Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales.

The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $330,000 of manufacturing overhead for an estimated activity level of $200,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows:

During the year, the following transactions were completed:

1. Raw materials purchased on account, $275,000.
2. Raw materials used in production, $280,000 (materials costing $220,000 were charged directly to jobs; the remaining materials were indirect).
3. Costs for employee services were incurred as follows:

4. Rent for the year was $18,000 ($13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities).
5. Utility costs incurred in the factory, $57,000.
6. Advertising costs incurred, $140,000.
7. Depreciation recorded on equipment, $100,000. ($88,000 of this amount related to equipment used in factory operations; the remaining $12,000 related to equipment used in selling and administrative activities.)
8. Record the manufacturing overhead cost applied to jobs.
9. Goods that had cost $675,000 to manufacture according to their job cost sheets were completed.
10. Sales for the year (all paid in cash) totaled $1,250,000. The total cost to manufacture these goods according to their job cost sheets was $700,000.

Required:

1. Prepare journal entries to record the transactions for the year.

2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don’t forget to enter the beginning balances in your inventory accounts).

3A. Is Manufacturing Overhead underapplied or overapplied for the year?

3B. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

4. Prepare an income statement for the year. (All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.)

Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells its birdcages through an extensive network of street vendors who receive commissions on their sales.

The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. Its predetermined overhead rate is based on a cost formula that estimated $330,000 of manufacturing overhead for an estimated activity level of $200,000 direct labor dollars. At the beginning of the year, the inventory balances were as follows:

During the year, the following transactions were completed:

1. Raw materials purchased for cash, $275,000.
2. Raw materials used in production, $280,000 (materials costing $220,000 were charged directly to jobs; the remaining materials were indirect).
3. Cash paid to employees as follows:

4. Cash paid for rent during the year was $18,000 ($13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities).
5. Cash paid for utility costs in the factory, $57,000.
6. Cash paid for advertising, $140,000.
7. Depreciation recorded on equipment, $100,000. ($88,000 of this amount related to equipment used in factory operations; the remaining $12,000 related to equipment used in selling and administrative activities.)
8. Manufacturing overhead cost was applied to jobs, $ ? .
9. Goods that had cost $675,000 to manufacture according to their job cost sheets were completed.
10. Sales for the year (all paid in cash) totaled $1,250,000. The total cost to manufacture these goods according to their job cost sheets was $700,000.

Required:

1. Prepare journal entries to record the transactions for the year.

2. Prepare T-accounts for each inventory account, Manufacturing Overhead, and Cost of Goods Sold. Post relevant data from your journal entries to these T-accounts (don’t forget to enter the beginning balances in your inventory accounts).

3A. Is Manufacturing Overhead underapplied or overapplied for the year?

3B. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

4. Prepare an income statement for the year. (All of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.)

Assume that the United States invests heavily in government and corporate securities of South Korea (hereafter, ‘Korea’). In addition, residents of Korea invest heavily in the United States. Approximately $20 billion worth of investment transactions occur between these two countries each year. The total dollar value of trade transactions per year is about $15 million. This information is expected to also hold in the future. Explain how each of the following conditions will affect the value of Korean currency, won, holding other things equal. a) U.S. inflation has suddenly increased substantially, while Korean inflation remains low. b)U.S. interest rates have increased substantially, while Korean interest rates remain low. Investors of both countries are attracted to high interest rates. c) The U.S. income level increased substantially, while Korean income level has remained unchanged d) The U.S. is expected to impose a small tariff on goods imported from Korea. e) Combine all expected impacts to develop an overall forecast.

Jaguar Electronics, Inc. is a specialized electronics firm located in Charleston, South Carolina in the United States. The company was founded in 1965 and has enjoyed success and modest growth as a supplier of components to large manufacturers of specialty electronic-mechanical devices. Recently the company's management has decided to begin manufacturing and marketing a product called the 'Airflow'. The Airflow is manufactured by assembling two component parts:

(1) mechanical assemblies (MA), which are purchased from a company in Belgium; and

(2) electronic assem­blies (EC) manufactured by Jaguar Electronics at its Charleston facility.

Jaguar Electronics has manufactured and supplied the electronic assemblies to several national manufacturers of products similar to the Airflow for several years. Most of the consumer demand for the final products comes from areas enjoying a relatively warm climate throughout the year. Accordingly, the manu­facturers of those products have sold their goods with great success throughout the southern and southwest­ ern United States. The population and economic growth in these areas have contributed greatly to the success of this type of consumer product.

