Flight Café prepares in-flight meals for airlines in its kitchen located next to a local airport. The company’s planning budget for July appears below:

In July, 23,000 meals were actually served. The company’s flexible budget for this level of activity appears below:

Required:

1. Calculate the company’s activity variances for July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

"A firm is considering purchasing a new milling machine and has collected the following information for its income statement and cash flow statement. However, this income statement was calculated as if there is no inflation! All dollars are expressed in constant (year-0) dollars. Recalculate the income and cash flow statement by assuming there is a general (average) inflation of 2.6% applied to revenue, O&M, and salvage value.
- The firm will pay back the loan in 2 years, and the annual loan payment is $26,571.
- The tax rate is 38%.
- The revenue for year 1 is $40,000 and $36,000 for year 2.
- O&M for year 1 is $8,000 and $11,000 for year 2.
- The interest paid on the debt is $2743 for year 1 and $1409 for year 2.
- The taxable income is $19,111 for year 1 and $14,897 for year 2.
- The income taxes are $7,262 for year 1 and $5,661 for year 2.
- The milling machine costs $71,000.
- The salvage value at the end of year 2 is $48,000.
Calculate the IRR of the cash flow based on actual dollars. Express your answer as a percentage between 0 and 100.
You should calculate the depreciation based on the information given in the problem, but do not refer to the MACRS table. You will also need to calculate the amount that is borrowed and that goes to the principal on the debt in years 1 and 2."

"A firm is considering purchasing a new milling machine and has collected the following information for its income statement and cash flow statement. However, this income statement was calculated as if there is no inflation! All dollars are expressed in constant (year-0) dollars. Recalculate the income and cash flow statement by assuming there is a general (average) inflation of 4.9% applied to revenue, O&M, and salvage value.
- The firm will pay back the loan in 2 years, and the annual loan payment is $11,808.
- The tax rate is 36%.
- The revenue for year 1 is $46,000 and $42,000 for year 2.
- O&M for year 1 is $12,000 and $13,100 for year 2.
- The interest paid on the debt is $1722 for year 1 and $895 for year 2.
- The taxable income is $22,275 for year 1 and $19,434 for year 2.
- The income taxes are $8,019 for year 1 and $6,996 for year 2.
- The milling machine costs $70,000.
- The salvage value at the end of year 2 is $48,000.
Calculate the IRR of the cash flow based on actual dollars. Express your answer as a percentage between 0 and 100.
You should calculate the depreciation based on the information given in the problem, but do not refer to the MACRS table. You will also need to calculate the amount that is borrowed and that goes to the principal on the debt in years 1 and 2."

"A firm is considering purchasing a new milling machine and has collected the following information for its income statement and cash flow statement. However, this income statement was calculated as if there is no inflation! All dollars are expressed in constant (year-0) dollars. Recalculate the income and cash flow statement by assuming there is a general (average) inflation of 4.9% applied to revenue, O&M, and salvage value.
- The firm will pay back the loan in 2 years, and the annual loan payment is $11,808.
- The tax rate is 36%.
- The revenue for year 1 is $46,000 and $42,000 for year 2.
- O&M for year 1 is $12,000 and $13,100 for year 2.
- The interest paid on the debt is $1722 for year 1 and $895 for year 2.
- The taxable income is $22,275 for year 1 and $19,434 for year 2.
- The income taxes are $8,019 for year 1 and $6,996 for year 2.
- The milling machine costs $70,000.
- The salvage value at the end of year 2 is $48,000.
Calculate the IRR of the cash flow based on actual dollars. Express your answer as a percentage between 0 and 100.
You should calculate the depreciation based on the information given in the problem, but do not refer to the MACRS table. You will also need to calculate the amount that is borrowed and that goes to the principal on the debt in years 1 and 2."

Keystone Development (KD) began operations in October 2019 and adopted ASPE-future tax method.

When property is sold on an instalment basis, KD recognizes instalment income for accounting purposes in the year of the sale. For tax purposes, instalment income is recognized as cash collections relating to the properties are made. Gross profit from instalment sales for 2019 was $600,000 and will result in taxable revenue as collections are made over the next three years (with the respective tax rates) as follows:

                        2020                $150,000          30%

                        2021                $250,000          40%

                        2022                $200,000          40%

KD also had product warranty expenses for accounting purposes in 2019 of $80,000 of which only $20,000 was paid in cash (tax deductibility is only for cash payments) with the balance to be paid over the next three years as follows:

                        2020                $20,000

                        2021                $25,000

                        2022                $15,000

Pretax accounting income for 2019 was $810,000 which included dividend revenue from taxable Canadian corporations of $10,000 which is not taxable. The tax rate in 2019 is 30%.

