Purpose: This assignments will assess knowledge of qualitative factors relating to differential analysis. The assignment is related to CLO5: Identify, construct, and appraise budgets for effective management.

Requirement: After reading all budgeting resources and viewing the videos, answer the following question 4 questions. If a narrative is required, create answers in your own words, using complete sentence structure and grammar. Please use citations if applicable.

The attached rubric displays grading criteria. For this specific assignment, feedback will be given 24 hours after the due date. This assignment should be processed through individual efforts. It is not a group assignment.

Part I: The General Manager  

1. Your budget analysis is out on FMLA and as a general manager, you need to prepare a quarterly budget for your company. You are budgeting a sales price of $110 per unit and they estimate they will sell 150 units in October and unit sales will increase by 5% each month after that. How many units are estimated to be sold in October, November, and December? (Round to nearest whole units and nearest whole cent.)

2. Using the Sales from above you will now estimate the selling expense budget for the quarter. The sales manager makes $50,000 per year plus a 10% commission from all sales made during the month. Complete the chart below to determine the selling expense for each month and the total for the quarter. (Round your answers to the nearest whole cent.)

Part II: The Consultant

3. You are reviewing a flexible budget report for a company. Indicate whether each variance in ABC Contracting’s Flexible Budget Report below is either Favorable or Unfavorable.

As a consultant, you need to explain to ABC Contracting variance concepts. What does it mean when a variance is described as a favorable variance and as an unfavorable variance?

4. You are a consultant for a start-up company, called Cycle Lovers Corporation, and it does not want to create a budget for the next fiscal year. The chief executive officer (CEO) of Cycle Lovers Corporation remarked to a colleague, "I do not understand why other companies waste so much time in the budgeting process. I set our company goals, and everyone strives to meet them. What is wrong with that approach?" Write a memorandum to the CEO stating whether you agree with this comment or not and explain why. The heading of the memorandum should contain the date, to whom it is written, from whom, and the subject matter.

Who designed the selection system that's now in use at Chipotle? Who decides which personality traits are critical enough to be assessed during screening and which don't quite make the cut? That would be Monty Moran, co-CEO of the company and a high school classmate of Ells. Moran had been the lead attorney for Chipotle and a CEO of a prestigious Denver law firm. Moran recalls the conversation that changed all that, repeating Ells's words: “Monty, you may be a great lawyer but that's not what you're best at . . . What you're best at is being a leader. That's more important. You should come to Chipotle and use that for a company of 10,000 instead of a firm of 600.” What hiring philosophy did Moran bring? “We don't care about experience very much,” Moran notes, “In fact, I think experience at another fast-food restaurant is as likely to be a negative as it is to be a positive. We look for people who possess certain qualities that you can't teach.” In particular, Moran created a checklist of 13 traits that hiring managers should use when screening Chipotle's applicants:

Conscientious

Motivated

Ambitious

Respectful

Hospitable

Polite

Happy

Curious

High energy

Infectiously enthusiastic

Honest

Presentable

Smart

It's clear from that list that Moran emphasizes the Big Five in hiring, along with integrity and cognitive ability—the subject of the next chapter. Moran wants the list kept manageable so that hiring managers can assess all of them in a relatively short meeting. Indeed, Moran “test drove” the list at a managerial retreat in Las Vegas. He interviewed a series of candidates on stage in front of 2000 people to illustrate how to gauge the traits. Moran estimates that there's 80 percent to 90 percent agreement on whether candidates possess the qualities in question. And Chipotle cares deeply about its commitment to its selection system, so much so that it avoids franchising. Most of its competitors do franchise because the fees paid by franchisees are a powerful means of raising capital. But Moran and Ells argue that franchising would release control over Chipotle's culture and its hiring practices. Chipotle views that control as important as it continues to expand—with plans to open around 200 new locations this year.

Questions

1. Which traits would you want to see in “front line” employees at Chipotle? How do those compare to the 13 traits that the company actually uses?

2.Would being a leader in the company—either a general manager running a store or a middle manager in the corporate headquarters—require a different set of traits? If so, which traits would be subtracted from the set of 13 and which would be added?

3. Do you agree that there would be “80 percent to 90 percent agreement” on whether an applicant possesses the 13 traits? Do you think Chipotle should assess the traits with an interview or with a more formal personality test?

FunKids Sdn Bhd produces a type of toy which is sold for RM120 per unit. The normal annual production and sales for the toys are 2,800 units, although the company has the capacity to produce up to 3,000 units.

The following data consist of costs incurred during the year ended 2019:

RM
Material (100% variable) 70,000
Labour (70% variable) 80,000
Selling expenses (40% variable) 58,000
Fixed administrative expenses 50,000

The management accountant of the company is proposing the following alternatives to increase sales for the year 2020 and to reduce the idle capacity:

1. Reducing the selling price to RM110 per unit which would lead to an estimated increase in the sales volume by 30%.
2. An increase in sales would result in an increase of variable labour cost per unit by 15%.
3. Fixed selling expenses is also expected to increase to RM32,500 due to an aggressive advertising and marketing campaign planned to boost sales.

