Wally’s Widget Company (WWC) incorporated near the end of 2011. Operations began in January of 2012. WWC prepares adjusting entries and financial statements at the end of each month. Balances in the accounts at the end of January are as follows: Cash $ 21,470 Unearned Revenue (25 units) $ 5,300 Accounts Receivable $ 12,500 Accounts Payable (Jan Rent) $ 3,200 Allowance for Doubtful Accounts $ (1,850) Notes Payable $ 15,500 Inventory (30 units) $ 2,400 Contributed Capital $ 6,900 Retained Earnings – Feb 1, 2012 $ 3,620 • WWC establishes a policy that it will sell inventory at $165 per unit. • In January, WWC received a $5,300 advance for 25 units, as reflected in Unearned Revenue. • WWC’s February 1 inventory balance consisted of 30 units at a total cost of $2,400. • WWC’s note payable accrues interest at a 12% annual rate. • WWC will use the FIFO inventory method and record COGS on a perpetual basis. February Transactions 02/01 Included in WWC’s February 1 Accounts Receivable balance is a $1,700 account due from Kit Kat, a WWC customer. Kit Kat is having cash flow problems and cannot pay its balance at this time. WWC arranges with Kit Kat to convert the $1,700 balance to a note, and Kit Kat signs a 6-month note, at 9% annual interest. The principal and all interest will be due and payable to WWC on August 1, 2012. 02/02 WWC paid a $600 insurance premium covering the month of February. The amount paid is recorded directly as an expense. 02/05 An additional 170 units of inventory are purchased on account by WWC for $12,750 – terms 2/15, n30. 02/05 WWC paid Federal Express $510 to have the 170 units of inventory delivered overnight. Delivery occurred on 02/06. 02/10 Sales of 140 units of inventory occurred during the period of 02/07 – 02/10. The sales terms are 2/10, net 30. 02/15 The 25 units that were paid for in advance and recorded in January are delivered to the customer. 02/15 20 units of the inventory that had been sold on 2/10 are returned to WWC. The units are not damaged and can be resold. Therefore, they are returned to inventory. Assume the units returned are from the 2/05 purchase. 02/16 WWC pays the first 2 weeks wages to the employees. The total paid is $2,700. 02/17 Paid in full the amount owed for the 2/05 purchase of inventory. WWC records purchase discounts in the current period rather than as a reduction of inventory costs. 02/18 Wrote off a customer’s account in the amount of $1,950. 02/19 $6,400 of rent for January and February was paid. Because all of the rent will soon expire, the February portion of the payment is charged directly to expense. 02/19 Collected $9,900 of customers’ Accounts Receivable. Of the $9,900, the discount was taken by customers on $7,500 of account balances; therefore WWC received less than $9,900. 02/26 WWC recovered $590 cash from the customer whose account had previously been written off (see 02/18). 02/27 A $900 utility bill for February arrived. It is due on March 15 and will be paid then. 02/28 WWC declared and paid a $850 cash dividend. Adjusting Entries: 02/29 Record the $2,700 employee salary that is owed but will be paid March 1. 02/29 WWC decides to use the aging method to estimate uncollectible accounts. WWC determines 8% of the ending balance is the appropriate end of February estimate of uncollectible accounts. 02/29 Record February interest expense accrued on the note payable. 02/29 Record one month’s interest earned Kit Kat’s note (see 02/01).

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $23.95 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below:

The total cost of operating the company for the year is $358,000 which includes the following costs:

Resource consumption is distributed across the activities as follows:

Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Required:

1. Prepare the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. The company recently completed a 600 square foot carpet-cleaning job at the Flying N Ranch—a 54-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system.

4. The revenue from the Flying N Ranch was $143.70 (600 square feet @ $23.95 per hundred square feet). Calculate the customer margin earned on this job.

Prepare the first-stage allocation of costs to the activity cost pools.

Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

The company recently completed a 600 square foot carpet-cleaning job at the Flying N Ranch—a 54-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your intermediate calculations and final answer to 2 decimal places.)

The revenue from the Flying N Ranch was $143.70 (6 hundred square feet @ $23.95 per hundred square feet). Calculate the customer margin earned on this job. (Negative customer margins should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.)

Chinsali Division, a subsidiary of Mungwi Group Plc has the following budgeted results: K’000 Capital Employed 6,400 Operating Profit 1,600 Mungwi Group uses the Return on (ROI) and the Residual Income (RI) to evaluate the performance of division managers. The non-current assets are valued at net book value at year end while net current assets are valued at the average for the year. Depreciation is calculated on straight line basis. Mungwi Group expects all new projects to earn a minimum 18% discounted cashflow return over four years. In addition to the budgeted results, Chinsali division is considering investment in the following three new independent projects: Project 1 Investment outlay of K1,200,000 in a processing plant Benefit - the plant will reduce annual revenue costs by K400,000’ The plant would be purchased at the beginning of next year, with a useful life of four years and no scrap value. Project 2 Investment outlay of K32,000 in computerized inventory control system at start of next year. Plus an additional member of staff to be employed specifically to manage the system at an annual salary of K36,000. Benefit of new system – reduction in inventory levels by an average of K180,000 over the year. This project investment to be regarded as a revenue expense lasting only one year. The extra cash to be remitted to Mungwi group head office. Project 3 Head office be allowed to assist chinsali handle its accounts receivable by injecting some extra cash. This assistance will enable chinsali increase accounts receivable by an average of K140,000 over a year. This will result in increased sales generating an additional annual contribution of a K100,000. Ignore inflation and taxation

Required: (1) Calculate the existing return on investment (ROI) and residual income (RI) for Chinsali Division without the proposed new investment projects’ (2)

Calculate Chinsali division’s return on investment and residual income for the next year for each of the three new independent projects. (3)

Recommend the new project(s) that are likely to encourage goal congruence between Mungwi group plc and chinsali division. Comment on the residual income decision rules. Discount factors (18%) Year 0 Year 1 Year 2 Year 3 Year4 Year5 1 0.847 1.566 2.174 2.690 3.127

We can make good decisions with good information and we can make bad decisions with good information. How would you apply the advice given in Job 28: 27-28 NIV to the information generated in accounting, 27 "then he looked at wisdom and appraised it; he confirmed it and tested it. 28 And he said to man, 'The fear of the Lord - that is wisdom, and to shun evil is understanding.'"

An instructor wishes to see if the way people obtain information is independent of their educational background. A survey of 400 high school and college graduates yielded this information. At a=5%, test the claim that the way people obtain information is independent of their educational background.

Table:

College 27 42 31

Suppose a marketing company wants to determine the current proportion of customers who click on ads on their smartphones. It was estimated that the current proportion of customers who click on ads on their smartphones is 0.39 based on a random sample of 100 customers. Compute a 95% confidence interval for the true proportion of customers who click on ads on their smartphones and fill in the blanks appropriately.

Answer:

___<P<____ (3 decimal Places)

It is assumed that there is an average of 12 customers per hour at a service counter according to a Poisson process.

a) How likely is it that 4 customers show up at this counter in the next 15 minutes?

b) Given that 4 customers showed up at this counter in a given 15-minute period, what is the probability that there were at least 2 customers that showed up in the last 5 minutes of this period?

You own a small company. Last year you conducted a study to learn more about your customers. You found that the mean age of your customers was 31.84 years with a standard deviation of 9.84 years. This year you take a random sample of 60 customers. What is the probability that the mean age of those 60 customers is greater than 33 years?