Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.
The pizzeria’s cost formulas appear below:
|
Fixed Cost per Month |
Cost per Pizza |
Cost per Delivery |
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| Pizza ingredients | $ | 4.30 | ||||||||
| Kitchen staff | $ | 6,110 | ||||||||
| Utilities | $ | 710 | $ | 0.30 | ||||||
| Delivery person | $ | 3.10 | ||||||||
| Delivery vehicle | $ | 730 | $ | 1.30 | ||||||
| Equipment depreciation | $ | 480 | ||||||||
| Rent | $ | 2,070 | ||||||||
| Miscellaneous | $ | 830 | $ | 0.15 | ||||||
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In November, the pizzeria budgeted for 1,860 pizzas at an average selling price of $17 per pizza and for 240 deliveries.
Data concerning the pizzeria’s actual results in November appear below:
| Actual Results | |||
| Pizzas | 1,960 | ||
| Deliveries | 220 | ||
| Revenue | $ | 33,970 | |
| Pizza ingredients | $ | 9,010 | |
| Kitchen staff | $ | 6,050 | |
| Utilities | $ | 935 | |
| Delivery person | $ | 682 | |
| Delivery vehicle | $ | 1,006 | |
| Equipment depreciation | $ | 480 | |
| Rent | $ | 2,070 | |
| Miscellaneous | $ | 850 | |
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Required:
1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)
In: Accounting
On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $330,000. The Cortland bonds have a stated interest rate of 5%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):
| January 1, 2021 | 11.0 | % |
| June 30, 2021 | 12.0 | % |
| December 31, 2021 | 14.0 | % |
Required:
1A - Bond fair value :
1. Calculate the price Ithaca would have paid for
the Cortland bonds on January 1, 2021 (ignoring brokerage fees),
and prepare a journal entry to record the purchase.
2. Prepare all appropriate journal entries related
to the bond investment during 2021, assuming Ithaca accounts for
the bonds as a held-to-maturity investment. Ithaca calculates
interest revenue at the effective interest rate as of the date it
purchased the bonds.
3. Prepare all appropriate journal entries related
to the bond investment during 2021, assuming that Ithaca chose the
fair value option when the bonds were purchased, and that Ithaca
determines fair value of the bonds semiannually. Ithaca calculates
interest revenue at the effective interest rate as of the date it
purchased the bonds.
In: Accounting
On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds
that have a face value of $330,000. The Cortland bonds have a
stated interest rate of 5%. Interest is paid semiannually on June
30 and December 31, and the bonds mature in 10 years. For bonds of
similar risk and maturity, the market yield on particular dates is
as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1
and PVAD of $1) (Use appropriate factor(s) from the tables
provided.):
| January 1, 2021 | 11.0 | % |
| June 30, 2021 | 12.0 | % |
| December 31, 2021 | 14.0 | % |
Required:
1. Calculate the price Ithaca would have paid for
the Cortland bonds on January 1, 2021 (ignoring brokerage fees),
and prepare a journal entry to record the purchase.
2. Prepare all appropriate journal entries related
to the bond investment during 2021, assuming Ithaca accounts for
the bonds as a held-to-maturity investment. Ithaca calculates
interest revenue at the effective interest rate as of the date it
purchased the bonds.
3. Prepare all appropriate journal entries related
to the bond investment during 2021, assuming that Ithaca chose the
fair value option when the bonds were purchased, and that Ithaca
determines fair value of the bonds semiannually. Ithaca calculates
interest revenue at the effective interest rate as of the date it
purchased the bonds.
In: Accounting
You are analyzing a proposal to build a new plant. Use the following information, a cost of capital of 14%, a capital gains tax rate of 5%, and an income tax rate of 40%. Land for the plant will be purchased today for $500. At the beginning of the second year (one year from today), $1,000 will be spent for the construction of the building. The equipment will be purchased at the beginning of the third year at a cost of $1,500. Operations will begin at the beginning of the fourth year, at which time a working capital investment of $500 will be required. Cash flows from operations will occur for 10 years and will be received at the end of each year. The building construction cost and the equipment will be depreciated on a straight-line basis, with zero expected salvage for each. Assume that you can't depreciate the building and equipment until you use them in operations. After 10 years of operation, you expect to sell the land for $600. Annual incremental revenue will be $2,000 for the first 5 years of operation, and $2,500 for the last 5 years of operation. Fixed operating costs (excluding depreciation) will be $200 each year. Annual variable operating costs will be 25% of annual revenue. The building and equipment both qualify for a 10% investment tax credit that can be received at the time each is purchased. This investment tax credit will not affect the amount you can depreciate.