Required:

a) Determine the following costs in year 2019:
i. Total variable costs per unit.                                                                       
ii. Total fixed costs.                                                                                       

b) Calculate the following in year 2019:
i. Break-even points in units and in value.                                                      
ii. Margin of safety in units and in value.                                                         
iii. The expected sales value if the company targets for a profit of RM100,000.


c) Advice the management of FunKids Sdn Bhd if the company should implement the proposed alternative for year 2020. (Show profit comparison).                            
(Total: 25 Marks)


Question 2 (Answer)
total variable cost
Material cost =100% variable
Labor cost
selling expenses
fixed administrative expenses
total variable cost per unit

Break even point in units
Break even point in sales
contribution margin ratio

Margin of safety

expected sales value for 100000 profit

Proposed plan
selling price
selling units
variable cost
fixed cost
Income statement
sales
variable cost

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity, but to have them available for sale when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017. Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $570,000 at face value. Sep. 1 Acquired $1,155,000 of American Instruments’ 10% bonds at face value. Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds. Oct. 2 Sold the Distribution Transformers bonds for $612,000. Nov. 1 Purchased $1,570,000 of M&D Corporation 6% bonds costing at face value. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments bonds $ 1,088,000 M&D Corporation bonds $ 1,649,000 (Hint: Interest must be accrued.) Required: 1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end. For any sales, prepare entries to update the fair-value adjustment, record any reclassification adjustment, and record the sale. 2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Required Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments. (Amounts to be deducted should be indicated with a minus sign.) Income statement: Interest revenue $ 75,200 Investment revenue Net income $ 75,200 Statement of comprehensive income: Net income Balance sheet: Assets Current Assets Interest receivable Investments $ 0 Shareholders’ Equity Required 1 Required 2

On Janaury 1, 2016 PJ Co. acquired 25% interest in AEJR Enterprises for $307,500. The price reflected the assessment that all AEJR's assets and liabilities were stated at fair value. During 2016 AEJR reported net income of $160,000 and paid dividends of $40,000. PJ Co. uses the equity method to account for its investment in AEJR Enterprises.

On January 1, 2017 PJ Co. acquired an additional 50% of AEJR Enterprises for $800,000. At the time of this second acquisition, PJ determined that AEJR had a recently negotiated customer contract with a fair value of $200,000 that was not recorded on its books. This contract had a remaining life of 4 years at the time of acquisiton. In 2017 AEJR had revenues of $400,000, expenses of $250,000 and paid dividends of $48,000. PJ Co. had revenues of $950,000 and expenses of $650,000 before any income related to its investment in AEJR Enterprises.

. Prepare all journal entries PJ Company would make on 1/1/2017 with the acquisition of an additional

      50 % of AEJR Enterprises. SHOW ALL WORK IN SUPPORT OF YOUR ANSWER.

b. What is the non controlling interest's share of AEJR Enterprises net income in 2017?

c. What is the value of the non controlling interest on the consolidated balance sheet as of 12/31/2017? SHOW ALL

     WORK IN SUPPORT OF YOUR ANSWER.

d. What is consolidated net income after allocation of income to the non controlling interest? SHOW ALL WORK IN

      SUPPORT OF YOUR ANSWER.

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity, but to have them available for sale when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017. Mar. 31 Acquired 6% Distribution Transformers Corporation bonds costing $430,000 at face value. Sep. 1 Acquired $945,000 of American Instruments’ 8% bonds at face value. Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds. Oct. 2 Sold the Distribution Transformers bonds for $458,000. Nov. 1 Purchased $1,410,000 of M&D Corporation 4% bonds costing at face value. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments bonds $ 892,000 M&D Corporation bonds $ 1,493,000 (Hint: Interest must be accrued.) Required: 1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end. For any sales, prepare entries to update the fair-value adjustment, record any reclassification adjustment, and record the sale. 2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.

Pete's Construction acquired new equipment, paid $50,000 down, and signed a 5%, $200,000 note payable. Both the principal and one-year's interest is due one year from the date of purchase. The cost to install the equipment was $4,000; the cost to test it before placing it on-line was $2,000.

Pete's Construction spent $20,000 to train employees on the above new equipment.
Materials, labour and overhead amounted to $400,000 for the construction of a building started and completed in the current year. The building was worth $600,000 at completion and will house the office operations for the company. Total interest cost recognized during the year was $50,000; $35,000 of that amount qualifies to be capitalized to this building. The land on which the building was constructed cost $100,000, also purchased this year.

A second tract of land was acquired as a building site, for $45,000. A second building on this land also was started during the year but not completed. $5,000 was spent for surveying this second land parcel; $30,000 was spent to excavate the foundation of the building; and $8,000 was spent to clear oak trees on the property.

Pete's Construction was assessed $12,000 by the county for sewers and other infrastructure costs for the site of the completed building.

Because there was so much work involved with this project, Pete took his staff out for a celebration lunch for a cost od $1,000.

Required
From the following transaction information for Pete's Construction Inc. for the current year, determine the ending balances for all property, plant and equipment accounts (including construction in progress). Show how you arrived at your answer for each. Ignore amortization, assume there were no beginning balances, and there is no need to show subsidiary accounts or include discussion.

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity, but to have them available for sale when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Mar. 31 Acquired 5% Distribution Transformers Corporation bonds costing $600,000 at face value.

Sep. 1 Acquired $1,200,000 of American Instruments’ 7% bonds at face value.

Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds.

Oct. 2 Sold the Distribution Transformers bonds for $645,000.

Nov. 1 Purchased $1,600,000 of M&D Corporation 3% bonds costing at face value.

Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments.

The market prices of the investments are: American Instruments bonds $ 1,130,000

M&D Corporation bonds $ 1,680,000

(Hint: Interest must be accrued.)

Required: 1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end. For any sales, prepare entries to update the fair-value adjustment, record any reclassification adjustment, and record the sale. 2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.