Allocating Joint Costs Using the Weighted Average Method

Orchard Fresh, Inc., purchases apples from local orchards and sorts them into four categories. Grade A are large blemish-free apples that can be sold to gourmet fruit sellers. Grade B apples are smaller and may be slightly out of proportion. These are packed in boxes and sold to grocery stores. Apples for slices are even smaller than Grade B apples and have blemishes. Apples for applesauce are of lower grade than apples for slices, yet still suitable for canning.

Information on a recent purchase of 20,000 pounds of apples is as follows: Assume that Orchard Fresh, Inc., uses the weighted average method of joint cost allocation and has assigned the following weights to the four grades of apples:

Total joint cost is $19,000.

Required:

1. Allocate the joint cost to the four grades of apples using the weighted average method. Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.

(Note: The joint cost allocation does not equal $19,000 due to rounding.)

2. What if the factory found that Grade A apples were being valued less by customers and decided to decrease the weight factor for Grade A apples to 3.0? How would that affect the allocation of cost to Grade A apples? How would it affect the allocation of cost to the remaining grades? Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.

(Note: The joint cost allocation does not equal $19,000 due to rounding.)

1. You want to study the relationship between fat intake (g/day) and the death rate in the Central Valley. Your friend, from PH 109, suggests that you conduct an ecological study first. You found the data and summarized it below. What is the association between fat intake (g/day) and death rate? Explain the ecological fallacy. Please show your scatter plot. (3 points)

2. In order to study the relationship between alcohol intake (high or low) and liver cancer, 2,345 persons with incident liver cancer were identified through cancer registries. 3,246 people without liver cancer, selected from the DMV registries were also included in this study. Alcohol intake data was collected through mailed questionnaires. 825 of the people with liver cancer and 855 of those without liver cancer reported high alcohol intake, while the others reported low alcohol intake.

1. Calculate and interpret the appropriate measure of association for the alcohol intake level and liver cancer association. Fill in the table below. (3 points)

2) A matched case-control study was carried out to assess the possible association between high-fat diet and colon cancer. The data are presented below.

Total = 400 matched pairs

1. Calculate the appropriate measure of association taking matching into account. (2 points)

b.   Construct an unmatched 2 х 2 table. Calculate the OR without taking the matching into account. (2 points)

1) In an air-standard Brayton cycle, the air enters the compressor at 0.1 MPa and 15?C. The pressure leaving the compressor is 1.0 MPa, and the maximum temperature in the cycle is 1100?C. Determine The pressure and temperature at each point in the cycle. The compressor work, turbine work, and cycle efficiency. For each control volume analysed, the model is ideal gas with constant specific heat at 300 K, and each process is steady state with no kinetic or potential energy changes.

2) A utility runs a Rankine cycle with a water boiler at 3MPa, and the highest and lowest temperatures of the cycle are 450?C and 45?C, respectively. Find the plant efficiency and the efficiency of a Carnot cycle with the same temperatures.

3) A single stage air compressor running at 80 RPM, compress air from a pressure of 1 bar and temperature of 15oC to a pressure of 5 bar. The clearance volume is 5 % of swept volume which is 0.42 m3 . Assuming that the compression and expansion to follow the law, PV(1.3)= constant. Determine volumetric efficiency, mass of air delivered in kg/sec, exit temperature of air and the power required to drive the compressor in KW.

4) The velocity of steam at inlet to a simple impulse turbine is 1000 m/s, and the nozzle angle is 20o. The blade speed is 400 m/s and the blades are symmetrical. Determine the blade angle if the steam is to enter the blade without shock. If the relative velocity at exit is reduced by friction to 80% of that at inlet, what are then the diagram power and the axial thrust for a mass flow of 0.75 kg/s? Calculate also the diagram efficiency in this case.

5) The nozzle of the impulse stage of a turbine receives steam at 15 bar and 300oC and discharges at 10 bar. The nozzle efficiency is 95% and the nozzle angle is 20 o . The blade speed is that required for maximum work and the inlet angle of the blades is that required for entry of the steam without shock. The blade exit angle is 5o less than the inlet angle. The blade velocity coefficient is 0.9. Calculate for a steam flow of 1350 kg/h: The diagram power; The diagram efficiency.

Siegel Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company’s profits have steadily declined and management has become increasingly concerned about the accuracy of its costing system. Sales of the deluxe model have been increasing rapidly.

Manufacturing overhead is assigned to products on the basis of direct labor-hours. For the current year, the company has estimated that it will incur $5,374,500 in manufacturing overhead cost and produce 12,000 units of the deluxe model and 111,000 units of the regular model. The deluxe model requires 1.0 hours of direct labor time per unit, and the regular model requires 0.5 hour. Material and labor costs per unit are as follows:

Determine the predetermined overhead rate for each of the four activity cost pools.

3. Using the predetermined overhead rates you computed in part (2), do the following:

a. Compute the total amount of manufacturing overhead cost that would be applied to each model using the activity-based absorption costing system. After these totals have been computed, determine the amount of manufacturing overhead cost per unit of each model.

b. Compute the unit product cost of each model (direct materials, direct labor, and manufacturing overhead).

SHOW ALL WORK

1) The air pollutant NO is produced in automobile engines from the high-temperature reaction, N2 (g) + O2 (g) ⇌ 2 NO (g); Kc = 1.7 × 10-3 at 2300K . If the initial concentrations of N2 and O2 at 2300 K are both 1.4 M, what are the concentrations of NO, N2, and O2 when the reaction mixture reaches equilibrium? Show your work (20 points).

