculate the payback period, profitability index, net present value, and internal rate of return for the new strip mine. Should Bethesda Mining take the contract and open the mine? no need for excel i need calculations and show your work please

DSW is a midsized coal mining company with 20 mines located in Hessen region in central Germany. The company operates deep mines as well as strip mines. Most of the coal mined is sold under contract, with excess production sold on the spot market.

The coal mining industry, especially high-sulfur coal operations such as DSW, has been hard-hit by environmental regulations and warmer than expected winter 2014/2015 and 2016/2017. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for high-sulfur coal. DSW has just been approached by SudenKraftwerk Company with a request to supply coal for its electric generators for the next four years. DSW does not have enough excess capacity at its existing mines to guarantee the contract. The company is considering opening a strip mine in Broken on 5,000 acres of land purchased 10 years ago for € 5 million. Based on a recent appraisal, the company feels it could receive € 6.2 million on an after-tax basis if it sold the land today.

Strip mining is a process where the layers of topsoil above a coal vein are removed and the exposed coal is removed. Changes in mining regulations now force a company to reclaim the land; that is, when the mining is completed, the land must be restored to near its original condition. The land can then be used for other purposes. Because it is currently operating at full capacity, DWS will need to purchase additional necessary equipment, which will cost € 78 million. The equipment will be depreciated on a seven-year linear basis. The contract runs for only four years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 60 percent of its initial purchase price in four years. However, DSW plans to open another strip mine at that time and will use the equipment at the new mine.

The contract calls for the delivery of 500,000 tons of coal per year at a price of €85 per ton. DWS feels that coal production will be 620,000 tons, 680,000 tons, 730,000 tons, and 590,000 tons, respectively, over the next four years. The excess production will be sold in the spot market at an average of € 80 per ton but the spot prices are highly volatile. The fact should be taken into consideration in the analysis. Variable costs amount to € 27 per ton, and fixed costs are € 3,700,000 per year. The mine will require net working capital of 5 percent of sales. The NWC will be built up in the year prior to the sales.

DSW will be responsible for reclaiming the land at termination of the mining. This will occur in year 5. The company uses an outside company for reclamation of all the company’s strip mines. It is estimated the cost of reclamation will be € 2.4 million. After the land is reclaimed, the company plans to donate the land to the state for use as a public park and recreation area. This will occur in year 6 and result in a charitable expense deduction of € 6.5 million. DSW faces a 19 percent tax rate. Assume that a loss in any year will result in a tax credit.

You have been approached by the CFO of the company with a request to analyze the project.

Calculate the payback period, profitability index, net present value, internal rate of return for the new strip mine. Please prepare also sensitivity analysis for the project.

To calculate WACC of DSW assume that it is rather illiquid company with capitalization on the level of € 680 million, beta equals 1,25, outstanding interest bearing debt on the level of € 300 million and cash level of € 78 million.[1] The current EBIT of DSW amounts € 80 million and the gross financial costs equals € 28 million.

Should DSW Mining take the contract and open the mine taking into consideration the risk of the project?

Carpenter Cornices, Ltd., produces a wide variety of cornice moldings for windows at a plant located in Evergreen Park, Illinois. Because there are hundreds of products, some of which are made only to order, the company uses a job-order costing system. On July 1, the start of the company’s fiscal year, inventory account balances were as follows: Raw materials $ 12,700 Work in process $ 6,700 Finished goods $ 10,400 The company applies overhead cost to jobs on the basis of machine-hours. Its predetermined overhead rate for the fiscal year starting July 1 was based on a cost formula that estimated $191,400 of manufacturing overhead for an estimated activity level of 58,000 machine-hours. During the year, the following transactions were completed (Assume all purchases and services were acquired on account): a. Raw materials purchased on account, $202,000. b. Raw materials requisitioned for use in production, $164,000 (materials costing $152,500 were chargeable directly to jobs; the remaining materials were indirect). c. Costs for employee services were incurred as follows: Direct labor $ 111,000 Indirect labor $ 48,300 Sales commissions $ 34,500 Administrative salaries $ 53,500 d. Prepaid insurance expired during the year, $28,000 ($17,700 of this amount related to factory operations, and the remainder related to selling and administrative activities). e. Utility costs incurred in the factory, $25,500. f. Advertising costs incurred, $14,800. g. Depreciation recorded on equipment, $39,000. ($25,500 of this amount was on equipment used in factory operations; the remaining $13,500 was on equipment used in selling and administrative activities.) h. Manufacturing overhead cost was applied to jobs, $?. (The company recorded 31,000 machine-hours of operating time during the year.) i. Goods that had cost $326,000 to manufacture according to their job cost sheets were completed. j. Sales (all on account) to customers during the year totaled $614,000. These goods had cost $325,000 to manufacture according to their job cost sheets.1. 1.- Prepare journal entries to record the transactions for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don’t forget to enter the opening balances in your inventory accounts). Compute an ending balance in each account. (Round your intermediate calculations to 2 decimal places.) 3-a. Is Manufacturing Overhead underapplied or overapplied for the year? (Round your intermediate calculations to 2 decimal places.) 3-b. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. (Round your intermediate calculations to 2 decimal places. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Prepare an income statement for the year. (Round your intermediate calculations to 2 decimal places.)

