Problem 11-18A Manufacturing cost flow for monthly and annual accounting periods LO 11-1, 11-2, 11-3

Evelyn Rundle started Rundle Manufacturing Company to make a universal television remote control device that she had invented. The company’s labor force consisted of part-time employees. The following accounting events affected Rundle Manufacturing Company during its first year of operation. (Assume that all transactions are cash transactions unless otherwise stated.)

Transactions for January 2018, First Month of Operation

1 Issued common stock for $10,000.

2 Purchased $430 of direct raw materials and $60 of production supplies.

3 Used $260 of direct raw materials.

4 Used 80 direct labor hours; production workers were paid $9.50 per hour.

5 Expected total overhead costs for the year to be $3,200, and direct labor hours used during the year to be 1,000. Calculate an overhead rate and apply the appropriate amount of overhead costs to Work in Process Inventory.

6 Paid $143 for salaries to administrative and sales staff.

7 Paid $23 for indirect manufacturing labor.

8 Paid $205 for rent and utilities on the manufacturing facilities.

9 Started and completed 100 remote controls during the month; all costs were transferred from the Work in Process Inventory account to the Finished Goods Inventory account.

10 Sold 70 remote controls at a price of $21.4 each.

Transactions for Remainder of 2018

11 Acquired an additional $18,500 by issuing common stock.

12 Purchased $3,900 of direct raw materials and $905 of production supplies.

13 Used $3,000 of direct raw materials.

14 Paid production workers $9.50 per hour for 890 hours of work.

15 Applied the appropriate overhead cost to Work in Process Inventory.

16 Paid $1,554 for salaries of administrative and sales staff.

17 Paid $239 of indirect manufacturing labor cost.

18 Paid $2,410 for rental and utility costs on the manufacturing facilities.

19 Transferred 900 additional remote controls that cost $12.76 each from the Work in Process Inventory account to the Finished Goods Inventory account.

20 Determined that $167 of production supplies was on hand at the end of the accounting period.

21 Sold 860 remote controls for $21.40 each.

22 Determine whether the overhead is over- or underapplied. Close the Manufacturing Overhead account to the Cost of Goods Sold account.

23 Close the revenue and expense accounts.

Required

For each of the above transactions, post the effects to the appropriate T-accounts.

Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2018.

Complete this question by entering your answers in the tabs below.

For each of the above transactions, post the effects to the appropriate T-accounts. (Do not round intermediate calculations.)

Prepare an income statement for 2018. (Do not round intermediate calculations.)

Do not round intermediate calculations.

·       Req B CGM Sched

QUESTION 3

Who benefits the most from the minimum capital requirements imposed by Basel regulation?

QUESTION 4

Country A raises its countercyclical buffer from 0% to 1% while Country B lowers its countercyclical buffer from 1% to 0%.

Which of the following statements is NOT correct?

QUESTION 5

The bank's provisions for bad and doubtful debt (lending provisions) amount to $16 million. The bank writes off $24 million non-performing loans.

As a result of the write off, the gross loans _____________________, the lending provisions _____________________ and bank's equity _______________.

QUESTION 6

1. A prior purchase agreement is a(n) ______________ and ________________ in ASIC relief list.

   	A.	naked short sale; is
   	B.	covered short sale; is
   	C.	naked short sale; is NOT
   	D.	ordinary sale; is
   	E.	covered short sale; is NOT

QUESTION 7

Which of the following statements is correct?

A traditional closed-ended managed fund _______________________________.

QUESTION 8

Which of the following statements is NOT correct?

Retail investors in ETF shares  ____________________________.

QUESTION 9

At the beginning of first quarter 2020, the bank buys a trading security for $150. At the end of the first quarter the price is $170. The bank sells the security at $200 at the end of the second quarter 2020.

In net, over the second quarter (i.e. comparing situation at two moments in time: at the beginning and the end of the second quarter), the bank shareholders' equity ______________, the retained profit ___________________ and the capital reserve _____________________.

QUESTION 10

A bank had bought shares with the objective of benefiting from a capital gain. However, prices in the stock market have been going down due to the  Covid-19 crisis.  If the crisis became more serious, the bank could be exceptionally authorized by the regulator to reclassify the shares from _________ to _________ in order to stop any further loss of the bank's equity.

QUESTION 12

Which of the following items is NOT part of CET1 capital?

QUESTION 13

A security borrowing agreement takes place at T followed by a sell order/match of the security at T+3.

Which of the following statements is CORRECT?

The borrower becomes the official owner of the security at    _____________    and at the time of the sale order, the sale is a __________________.