2) For each of the following equilibria, use LeChatelier’s principle to predict the direction of reaction when the volume is increased. (15 points)

(a) CO(g) + H2(g) ⇌ C(s) + H2O(g)

(b) 2H2(g) + O2 (g) ⇌ 2 H2O(g)

(c) Fe2O3(s) + 3 H2(g) ⇌ 2Fe(s) + 3 H2O(g)

3) Will the concentration of NO2 increase, decrease, or remain the same when the equilibrium of the exothermic reaction, NOCl(g) + NO2(g) ⇌ NO2Cl (g) + NO(g) is disturbed by the following changes? (15 points)

(a) adding NOCl

(b) adding NO

(c) Removing NO

(d) Adding argon

(e) addition of a catalyst

4) Calculate [H+] of a solution prepared by dissolving 4.25 grams of lithium hydroxide (24 g/mole) in water (18 g/mole) to give 350.0 mL of solution. (12 points) Kw = 1.0 × 10-14

5) Lactic acid (C3H6O3), which occurs in sour milk and foods such as sauerkraut, is a weak monoprotic acid. The [H+] of a 0.10 M solution of lactic acid is 4.57 × 10-3. What is the value of Ka for lactic acid? (16 points)

6) Write a chemical reaction for each of the following ions reacting with water. Demonstrate with this reaction whether they give neutral, acidic, or a basic solution. (16 points)

(a) F-

(c) NH4+

(d) K(H2O)6+

(e) SO32-

7) Calculate the percent dissociation of 0.10 M hydrazoic acid (HN3; Ka = 1.9 ×10-5) in the presence of 0.10 M HCl, and explain if this dissociation is more, the same, or less than if the HCl was not present. (16 points)

Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pathfinder. Data concerning these two product lines appear below:

The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:

Required:

1. Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system.

2. The company is considering replacing its traditional costing system with an activity-based costing system that would assign its manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idle capacity costs):

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

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

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Round your intermediate calculations to 2 decimal places.)

6. Which of the following is an example of systematic risk?
(a) The earnings of a company drop.
(b) The chief executive officer resigns.
(c) A legal suit against a company for environmental pollution.
(d) Changes in the level of interest rates.
(e) The development of a new product line.

7. Suppose a company had earnings per share of $2 over the past year. The industry average PE ratio is 10. Use this information to value this company’s stock price.
(a)$5 (b) $8 (c) $10 (d) $20 (e) $25

8. Which one of the following portfolios should have the most systematic risk?
(a) 50 percent invested in U.S. Treasury bills and 50 percent in a market
index mutual fund
(b) 20 percent invested in U.S. Treasury bills and 80 percent invested in a
stock with a beta of .80
(c) 10 percent invested in a stock with a beta of 1.0 and 90 percent invested
in a stock with a beta of 1.40
(d) 100 percent invested in a mutual fund which mimics the overall market
(e) 100 percent invested in U.S. Treasury bills

9. Which of the following is correct if markets have weak form efficiency?
I) If markets are efficient in the weak form, then it is impossible to make consistently superior profits by using trading rules based on past returns
II) If the markets are efficient in the weak form, then prices will adjust immediately to public information
III) If the markets are efficient in the weak form, then prices reflect all information
(a) I only (b) II only (c) I and II only (d) II and III only (e) I and III only

10. The market rate of return is 12 percent and the risk-free rate of return is 3 percent. Lexant stock has 3 percent less systematic risk than the market and has an actual return of 12 percent. This stock:
(a) is underpriced.
(b) is correctly priced.
(c) will plot below the security market line.
(d) will plot on the security market line.
(e) will plot to the right of the overall market on a security market line graph.

QUESTION: Paraphrase this article into your own words.

Article: Assessing the Allowance for Doubtful Accounts

This article describes three techniques for assessing allowance for doubtful accounts estimates and complying with Statement on Auditing Standards (SAS) no. 57 and AU section 342, Auditing Accounting Estimates, which suggest auditors compare prior accounting estimates with subsequent results to evaluate the reliability of the process used to develop estimates.

TECHNIQUES FOR ANALYZING THE ESTIMATE-GENERATING

The techniques use historical data, they give an indication of the effectiveness of past.

Technique 1: Compare bad debt expense (BDE) to write-offs (WO)

Bad debt expense recorded in a specific year implies the necessity for write-offs during that year and subsequent years. While it is unrealistic to expect estimated bad debt expense to perfectly match actual write-offs in a given year, it is reasonable to expect the ratio of bad debt expense to write-offs to be close to 1.0 over an extended period.

Technique 2: Compare beginning allowance for doubtful accounts (BADA) to write-offs (WO)

This ratio is computed each year using the beginning-of-year allowance for doubtful accounts as the numerator and write-offs of accounts receivable recorded during the year as the denominator. The beginning-allowance-to-write-offs ratio indicates how adequately the allowance accommodated subsequent write-offs. Lower ratios suggest the beginning-of-year allowance may not have been large enough to absorb impending write-offs, while inordinately high ratios might indicate the entity was accumulating excessive allowances.

Technique 3: Assess the allowance exhaustion rate

Exhaustion rates indicate the time (expressed in years) taken to use the beginning-of-year allowance in the form of actual write-offs.

Assessing the effectiveness of past estimates provides a potential basis for confidence in future estimates. The techniques illustrated in this article are designed to help with and clarify assessment of an entity’s past success in estimating its allowance for doubtful accounts. While economic circumstances vary, historical trends provide useful information about the process used to form estimates.