Sager Company manufactures variations of its product, a technopress, in response to custom orders from its customers. On May 1, the company had no inventories of work in process or finished goods but held the following raw materials.

On May 4, the company began working on two technopresses: Job 102 for Worldwide Company and Job 103 for Reuben Company.

Purchased raw materials on credit and recorded the following information from receiving reports and invoices.

Receiving Report No. 426, Material M, 290 units at $290 each.
Receiving Report No. 427, Material R, 130 units at $270 each.

Record these purchases with a single journal entry. Enter the receiving report information on the materials ledger cards.

Requisitioned the following raw materials for production.

Requisition No. 35, for Job 102, 189 units of Material M.
Requisition No. 36, for Job 102, 72 units of Material R.
Requisition No. 37, for Job 103, 98 units of Material M.
Requisition No. 38, for Job 103, 102 units of Material R.
Requisition No. 39, for 27 units of paint.

Enter amounts for direct materials requisitions on the materials ledger cards and the job cost sheets. Enter the indirect materials amount on the materials ledger card.

Received the following employee time tickets for work in May.

Time tickets Nos. 1 to 10 for direct labor on Job 102, $86,000.
Time tickets Nos. 11 to 30 for direct labor on Job 103, $53,000.
Time tickets Nos. 31 to 36 for equipment repairs, $20,000.

Record direct labor from the time tickets on the job cost sheets.

Paid cash for the following items during the month: factory payroll, $159,000, and miscellaneous overhead items, $114,000. Use the time tickets to record the total direct and indirect labor costs.

Finished Job 102 and transferred it to the warehouse. The company assigns overhead to each job with a predetermined overhead rate equal to 80% of direct labor cost.

Enter the allocated overhead on the cost sheet for Job 102, fill in the cost summary section of the cost sheets.

Delivered Job 102 and accepted the customer’s promise to pay $520,000 within 30 days.

Applied overhead cost to Job 103 based on the job’s direct labor to date.

Required:
Complete the materials ledger cards for Material M, Material R, and paint using the information given in part a and b. Complete the job cost sheets for Jobs 102 and 103 using the information given in part a, b, c and e. Prepare journal entries for part a through g.

Complete the job cost sheets for Jobs 102 and 103 using the information given in part a, b, c and e.

Prepare journal entries for part a through g. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

Record the purchase of raw materials on credit from the receiving reports and invoices given in letter a). Record these purchases with a single journal entry.

Note: Enter debits before credits.

Sager Company manufactures variations of its product, a technopress, in response to custom orders from its customers. On May 1, the company had no inventories of work in process or finished goods but held the following raw materials.

On May 4, the company began working on two technopresses: Job 102 for Worldwide Company and Job 103 for Reuben Company.

Purchased raw materials on credit and recorded the following information from receiving reports and invoices.

Receiving Report No. 426, Material M, 290 units at $290 each.
Receiving Report No. 427, Material R, 95 units at $230 each.

Record these purchases with a single journal entry. Enter the receiving report information on the materials ledger cards.

Requisitioned the following raw materials for production.

Requisition No. 35, for Job 102, 162 units of Material M.
Requisition No. 36, for Job 102, 72 units of Material R.
Requisition No. 37, for Job 103, 84 units of Material M.
Requisition No. 38, for Job 103, 76 units of Material R.
Requisition No. 39, for 21 units of paint.