QUESTION 14

Consider a bank statement of financial position.

Which of the following statement is NOT correct?

QUESTION 17

The conversion of capital notes to ordinary shares ________________________________.

Answer the following questions in your answer:

1. What specific metrics are being used?

2. What value is the company getting from using this data?

3. What other metrics would you suggest they look at?

4. Are there any ethical concerns with what data they are using or how they are using it?

The article:

Why Fashion Stores Shouldn't Join Amazon's Data Behemoth

Providing Amazon with more customer data will only make the e-commerce giant an even stronger opponent. Instead, fashion companies should embrace the current wave of consolidation.

Amazon has conquered the world, one consumer category at a time. Now, it seems the final frontier is the fashion category where the e-commerce giant is yet to prove victorious. But do smaller fashion companies stand a chance against the mean, lean shopping machine if they go at it alone? It seems unlikely.

This is why there’s a wave of consolidation washing over the fashion world currently. Just recently Michael Kors acquired Versace and Chanel bought swimwear brand Orlebar Brown.

One of the main driving reasons behind these mergers and acquisitions is a clear need to gang up against Amazon. Even though the companies might not express this directly, all of them should be painfully aware of the world’s second most valuable company breathing down their necks.

While many major brands have already surrendered to Amazon’s allure of supreme online traffic, brands and fashion stores should resist joining forces with the data monster that is ultimately set out to consume them.

There’s no questioning the allure of Amazon and there’s probably no company in the world better at selling and distributing goods online. For the same reason, having their products sold on Amazon will help fashion companies reach a few extra percentages of sales within the next quarter. But what does the end game look like?

With each data set, Amazon will get more acquainted with a new target group and perhaps in time, finally understand this wildly different shopping behavior. After all, the fashion shopper is much more of a browser than a searcher – a trouble for Amazon which is almost entirely built on customers searching and finding. Shopping for a phone charger comes down to a few variables that are easily laid out in data: Price and brand. Fashion shopping is a lot more complicated. Mainly because the shopper often needs to browse through dozens of pictures before becoming aware of his or her preference as to shape and color.

At first glance, this behavior makes the fashion shopping seem mostly random, something humans is still far better at making sense of than algorithms. But in the end, even the more delicate details of online fashion shopping can be broken down into delicate data if Amazon gets enough samples from fashion companies joining their ranks.

This will only help the Amazon data monster grow stronger and by time, absorb all the smaller fashion companies, one data set a time. And it has been reported that Amazon directly uses the data against Marketplace sellers by selling the most popular products through its service. Conversely, when fashion companies join Amazon, they lose access to their customer data and will only gain access through substantial payments.

Instead, fashion companies should consider standing their ground and consider the path of consolidation. The path towards victory over online giants seems impassable by the small players since scale in production and distribution is paramount for profitability. But through consolidation, fashion companies might just be able to create the scale needed while at the same keeping access to their data.

Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies:

• Ending finished goods inventory should be 40 percent of next month’s sales.
• Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold.

     Iguana, Inc., had $10,500 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

     Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $2,000. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $240 in depreciation. During April, Iguana plans to pay $2,000 for a piece of equipment.

Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies:

• Ending finished goods inventory should be 40 percent of next month’s sales.
• Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold.

     Iguana, Inc., had $10,500 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

Compute the budgeted cash receipts for Iguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.)

Compute the budgeted cash payments for Iguana. (Do not round your intermediate calculations. Round final answers to 2 decimal places.)

Prepare the cash budget for Iguana. Assume the company can borrow in increments of $1,000 to maintain a $10,000 minimum cash balance. (Leave no cell blank enter "0" wherever required. Round your answers to 2 decimal places.)

Case Study 2

Customs Changes, Tariff Reduction Among Measures Responding to COVID-19

Monday, March 30, 2020

Sandler, Travis & Rosenberg Trade Report

Countries around the world are taking a variety of measures to ensure adequate access to and supplies of medical goods to deal with the COVID-19 pandemic. A recent Congressional Research Service report examines some of these actions, including the following.

Imposing Export Restrictions. The European Union has introduced measures that prohibit the export of personal protective equipment (e.g., masks, protective glasses, and garments) without prior regulatory approval. India has restricted exports of 26 pharmaceutical components as well as medicines and vitamins made from them. Dozens of other countries have also imposed export restrictions to address potential supply shortages. The U.S. has generally not supported such measures, but it is unclear whether they are inconsistent with World Trade Organization rules or may qualify for one of the available exceptions regarding critical shortages of essential products, protection of human life, or national security.

