PA9-1 Calculating Direct Material, Direct Labor, Variable Overhead Variances [LO 9-3, 9-4, 9-5]

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows:

Barley Hopp had the following actual results last year:

Required:
1. Calculate the direct materials price, quantity, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable and "U" for unfavorable.)



2. Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable and "U" for unfavorable.)



3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.)

Question I Value Derivatives

An investor is very bullish on LewCo, a nondividend paying company. The current spot price of the company’s equity is $50 per share. The investor is confident the company will solve the social distancing issue and that the value of the stock will be at least $100 in 12 months.

The investor uses a 12-period binomial tree assuming

S0 = $50

T = 12 months

r = 30 basis points per month

u=1.1 per month

d = 1/u= 1.1-1 per month 1.

1. Apply the binomial tree model to value a 12-month European style call with a strike of $100. What is the call premium?

2. Use put-call parity to value the put on the same asset, for the same expiration, and with the same strike. What is the put premium?

3. The investor is considering two other calls. One with a strike of $200. Another with a strike of $0. The values of these structures should be evident to you. What is the premium on the call with a strike of $200? Why? What is the premium on the call with the strike of $0? Why?

4. Why do investors use options? To answer this, we consider an investor with $5,000 to invest. Assume the spot price in 12 months is $100, as predicted by the investor. Calculate the amount the investor will make spending the $5,000 to buy shares of stock, spending the $5,000 to buy puts with a strike of $100, or spending the $5,000 to buy calls with a strike of $100? Based on this analysis, what is the advantage of using options?

5. What would be the premium of a derivative structure paying the square of the call payoff in each node of the terminal distribution?

(3) Malls face increasing completion from Amazon. Last year the average consumer spent $50 at the local mall. Is consumer spending decreasing? This year, in a random sample of shoppers, each was asked how much money she/he spent on the last trip to the local mall. Do they data support at a=10% significance level the research hypothesis that average shopper this year spent less that $50?

   a. What are the null and alternative hypotheses?

   b. What is the appropriate p-value?

   c. Can they infer at the 10% significance level that consumer spending decreased since last year? State your conclusion.

PA9-1 Calculating Direct Material, Direct Labor, Variable Overhead Variances [LO 9-3, 9-4, 9-5]

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows:

Barley Hopp had the following actual results last year:

Required:
1. Calculate the direct materials price, quantity, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable and "U" for unfavorable.)



2. Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable and "U" for unfavorable.)



3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.)

Walkenhorst Company’s machining department prepared its 2016 budget based on the following data:

PA9-5 Calculating Direct Materials, Direct Labor, Variable Manufacturing Overhead Variances [LO 9-3, 9-4, 9-5]

Bullseye Company manufactures dartboards. Its standard cost information follows:

Bullseye has the following actual results for the month of September:

Required:
1. Calculate the direct materials price, quantity, and total spending variances for Bullseye. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

    

2. Calculate the direct labor rate, efficiency, and total spending variances for Bullseye. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

    

3. Calculate the variable overhead rate, efficiency, and total spending variances for Bullseye. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.)

    

The following table includes quarterly working capital levels for your firm for the next year.

If you choose to enter the year with $397,000 total in cash and maintain a minimum cash balance of $104,000?, what is your maximum?short-term borrowing?

This is the answer but I need someone to show me how to calculate this in excel. I need details for how the "cash at the beginning of the qrt" was calculated.

You must find the total working capital for each quarter and then subtract the permanent working? capital, which is the smallest working capital of the four quarters. This will give you the temporary working capital for each quarter.

The temporary working capital for each quarter are shown? below:

?Below, we determine the maximum amount of? short-term borrowing needed if the firm enters the year with $397,000 in cash.

Samson plc is registered for VAT.

The following information relates to the company’s VAT return for the quarter ended 31 March 2020:

1. Sales invoices totalling £330,000 were issued to VAT registered customers, of which £240,000 were for standard-rated sales and £90,000 were for zero-rated sales.

2. Samson plc offers its standard-rated customers a 5% discount for prompt payment. This discount was taken by 1/3 of the customers.

3. Purchase invoices totalling £154,000 were received from VAT registered suppliers, of which £136,000 were for standard-rated purchases and £18,000 for zero-rated purchases.

4. Standard-rated expenses amounted to £28,000. This includes £3,900 for entertaining UK customers.

5. On 15 March 2020, the company wrote off irrecoverable receivables of £4,000 and £1,680 in respect of invoices that were due for payment on 10 August 2019 and 5 November 2019 respectively.

6. On 11 January 2020, Samson plc purchased machinery for £24,000 and sold office fittings for £8,000. Input VAT had been claimed when the office fittings were originally purchased.
7. On 1 March 2020, Samson plc purchased a motor car costing £28,400 for the use of its finance director. The finance director is provided with free petrol for private mileage, and the cost of this is included in the standard-rated expenses in note (iv). The relevant quarterly scale charge is £432. Both figures are inclusive of VAT.

Unless stated otherwise, all of the figures above are exclusive of VAT.

YOU ARE REQUIRED TO:

1. Calculate the VAT payable by Samson plc for the quarter ended 31 March 2020 and state the payment due date.

2. Samson plc is experiencing cash-flow difficulties. The company submitted its VAT return and paid the VAT due for the quarter ended 31 December 2019 on 15 March 2020.

State the consequences if Samson plc does not submit the return for the quarter ended 31 March 2020 until 25 May 2020.

(maximum word count 80 words)

TOTAL 20 MARKS

UK TAX

Exercise 6-2 (Algo) Dropping or Retaining a Segment [LO6-2]

The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:

*Allocated on the basis of sales dollars.

Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.

Required:

1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

2. Should the production and sale of racing bikes be discontinued?

3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

?

Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

Assume the required reserve ratio at The First Bank of Idaho is 10%. The First Idaho Bank is a primary dealer, which means that it is a financial institution that is able to buy and sell securities directly to the U.S. Federal Reserve (Fed). Remember any bank in the U.S. can borrow from the Fed.

Provided below is the balance sheet for The First Bank of Idaho:

Use the information as well as the balance sheet for The First Bank of Idaho provided above to complete and answer the following:

What is the amount of excess reserves held by The First Bank of Idaho?

The Fed buys $50,000 of securities from The First Bank of Idaho and pays for those securities by increasing The First Bank of Idaho’s bank deposits at the Fed. Show the effect of this transaction on The First Bank of Idaho’s balance sheet.

When completing this part of your answer, remember that reserves equal bank deposits held at the Fed, plus vault cash.

What happens to excess reserves when the Fed buys securities from The First Bank of Idaho?

What happens to the amount of loans The First Bank of Idaho can create after the Fed buys securities? What will happen to the money supply if The First Bank of Idaho makes additional loans?

Go back to the original balance sheet. Suppose The First Bank of Idaho borrows $25,000 from the Fed. Show the effect of that transaction on The First Bank of Idaho’s balance sheet.

What happens to excess reserves at The First Bank of Idaho after the discount loan? What will happen to the money supply?

What happens to the amount of loans The First Bank of Idaho can create after the discount loan?

Go back to the original balance sheet. The Fed has a new tool that can pay interest on reserves held at the Fed. If the interest rate on reserves increases, will The First Bank of Idaho be more- or less-likely to hold excess reserves? What will happen to the amount of loans The First Bank of Idaho will make if the interest rate on reserves increases? What will happen to the money supply?

The Fed is currently using three tools: open market operations, interest rate on reserves, and forward guidance. Define each tool and explain how the Fed uses that tool to increase and decrease the money supply.