The man largely responsible for Jaguar Electronics' proposed move into manufacturing and marketing Air­ flow is the company president, Mr Smith. He has spent his entire career in the electronics industry and was with Jaguar Electronics for several years before becom­ ing its president. His reign as president has been very successful. However, he has viewed the impressive sales growth of EC units with mixed feelings. As a supplier of EC components, Jaguar Electronics has prospered from the growth in sales of products such as Airflow. However, Smith has always felt that his company was not reaping all of the benefits available in sales to the consumers. At the same time he felt that Jaguar Elec­tronics did not have the resources to compete success­ fully with the large firms that dominate the US market. Smith employed a consultant to determine where increasing consumer demand for Airflow-type prod­ucts would approach a level sufficiently high to justify entering these smaller markets. After reviewing the consultant's recommendations, Smith decided that Jaguar Electronics should target two of the higher-income countries in Latin America, Country 1 and Country 2. These nations, because of the income levels in particu­ lar cities, had the potential to be lucrative markets for Airflow. The consultant estimated the potential demand for Airflow to be 20,000 units per year in Country 1, and 40,000 units per year in Country 2.

The consultant had also recommended four options available to Jaguar Electronics as to how the widgets could be produced and distributed to these markets:

1. Assemble the widgets in Charleston and distribute them from that point.
2. Assemble them in Country 1, and distribute them from that point.
3. Assemble them in a free trade zone in Country 2.
4. Assemble them in a free trade zone in another coun­try, Country 3, which had no significant potential domestic market for Airflow, but a lower labor cost.

Smith held a meeting to brief his production manager, Daphne R. Feldblum, and his distribution manager, Karl Q. Winklepleck, on the proposed Airflow venture and the consultant's recommendations. Both had been with the company for several years.

After briefing the two managers, Smith asked: 'What course of action would you recommend?' Feldblum replied: 'We should probably assemble them where the labor cost would be lowest.' Winklepleck commented: 'We should also consider transportation rates, insurance rates, import duties, and free trade zones.' Smith decided that Feldblum and Winklepleck should work together to compile the information nec­essary for making the best possible decision.

Two weeks later the information shown in Tables 13.2 and 13.3 had been compiled.

With the data available, Smith had a meeting withFeldblum, Winklepleck, and a member of the corporate legal staff to discuss what should be done. The meeting went poorly. Feldblum still believed that the company should locate assembly in the place with the lowest labor cost. Winklepleck realized that he should have provided a spreadsheet indicating total costs associated with each approach.

Table 13.2 Cost, demand, weight, and tariff data

Annual demand in Country 1               20,000 units

Annual demand in Country 2                40,000 units

Labor costs for assembly

in Charleston                                  $5.00/unit

in Country 1                                    $4.50/unit

in Country 2 free trade zone            $4.00/unit

in Country 3 free trade zone             $3.75/unit

Cost of components

MA,FOB Brussels {Belgium)            $25.00/unit EC, FOB Charleston                $30.00/unit

Product weight

MA                                                   60 lb/ unit

EC                                                   40 lb/ unit

Airflow                                           100 lb/ unit

Import duties as a percentage of price paid)

Table 13.3 Combined rates for transportation and insurance between respective points

(Note: Projected sales volumes would justify shipping by container load. Though shipping rates would actually be charged per container load, for ease of calculation the rates below are shown as dollar costs per hundred pounds ($/cwt). If products were shipped in less­ than-container loads, rates would be much higher.)

Footnote by Winklepleck: Ocean freight shipments from Belgium to Country 3 are very infrequent.

The total cost figures for assembling in Charleston and Country 3 appeared to be very close. If it was possible to obtain some type of free trade area in Charleston, or if the US government could refund duty on the component MA when the finished product was exported, Charleston would actually be less expensive. In any event, figures for all of the combinations should be carefully calculated.

Winklepleck also had some questions in his mind that he wondered if he should raise. They seemed to be important, but the president might not be pleased to have them brought up. If assembly were to be done overseas, how would quality be controlled? Should the company consider making a product for export that it thought it couldn't market successfully in the United States? Did the company have the resources needed and was it prepared to make the effort required to begin marketing internationally: establishing market­ ing channels, product promotion, etc.? How Jong would it take to reach the projected sales overseas, and what would be needed to promote the product? How sure could they be that they could ever sell the expected number of units in each of the two overseas markets?

