This is your lucky day. You have won a $20,000 prize. You are setting aside $8,000 for taxes and partying expenses, but you have decided to invest the other $12,000. Upon hearing the news, two different friends have offered you an opportunity to become a partner in two different entrepreneurial ventures, one planned by each friend. In both cases, this investment would involve spending some of your time next summer as well as putting up cash. Becoming a full partner in the first friend’s venture would require an investment of $10,000 and 400 hours, and your estimated profit (ignoring the value of your time) would be $9,000. The corresponding figures for the second friend’s venture are $8,000 and 500 hours, with an estimated profit to you of $9,000. However, both friends are flexible and would allow you to come in at any fraction of a full partnership you would like. If you choose a fraction of a full partnership, all the above figures given for a full partnership (money investment, time investment, and your profit) would be multiplied by this fraction. Because you were looking for an interesting summer job anyway (maximum 600 hours), you have decided to participate in one or both friends’ ventures in whichever combination that would maximize your total estimated profit. You need to solve the problem of finding the best combination.

a) Use the graphical solution method to solve this problem. Clearly display the feasible region of the problem and its optimal solution.

b) What profit would the first friend have to offer you in order to be optimal to invest your money and time to become his full partner?

Absorption and Variable Costing Income Statements for Two Months and Analysis

During the first month of operations ended July 31, Head Gear Inc. manufactured 32,600 hats, of which 30,600 were sold. Operating data for the month are summarized as follows:

During August, Head Gear Inc. manufactured 28,600 designer hats and sold 30,600 hats. Operating data for August are summarized as follows:

Required:

1a. Prepare an income statement for July using the absorption costing concept. Enter all amounts as positive numbers.

Feedback

1a. & b. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = income from operations
*(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units)
a & b. Sales - variable cost of goods sold* = Manufacturing margin; Manufacturing margin - variable selling and administrative expenses = Contribution margin; Contribution margin - (fixed manufacturing costs + fixed selling and administrative expenses) = income from operations
*Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)]

Learning Objective 1 and Learning Objective 2.

1b. Prepare an income statement for August using the absorption costing concept. Enter all amounts as positive numbers.

Feedback

Learning Objective 1 and Learning Objective 2.

2a. Prepare an income statement for July using the variable costing concept. Enter all amounts as positive numbers.

Feedback

2a. & b. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = income from operations
*(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units)
a & b. Sales - variable cost of goods sold* = Manufacturing margin; Manufacturing margin - variable selling and administrative expenses = Contribution margin; Contribution margin - (fixed manufacturing costs + fixed selling and administrative expenses) = income from operations
*Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)]

Learning Objective 1 and Learning Objective 2.

2b. Prepare an income statement for August using the variable costing concept. Enter all amounts as positive numbers.

Feedback

Learning Objective 1 and Learning Objective 2.

3a. For July, income from operations reported under variable costing is less than absorption costing due to part of fixed manufacturing costs that are expensed.

3b. When large changes in inventory levels occur from one period to the next, it is possible for management to misinterpret such increases (or decreases) in income from operations as due to changes in:

costs.

prices.

sales volume.

"sales volume", "prices" and "costs" are correct.

None of these choices is correct.

The correct answer is:
d

4. Based on your answers to (1) and (2), did Head Gear Inc. operate more profitably in July or in August? Explain.

Head Gear Inc. was equally profitable in July and in August under the variable costing concept. The difference in income reported under the absorption costing concept is due to allocating fixed manufacturing costs to the July 31 ending inventory .

Feedback

3a. Review the effects on income from operations when the number of units manufactured differs from the number of units sold and how managers should analyze these situations.

3b. Remember that under absorption costing, both variable and fixed selling and administrative costs are combined and then subtracted from gross profit to obtain income from operations.

Learning Objective 1 and Learning Objective 2.

Feedback

Partially correct

A sample of 20 cars, including measurements of fuel consumption (city mi/gal and highway mi/gal), weight (pounds), number of cylinders, engine displacement (in liters), amount of greenhouse gases emitted (in tons/year), and amount of tailpipe emissions of NO_x (in lb/yr).

To determine whether there is any linear relationship between the number of cylinders (CYLINDERS) a car has and the greenhouse emission gasses (GHG) , first we make a scatterplot for the data, then we calculate the linear correlation coefficient. If there is strong linear correlation then we do regression.Answer the following questions:

1. Make a scatterplot for CYLINDERS and GHG. Use your independent variable as CYLINDERS and dependent variable as GHG.

i. Describe the type of linear correlation- positive, negative, no correlation. Is it nonlinear?

2. Find the linear correlation coefficient between CLYLINERS and GHG.

i. Describe the linear correlation coefficient. Is it positive or negative? Is it strong, moderate or week?

ii. Use Table A6 and a = 0.05  to determine whether there is correlation between CYLINDER and GHG in the population.

3. Find the regression line between CYLINDERS and GHG.

i. What is the meaning of the slope for your regression equation?

ii. What is the meaning of y-intercept for your regression equation?

iii. Estimate the greenhouse emission gasses amount if the number of cylinders for cars could be 5.

This is an exploratory problem intended to introduce the idea of curvilinear regression. Personally, I was a bit shocked to discover that multiple LINEAR regression is the main vehicle to calculate regressions for data with nonlinear relationships...sounds a bit counter-intuitive. However, if we think of the higher-power terms (quadratic, cubic, etc.) as distinct variables, the ideas work well together.