Enter amounts for direct materials requisitions on the materials ledger cards and the job cost sheets. Enter the indirect materials amount on the materials ledger card.

Received the following employee time tickets for work in May.

Time tickets Nos. 1 to 10 for direct labor on Job 102, $84,000.
Time tickets Nos. 11 to 30 for direct labor on Job 103, $52,000.
Time tickets Nos. 31 to 36 for equipment repairs, $23,750.

Record direct labor from the time tickets on the job cost sheets.

Paid cash for the following items during the month: factory payroll, $159,750, and miscellaneous overhead items, $108,000. Use the time tickets to record the total direct and indirect labor costs.

Finished Job 102 and transferred it to the warehouse. The company assigns overhead to each job with a predetermined overhead rate equal to 80% of direct labor cost.

Enter the allocated overhead on the cost sheet for Job 102, fill in the cost summary section of the cost sheets.

Delivered Job 102 and accepted the customer’s promise to pay $550,000 within 30 days.

Applied overhead cost to Job 103 based on the job’s direct labor to date.

Required:
Complete the materials ledger cards for Material M, Material R, and paint using the information given in part a and b. Complete the job cost sheets for Jobs 102 and 103 using the information given in part a, b, c and e. Prepare journal entries for part a through g.

Complete the job cost sheets for Jobs 102 and 103 using the information given in part a, b, c and e.

Journal entry worksheet

Record the purchase of raw materials on credit from the receiving reports and invoices given in letter a). Record these purchases with a single journal entry.

Note: Enter debits before credits.

Explain how price (rate) regulation may improve the performance of monopolies. In your answer distinguish between (a) socially optimal (marginal-cost) pricing and (b) fair-return (average-total-cost) pricing. What is the “dilemma of regulation”?

Work in Process Account Data for Two Months; Cost of Production Reports

Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which consists of the smelting and rolling processes. Materials are entered from smelting at the beginning of the rolling process. The inventory of Work in Process—Rolling on September 1 and debits to the account during September were as follows:

Bal., 400 units, 30% completed:

Direct materials (400 x $3.1)$ 1,240

Conversion (400 x 30% x $1.3)156

$ 1,396

From Smelting Department, 9,320 units$29,824

Direct labor8,672

Factory overhead4,670

During September, 400 units in process on September 1 were completed, and of the 9,320 units entering the department, all were completed except 700 units that were 90% completed. Charges to Work in Process—Rolling for October were as follows:

From Smelting Department, 10,700 units$36,380

Direct labor10,720

Factory overhead5,765

During October, the units in process at the beginning of the month were completed, and of the 10,700 units entering the department, all were completed except 500 units that were 60% completed.

Required:

1. Enter the balance as of September 1 in a four-column account for Work in Process—Rolling. Record the debits and the credits in the account for September. Construct a cost of production report and present computations for determining (a) equivalent units of production for materials and conversion, (b) costs per equivalent unit, (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in September, and (d) work in process inventory. If an amount box does not require an entry, leave it blank.

ACCOUNTWork in Process-Rolling Department ACCOUNT NO.

BALANCE

DATEITEMPOST. REF.DEBITCREDITDEBITCREDIT

Sept. 1Bal., 400 units, 30% completed

Sept. 30Smelting Dept., 9,320 units at $3.2

Sept. 30Direct labor

Sept. 30Factory overhead

Sept. 30Finished goods

Sept. 30Bal., 700 units, 90% completed

If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent.

Pittsburgh Aluminum Company
Cost of Production Report-Rolling Department
For the Month Ended September 30

Whole UnitsEquivalent Units

Units Direct Materials (a)Conversion (a)

Units charged to production:   

Inventory in process, September 1  

Received from Smelting Department  

Total units accounted for by the Rolling Department  

Units to be assigned costs:   

Inventory in process, September 1

Started and completed in September

Transferred to finished goods in September

Inventory in process, September 30

Total units to be assigned costs

Costs

Costs Direct Materials Conversion Total Costs

Cost per equivalent unit:            

Total costs for September in Rolling Department $   $      

Total equivalent units          

Cost per equivalent unit (b) $   $      

Costs assigned to production:            