1. Calculate the NPV
2. Calculate the IRR
In: Finance
Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.
The pizzeria’s cost formulas appear below:
| Fixed Cost per Month |
Cost per Pizza |
Cost per Delivery |
||||||||
| Pizza ingredients | $ | 4.80 | ||||||||
| Kitchen staff | $ | 6,210 | ||||||||
| Utilities | $ | 760 | $ | 0.80 | ||||||
| Delivery person | $ | 2.60 | ||||||||
| Delivery vehicle | $ | 780 | $ | 1.80 | ||||||
| Equipment depreciation | $ | 520 | ||||||||
| Rent | $ | 2,170 | ||||||||
| Miscellaneous | $ | 880 | $ | 0.20 | ||||||
In November, the pizzeria budgeted for 2,010 pizzas at an average selling price of $14 per pizza and for 210 deliveries.
Data concerning the pizzeria’s actual results in November appear below:
| Actual Results | |||
| Pizzas | 2,110 | ||
| Deliveries | 190 | ||
| Revenue | $ | 30,240 | |
| Pizza ingredients | $ | 9,910 | |
| Kitchen staff | $ | 6,150 | |
| Utilities | $ | 960 | |
| Delivery person | $ | 494 | |
| Delivery vehicle | $ | 1,016 | |
| Equipment depreciation | $ | 520 | |
| Rent | $ | 2,170 | |
| Miscellaneous | $ | 880 | |
Required:
1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)
In: Accounting
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The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 35 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | ||||||
| Investment | $ | 44,000 | ||||||||
| Sales revenue | $ | 22,500 | $ | 23,000 | $ | 23,500 | $ | 20,500 | ||
| Operating costs | 4,700 | 4,800 | 4,900 | 4,100 | ||||||
| Depreciation | 11,000 | 11,000 | 11,000 | 11,000 | ||||||
| Net working capital spending | 500 | 550 | 600 | 500 | ? | |||||
| a. |
Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) |
| Year 1 | Year 2 | Year 3 | Year 4 | ||
| Net income | $ | $ | $ | $ | |
| b. |
Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | |
| Cash flow | $ | $ | $ | $ | $ |
| c. |
Suppose the appropriate discount rate is 13 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| NPV | $ |
In: Finance
Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.
The pizzeria’s cost formulas appear below:
| Fixed Cost per Month |
Cost per Pizza |
Cost per Delivery |
||||||||
| Pizza ingredients | $ | 4.00 | ||||||||
| Kitchen staff | $ | 6,050 | ||||||||
| Utilities | $ | 680 | $ | 1.00 | ||||||
| Delivery person | $ | 2.80 | ||||||||
| Delivery vehicle | $ | 700 | $ | 2.20 | ||||||
| Equipment depreciation | $ | 456 | ||||||||
| Rent | $ | 2,010 | ||||||||
| Miscellaneous | $ | 800 | $ | 0.20 | ||||||
In November, the pizzeria budgeted for 1,770 pizzas at an average selling price of $14 per pizza and for 210 deliveries.