Here is a data set for students in a gifted program. The first score (X1=GPAX1=GPA) is the students’ math grade from last year, and the second score (Y=SATY=SAT) is their SAT-M score. As this is a non-representative group (when considering the population of all students taking math classes in high school), it is not unexpected to see range-restriction effects (generally all high performing, few lower performing representatives) or ceiling effects (maximum score on the SAT-M is 800). In data such as this, it is not uncommon to see non-linear trends.

Step 1: Copy the data into your prefered statistical software program. Change the variable names to GPA and SAT if need be. Before doing any analysis, look at a scatterplot of the data with GPA on the horizontal axis and SAT on the vertical axis. Be sure to note any trends.

The following includes information for Excel users. If you are not using Excel, please disregard.

Step 2: Run a regression (Data Analysis > Regression) with SAT as the X variable. Again, be sure to note what evidence supports the assumptions for a regression analysis. Report the regression equation and the requested statistics:

SAT=SAT=  +  ×GPA×GPA
(Report regression coefficients accurate to 3 decimal places.)

R2adj=Radj2=
(Report accurate to 3 decimal places.)

Step 3: Create a third variable called GPAsq (for squared GPA). In Excel, use a formula, something like =B1^2 and fill down the rest of the column.

Step 4: Run the quadratic regression by adding the independent variable GPAsq to the model. Report the regression equation and the requested statistics:

SAT=SAT=  +  ×GPA×GPA +  ×GPA2×GPA2
(Report regression coefficients accurate to 3 decimal places.)

R2adj=Radj2=
(Report accurate to 3 decimal places.)

Step 5: Notice how the adjusted coefficient of multiple determination changed from the bivariate regression to the quadratic (multiple) regression. The next step is to determine if this more complicated model is statistically significantly better than the more parsimonious linear model.

For the multiple regression model, what was the F-ratio and the resulting P-value?
Fmodel=Fmodel=
(Report accurate to 2 decimal places.)
P=P=
(Report accurate to 3 decimal places.)

Question 4

Dr Mutasa started a new business on 1 January 2017. The following transactions took place during his first month in business

2017

1.1 Started business with N$ 100 000 in cash

1.2 Put N$ 8000 of the cash into the business bank account

1.3 Bought a van on credit from Sensei's Kung-Fu Dojo for N$ 3000

1.4 Paid rent N$ 1000 by cheque

1.5 Bought goods on credit from Roy limited for N$ 4000

1.6 Paid shop expenses N$ 1500 by cheque

1.7 Sold goes on credit to Scott Company

1.8 Paid Perkin N$ 3000 by cheque

1.9 Received a cheque from Scott Company for N$ 2000

1.10 Paid Roy limited N$ 500 by cheque

1.11 Bought goods for N$ 3000 from Roy limited on credit

1.12 Cash sales N$2000

Required : Enter the above transactions in appropriate ledger accounts, balance off each accounts as at 31 January 2017 1 mark for every correct entry and balancing off.

Absorption and Variable Costing Income Statements

During the first month of operations ended July 31, YoSan Inc. manufactured 9,800 flat panel televisions, of which 9,100 were sold. Operating data for the month are summarized as follows:

Required:

1. Prepare an income statement based on the absorption costing concept.

2. Prepare an income statement based on the variable costing concept.

3. Explain the reason for the difference in the amount of operating income reported in (1) and (2).

The operating income reported under   costing exceeds the operating income reported under  costing, due to   manufacturing costs that are deferred to a future month under   costing.

1. Absorption and Variable Costing Income Statements

   During the first month of operations ended July 31, YoSan Inc. manufactured 9,900 flat panel televisions, of which 9,100 were sold. Operating data for the month are summarized as follows:

   Sales		$1,638,000
   Manufacturing costs:
   Direct materials	$841,500
   Direct labor	247,500
   Variable manufacturing cost	217,800
   Fixed manufacturing cost	108,900	1,415,700
   Selling and administrative expenses:
   Variable	$127,400
   Fixed	58,600	186,000

   Required:

   1. Prepare an income statement based on the absorption costing concept.

   YoSan Inc.
   Absorption Costing Income Statement
   For the Month Ended July 31
   		$
   Cost of goods sold:
   	$
   		$
   		$

   2. Prepare an income statement based on the variable costing concept.

   YoSan Inc.
   Variable Costing Income Statement
   For the Month Ended July 31
   		$
   Variable cost of goods sold:
   	$
   		$
   		$
   Fixed costs:
   	$
   		$

   3. Explain the reason for the difference in the amount of operating income reported in (1) and (2).

   The operating income reported under   costing exceeds the operating income reported under   costing, due to   manufacturing costs that are deferred to a future month under   costing.

Gordon Company is highly automated and uses computerized controllers in manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of the time recorded to complete each job by the computerized controllers attached to each machine. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

A severe economic recession resulted in cutting back production and a buildup of inventory in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year:

Required:

1. Compute the company’s predetermined overhead rate for the year.

2. Compute the underapplied or overapplied overhead for the year.

3. Prepare the journal entry to show the disposal of under/overapplied overhead. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Hodges Company uses a job-order costing system and has the following information for the first week of June:

1. Direct labor and direct materials used

2. The direct labor wage rate = $5

3. The overhead rate (based on direct labor hours) = $8

4. Actual overhead costs for the week = $3,300

5. Jobs completed: Nos. 498, 501, and 503.

6. The factory had no work in process at the beginning of the week.

Required:

a. Prepare journal entries to record the direct materials, direct labor and applied overhead for each job.

b. Prepare a summary that will show the total cost assigned to each job.

c. Compute the amount of overhead over- or underapplied during the week.

d. Calculate the cost of the work in process at the end of the week.

e. Job 498 was sold. Calculate the cost of goods sold and finished goods inventory.