Inventory in process, September 1         $  

Costs incurred in September           

Total costs accounted for by the Rolling Department         $  

Costs allocated to completed and partially completed units:            

Inventory in process, September 1 balance (c)         $  

To complete inventory in process, September 1 (c) $   $     

Cost of completed September 1 work in process         $  

Started and completed in September (c) $        

Transferred to finished goods in September (c)         $  

Inventory in process, September 30 (d)         

Total costs assigned by the Rolling Department         $  

2. Provide the same information for October by recording the October transactions in the four-column work in process account. Construct a cost of production report, and present the October computations (a through d) listed in part (1). If an amount box does not require an entry, leave it blank.

ACCOUNTWork in Process-Rolling Department ACCOUNT NO.

Balance

DATEITEMPOST. REF.DEBITCREDITDEBITCREDIT

October 1Balance

October 31Smelting Dept., 10,700 units at $3.4

October 31Direct labor

October 31Factory overhead

October 31Finished goods

October 31Bal., 500 units, 60% completed

If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent.

Pittsburgh Aluminum Company
Cost of Production Report-Rolling Department
For the Month Ended October 31

Whole UnitsEquivalent Units

Units Direct Materials (a)Conversion (a)

Units charged to production:   

Inventory in process, October 1  

Received from Smelting Department  

Total units accounted for by the Rolling Department  

Units to be assigned costs:   

Inventory in process, October 1

Started and completed in October

Transferred to finished goods in October

Inventory in process, October 31

Total units to be assigned costs

Costs

Costs Direct Materials Conversion Total Costs

Cost per equivalent unit:            

Total costs for October in Rolling Department $   $      

Total equivalent units          

Cost per equivalent unit (b) $   $      

Costs assigned to production:            

Inventory in process, October 1         $  

Costs incurred in October           

Total costs accounted for by the Rolling Department         $  

Costs allocated to completed and partially completed units:            

Inventory in process, October 1 balance (c)         $  

To complete inventory in process, October 1 (c) $   $     

Cost of completed October 1 work in process         $  

Started and completed in October (c)         

Transferred to finished goods in October (c)         $  

Inventory in process, October 31 (d)         

Total costs assigned by the Rolling Department         $  

3. The cost per equivalent unit for direct materials increased  from August to October. The cost per equivalent unit for conversion costs increased  from August to October. These changes should  be investigated for their underlying causes, and any necessary corrective actions should be taken.

Feedback

Costs accumulate in each department before being transferred to finished goods. There are three types of inventory; materials, work in process, and finished goods.

Calculate equivalent units for materials and conversion costs. Calculate the cost per equivalent unit for materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed, and the ending inventory. Compare the costs per equivalent unit for January through October. The costs per equivalent units for materials and conversion for January are in the September 1 work in process inventory.

Work in Process Account Data for Two Months; Cost of Production Reports

Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which consists of the smelting and rolling processes. Materials are entered from smelting at the beginning of the rolling process. The inventory of Work in Process—Rolling on September 1 and debits to the account during September were as follows:

Bal., 400 units, 30% completed:

Direct materials (400 x $3.1)$ 1,240

Conversion (400 x 30% x $1.3)156

$ 1,396

From Smelting Department, 9,320 units$29,824

Direct labor8,672

Factory overhead4,670

During September, 400 units in process on September 1 were completed, and of the 9,320 units entering the department, all were completed except 700 units that were 90% completed. Charges to Work in Process—Rolling for October were as follows:

From Smelting Department, 10,700 units$36,380

Direct labor10,720

Factory overhead5,765

During October, the units in process at the beginning of the month were completed, and of the 10,700 units entering the department, all were completed except 500 units that were 60% completed.

Required:

1. Enter the balance as of September 1 in a four-column account for Work in Process—Rolling. Record the debits and the credits in the account for September. Construct a cost of production report and present computations for determining (a) equivalent units of production for materials and conversion, (b) costs per equivalent unit, (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in September, and (d) work in process inventory. If an amount box does not require an entry, leave it blank.

ACCOUNTWork in Process-Rolling Department ACCOUNT NO.