Reducing Tariffs. The U.S. has removed some of its Section 301 tariffs on medical goods from China, but the Trump administration has come under pressure to remove or suspend others as well. The report points out that Congress could potentially do this itself since it has the constitutional authority to “lay and collect duties.” Another option would be for the administration to permit duty-free imports of food, clothing, and medical, surgical, and other supplies for use in emergency relief work under Section 318 of the Tariff Act of 1930.

Revising Import Procedures. Most countries regulate imports of medical goods for public health and safety reasons, but some have taken steps to streamline their customs procedures to address issues that could delay access to medical goods. For example, China created a “green lane” system that prioritizes the inspection and review of imported medical goods. Similarly, the EU recently introduced guidelines instructing its member states to create “green lanes” for freight transport to ensure access to essential products such as medicines and medical equipment.

The U.S. has not yet publicly proposed amending its customs or other regulatory procedures in response to the COVID-19 pandemic. However, U.S. Customs and Border Protection may be able to create a “green lane” system using its congressional authorization to develop and implement screening and targeting capabilities, including prioritizing of passengers and cargo. The report notes that creating such a system may require CBP to complete a rulemaking process, which could take time, but that Congress could consider using its constitutional authority to regulate foreign commerce to more quickly implement new customs prioritization procedures.

Prioritizing Domestic Production. Many countries import more health-related products than they export. As an alternative to reliance on cross-border supply chains, the U.S. and some of its trading partners have sought to prioritize domestic production of necessary goods, either by requiring manufacturers to complete orders of medical goods before orders of non-medical goods or by imposing increased production requirements on these manufacturers. Such measures may be permitted under WTO rules provided (a) they are not unlawful subsidies (e.g., those that harm the industries of other WTO members) under the WTO Agreement on Subsidies and Countervailing Measures or (b) if they are potentially WTO-inconsistent, they fall within an exception.

Questions:

1.   What do your understand of the term ‘green lane’ as mentioned in the paragraph? What will happen if the ‘green lane’ system is not being applied in this time of COVID-19 pandemic? Explain.

2.   In this case, why do you think most countries in the world are introducing custom changes and tariff reduction? Have these changes in trade policies helped the countries’ economy or created even bigger barriers for trade. Discuss.

Silver Company makes a product that is very popular as a Mother’s Day gift. Thus, peak sales occur in May of each year, as shown in the company’s sales budget for the second quarter given below:

From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $260,000, and March sales totaled $290,000.

Required:

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

2. What is the accounts receivable balance on June 30th?

Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter.

What is the accounts receivable balance on June 30th?

Huang Industries, Ltd. (HIL) is based in Singapore and manufactures tools used in Asian auto factories. Shanghai Automotive Industry Corporation (SAIC) purchased $ 60 million worth of tools from HIL in a single order that was delivered on June 30, the last day of HIL’s second fiscal quarter. SAIC may return any portion of the order within three months of delivery for a full refund. HIL’s experience with product returns suggests that products that are returned are generally in good enough condition to be restored to inventory and sold at a later date.

SAIC is a long-term customer that aggressively takes advantage of product return rights but is consistent in its behavior. HIL’s accountants estimate that 10 percent of the products shipped to SAIC will eventually be returned.

Part A. Assume that HIL’s gross margin percentage is always 30 percent. Required: How much pretax profit should HIL recognize on the sale in the second fiscal quarter?

Part B. Assume SAIC returned 9 percent of the shipment on September 12. It did not return any additional product before the right of return expired.

Required: Compute the effect of the sale on HIL’s pretax income in the third fiscal quarter. Your answer should include the effect of the product return on September 12 as well as the expiry of the right of return on September 30.

Question 3: [18 marks] You need to prepare the budget for Yellow tree for the quarter ending June 2018. The budget must be prepared monthly. The quarter consists of 13 weeks. The forecasted sales are as follows: April 4 weeks May 5 weeks June 4 weeks July 4 weeks Sales Units 1,250 1,500 1,750 1,800 The company’s policy changed the inventory policy to keep closing inventory of completed units at 25% of the following month’s sales. Opening inventory on the 1st of April was 475 units. The labour information is as follows: Normal working hours 8 hours per day Weekend work None, only if overtime is required. Number of employees 20 currently Additional 10 employees will be employed for the month of June Normal time rate R32.50 per hour Overtime rate 30% above normal time rate per hour Hours per unit 3 hours 10 Required: 1. Calculate the production budget for the quarter. (3) 2. Calculate the budgeted labour hours per month. Split the hours between normal time and overtime. (9) 3. Calculate the budgeted labour cost monthly. Split the cost between normal time and overtime. (6)