Data concerning the pizzeria’s actual results in November appear below:
| Actual Results | |||
| Pizzas | 1,870 | ||
| Deliveries | 190 | ||
| Revenue | $ | 26,800 | |
| Pizza ingredients | $ | 8,470 | |
| Kitchen staff | $ | 5,990 | |
| Utilities | $ | 920 | |
| Delivery person | $ | 532 | |
| Delivery vehicle | $ | 1,000 | |
| Equipment depreciation | $ | 456 | |
| Rent | $ | 2,010 | |
| Miscellaneous | $ | 832 | |
Required:
1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)
In: Accounting
The Moto Hotel opened for business on May 1, 2017. Here is its trial balance before adjustment on May 31.
| MOTO HOTEL Trial Balance May 31, 2017 |
||||||
|
Debit |
Credit |
|||||
| Cash | $ 2,463 | |||||
| Supplies | 2,600 | |||||
| Prepaid Insurance | 1,800 | |||||
| Land | 14,963 | |||||
| Buildings | 71,200 | |||||
| Equipment | 16,800 | |||||
| Accounts Payable | $ 4,663 | |||||
| Unearned Rent Revenue | 3,300 | |||||
| Mortgage Payable | 37,200 | |||||
| Common Stock | 59,963 | |||||
| Rent Revenue | 9,000 | |||||
| Salaries and Wages Expense | 3,000 | |||||
| Utilities Expense | 800 | |||||
| Advertising Expense |
500 |
|||||
|
$114,126 |
$114,126 |
|||||
Other data:
| 1. | Insurance expires at the rate of $360 per month. | |
| 2. | A count of supplies shows $1,070 of unused supplies on May 31. | |
| 3. | (a) Annual depreciation is $3,000 on the building. | |
| (b) Annual depreciation is $2,400 on equipment. | ||
| 4. | The mortgage interest rate is 6%. (The mortgage was taken out on May 1.) | |
| 5. | Unearned rent of $2,510 has been earned. | |
|
6. Salaries of $860 are accrued and unpaid at May 31. Questions 1. Prepare a ledger using T-accounts. Enter the trial balance amounts and post the adjusting entries. 2. Prepare an adjusted trial balance on May 31 3. Prepare an income statement for the month of May 4. Prepare a retained earnings statement for the month of May 5. Prepare a classified Balance Sheet at May 31 6. Identify which accounts should be closed on May 31 |
In: Accounting
Robin Hood and his Merry Men are now in trouble because wealthy travelers (their source of revenue) are avoiding the forest. As is often common in an entrepreneurial organization, the Merry Men were highly motivated by Robin Hood’s leadership. Therefore, Robin had previously relied on informal communication to organize and implement operations. Robin is pleased with the growing size and influence of his organization. However, growth has meant that specialized duties have begun taking up most of the men’s time, leaving a command vacuum between Robin and the first line recruits. In addition, they are now all located in a large encampment that can be seen for miles. This creates the probability of a surprise attack on their position. Growth has also put great pressures on resources, so now they must harvest the forest more thoroughly. Where will additional revenue come from? Rich travelers are avoiding the forest, so in desperation Robin is considering robbing the poorer travelers, which means his lieutenants must now tell their men to rob their brothers and fathers. What started as a rebellion is in danger of being routinized into banditry. Robin must therefore begin to evaluate the Merry Men’s mission in view of the changing environment.
What business is Robin Hood’s organization in?
What strategic problems does Robin Hood have?
What issues need to be addressed?
What decisions need to be made?
What strategy should Robin Hood implement?
In: Operations Management
The following is a partial trial balance for General Lighting
Corporation as of December 31, 2018:
| Account Title | Debits | Credits |
| Sales revenue | 2,500,000 | |
| Interest revenue | 83,000 | |
| Loss on sale of investments | 24,000 | |
| Cost of goods sold | 1,220,000 | |
| Loss from write-down of inventory due to obsolescence | 230,000 | |
| Selling expenses | 330,000 | |
| General and administrative expenses | 165,000 | |
| Interest expense | 82,000 | |
200,000 shares of common stock were outstanding throughout 2018.
Income tax expense has not yet been recorded. The income tax rate
is 40%.
Required:
1. Prepare a single-step income statement for
2018, including EPS disclosures.
2. Prepare a multiple-step income statement for
2018, including EPS disclosures.
Required 1
Required 2
Prepare a single-step income statement for 2018, including EPS disclosures. (Round EPS answer to 2 decimal places.)
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2
Required 2
Prepare a multiple-step income statement for 2018, including EPS disclosures. (Round EPS answer to 2 decimal places. Amounts to be deducted should be indicated with a minus sign.)
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In: Accounting