BALANCE

DATEITEMPOST. REF.DEBITCREDITDEBITCREDIT

Sept. 1Bal., 400 units, 30% completed

Sept. 30Smelting Dept., 9,320 units at $3.2

Sept. 30Direct labor

Sept. 30Factory overhead

Sept. 30Finished goods

Sept. 30Bal., 700 units, 90% completed

If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent.

Pittsburgh Aluminum Company
Cost of Production Report-Rolling Department
For the Month Ended September 30

Whole UnitsEquivalent Units

Units Direct Materials (a)Conversion (a)

Units charged to production:   

Inventory in process, September 1  

Received from Smelting Department  

Total units accounted for by the Rolling Department  

Units to be assigned costs:   

Inventory in process, September 1

Started and completed in September

Transferred to finished goods in September

Inventory in process, September 30

Total units to be assigned costs

Costs

Costs Direct Materials Conversion Total Costs

Cost per equivalent unit:            

Total costs for September in Rolling Department $   $      

Total equivalent units          

Cost per equivalent unit (b) $   $      

Costs assigned to production:            

Inventory in process, September 1         $  

Costs incurred in September           

Total costs accounted for by the Rolling Department         $  

Costs allocated to completed and partially completed units:            

Inventory in process, September 1 balance (c)         $  

To complete inventory in process, September 1 (c) $   $     

Cost of completed September 1 work in process         $  

Started and completed in September (c) $        

Transferred to finished goods in September (c)         $  

Inventory in process, September 30 (d)         

Total costs assigned by the Rolling Department         $  

2. Provide the same information for October by recording the October transactions in the four-column work in process account. Construct a cost of production report, and present the October computations (a through d) listed in part (1). If an amount box does not require an entry, leave it blank.

ACCOUNTWork in Process-Rolling Department ACCOUNT NO.

Balance

DATEITEMPOST. REF.DEBITCREDITDEBITCREDIT

October 1Balance

October 31Smelting Dept., 10,700 units at $3.4

October 31Direct labor

October 31Factory overhead

October 31Finished goods

October 31Bal., 500 units, 60% completed

If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent.

Pittsburgh Aluminum Company
Cost of Production Report-Rolling Department
For the Month Ended October 31

Whole UnitsEquivalent Units

Units Direct Materials (a)Conversion (a)

Units charged to production:   

Inventory in process, October 1  

Received from Smelting Department  

Total units accounted for by the Rolling Department  

Units to be assigned costs:   

Inventory in process, October 1

Started and completed in October

Transferred to finished goods in October

Inventory in process, October 31

Total units to be assigned costs

Costs

Costs Direct Materials Conversion Total Costs

Cost per equivalent unit:            

Total costs for October in Rolling Department $   $      

Total equivalent units          

Cost per equivalent unit (b) $   $      

Costs assigned to production:            

Inventory in process, October 1         $  

Costs incurred in October           

Total costs accounted for by the Rolling Department         $  

Costs allocated to completed and partially completed units:            

Inventory in process, October 1 balance (c)         $  

To complete inventory in process, October 1 (c) $   $     

Cost of completed October 1 work in process         $  

Started and completed in October (c)         

Transferred to finished goods in October (c)         $  

Inventory in process, October 31 (d)         

Total costs assigned by the Rolling Department         $  

3. The cost per equivalent unit for direct materials increased  from August to October. The cost per equivalent unit for conversion costs increased  from August to October. These changes should  be investigated for their underlying causes, and any necessary corrective actions should be taken.

Feedback

Costs accumulate in each department before being transferred to finished goods. There are three types of inventory; materials, work in process, and finished goods.

Calculate equivalent units for materials and conversion costs. Calculate the cost per equivalent unit for materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed, and the ending inventory. Compare the costs per equivalent unit for January through October. The costs per equivalent units for materials and conversion for January are in the September 1 work in process inventory.

The XGENZ Corporation issued a 30-year, 7 percent semiannual bond 3 years ago. The bond currently sells for 93 percent of its face value. The company’s tax rate is 35 percent. a. What is the pretax cost of debt? b. What is the aftertax cost of debt? c. Which is more relevant, the pretax or the aftertax cost of debt? Why? d. Suppose the book value of the debt issue is $85 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 12 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 59 percent of par. (i) What is the company’s total book value of debt? (ii) The total market value? (iii) What is your best estimate of the aftertax cost of debt now?