Required

1. Prepare the appropriate journal entry to record KD’s 2019 income taxes.
2. Provide the income statement excerpt for KD beginning with net income before tax for 2019.
3. How should the future income tax amounts be classified in the balance sheet at December 31, 2019?

Exercise 9-4 Prepare a Flexible Budget Performance Report [LO9-4]

Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:

The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.

Required:

1. Prepare a flexible budget performance report for July that includes revenue and spending variances and activity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Hawk Homes, Inc., makes one type of birdhouse that it sells for $29.00 each. Its variable cost is $13.30 per house, and its fixed costs total $13,643.30 per year. Hawk currently has the capacity to produce up to 2,300 birdhouses per year, so its relevant range is 0 to 2,300 houses.

Required:
1. Prepare a contribution margin income statement for Hawk assuming it sells 1,130 birdhouses this year. (Enter your answers rounded to 2 decimal places.)



2. Without any calculations, determine Hawk’s total contribution margin if the company breaks even. (Enter your answers rounded to 2 decimal places.)



3. Calculate Hawk’s contribution margin per unit and its contribution margin ratio. (Round your answers to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))



4. Calculate Hawk’s break-even point in number of units and in sales revenue. (Round your "Sales Revenue" answer to 2 decimal places and "Unit" answer to the nearest whole number.)



5. Suppose Hawk wants to earn $28,000 this year. Determine how many birdhouses it must sell to generate this amount of profit. (Round up to the next whole number.)

Government intervention (II) (Question 10):

Suppose that, in the market for soft drinks (in litres),

     demand is given by P = 20 – 0.3Q; and

     supply is given by P = 0.1Q.

In order to raise revenue, the government decides to impose a $0.5 per litre tax on soft drinks. Use these facts to answer the following questions.

    A) On a graph, demonstrate the effect of the tax on the equilibrium price and quantity. (Clearly label the value of each both before and after the tax.)

    B) Show on the graph and calculate the tax revenue and deadweight loss that result from the tax. Briefly explain why a per-unit tax results in a deadweight loss.

    C) Graphically show the incidence of the tax i.e. the consumers and producers burden of the tax.

        i)Who bears the greater burden of the tax, producers or consumers? Explain why this is the case.

        ii)If the elasticity of supply increased, what do you expect to happen to the incidence of the tax? Explain.

    D) Apart from a per-unit tax, what is another measure that the government could impose to reduce the quantity of soft drink consumed? Evaluate whether this is better than a per-unit tax. Is there a measure which will not result in a deadweight loss?

    E) Given that a per unit tax creates deadweight loss and is not Pareto efficient, identify a Pareto improving transaction to eliminate this deadweight loss.

Suppose that, in the market for soft drinks (in litres),

     demand is given by P = 20 – 0.3Q; and

     supply is given by P = 0.1Q.

In order to raise revenue, the government decides to impose a $0.5 per litre tax on soft drinks. Use these facts to answer the following questions.

    A) On a graph, demonstrate the effect of the tax on the equilibrium price and quantity. (Clearly label the value of each both before and after the tax.)

    B) Show on the graph and calculate the tax revenue and deadweight loss that result from the tax. Briefly explain why a per-unit tax results in a deadweight loss.

    C) Graphically show the incidence of the tax i.e. the consumers and producers burden of the tax.

        i)Who bears the greater burden of the tax, producers or consumers? Explain why this is the case.

        ii)If the elasticity of supply increased, what do you expect to happen to the incidence of the tax? Explain.

    D) Apart from a per-unit tax, what is another measure that the government could impose to reduce the quantity of soft drink consumed? Evaluate whether this is better than a per-unit tax. Is there a measure which will not result in a deadweight loss?

    E) Given that a per unit tax creates deadweight loss and is not Pareto efficient, identify a Pareto improving transaction to eliminate this deadweight loss.

Earnings per Share and Multiple-Step Income Statement
The following summarized data relate to Bowden Corporation’s current operations:

Required
Prepare a multiple-step income statement for Bowden Corporation for the year. Include earnings per share disclosure at the bottom of the income statement.

Do not use negative signs with any of your answers below.

I need the earnings per share of common stock answered. The answer is not any of these... $3, $4, $4.43, $2.82, or $7.38!!!!!