Questions to be Answered: Try Solving Using Excel

1. Calculate the total costs if the Airflow is assembled in Country 1 vs. Country 2, vs. Country 3. Note that Country 2 and 3 have a foreign trade zones and Country 1 does not. Note also that calculations should be done for total sales to supply the two countries.
2. Which country should they select to assemble the Airflow to maximize profit?
3. If the duty rate for Country 2 increases to 20%, how would this change your answer in question #2?

Assume that the United States invests heavily in government and corporate securities of South Korea (hereafter, ‘Korea’). In addition, residents of Korea invest heavily in the United States. Approximately $20 billion worth of investment transactions occur between these two countries each year. The total dollar value of trade transactions per year is about $15 million. This information is expected to also hold in the future.
Explain how each of the following conditions will affect the value of Korean currency, won, holding other things equal.
a) U.S. inflation has suddenly increased substantially, while Korean inflation remains low.
b)U.S. interest rates have increased substantially, while Korean interest rates remain low. Investors of both countries are attracted to high interest rates.
c) The U.S. income level increased substantially, while Korean income level has remained unchanged
d) The U.S. is expected to impose a small tariff on goods imported from Korea.
e) Combine all expected impacts to develop an overall forecast.

South Coast Papers wants to mix two lubricating oils (A and B) to create a mix that has a viscosity rating of no less than 40. A has a viscosity rating of 45 and costs 60 cents per gallon; B has a viscosity rating of 37.5 and costs 40 cents per gallon. There are 2,000 gallons of A and 4,000 gallons of B available.

The company needs no less than 3,000 gallons of the mix to run the machines next month. It has a maximum oil storage capacity of 4,000 gallons. When lubricating oils are mixed, the amount of mix obtained is exactly equal to the sum of the amounts put in. The viscosity rating is the weighted average of the individual viscosities, weighted in proportion to their volumes.

How many gallons of A and how many gallons of B to use in the mix to minimize the total cost, while meeting all the constraints stated above?

Formulate the LP model for the problem. (14 Points) Hint: Suppose X amount of Oil A is mixed with Y amount of Oil B. The viscosity rating of the mix = (45X + 37.5Y)/(X + Y)

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 3 years ago for $4798465 in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $3848715. An engineer was hired to study the land at a cost of $823164, and her conclusion was that the land can support the new manufacturing facility. The company wants to build its new manufacturing plant on this land; the plant will cost $4984348 million to build, and the site requires $1185814 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

Welcome Inc. is a chain of fast-food restaurants located in major metropolitan areas in the South. Sales have been growing very slowly for the last two years. Management has decided to add some new items to the menu, but first, managers want to know more about their customers and their preferences.
What kind of research design/s would you recommend? Why? Also, recommend various data-collection technique/s to be used in the chosen design/s. Provide the rationale.
5. Rohtak Police wants to find out if the level of alcohol consumed by the driver impacts his braking response time. The Police Superintendent suspects that ‘age of the driver’ and ‘mobile phone usage during driving’ might also affect the braking response time. They hire you to reach conclusions regarding the matter using experiments.
(a) Identify the dependent and independent variable/s for your experiment. Which Statistical Design would you adopt for your investigation? And why?
(b) Graphically present all the main effects and interaction effects possible in this case. Make hypothetical scenarios with the following levels:
Level of Alcohol
Low, Medium, High
Age of the driver
Young, Old
Mobile usage
Yes, No

Seth Bullock, the owner of Bullock Gold Mining, is evaluating a new gold mine in South Dakota. Dan Dority, the company's geologist, has just finished his analysis of the mine site. He has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Dan has taken an estimate of the gold deposits to Alma Garrett, the company's financial officer. Alma has been asked by Seth to perform an analysis of the new mine and present her recommendation on whether the company should open the new mine.

Alma has used the estimates provided by Dan to determine the revenues that could be expected from the mine. She has also projected the expense of opening the mine and the annual operating expenses. If the company opens the mine, it will cost $635 million today, and it will have a cash outflow of $45 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the table. Bullock Mining has a 12 percent required return on all of its gold mines.

Questions: 1. Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and the net present value of the proposed mine.

2. Based on your analysis, should the company open the mine?

3. Bonus question: Most spreadsheets does not have a built-in formula to calculate the payback period. Write a VBA script that calculates the payback period for a project.