what is the total period cost for the month under the variable costing approach 636584

Aug 30, 2021 | Uncategorized

Abbitt Company, which has only one product, has provided the following data concerning its

most recent month of operations:

What is the total period cost for the month under the variable costing approach?

A) $55,200

B) $82,500

C) $137,700

D) $123,900

what is the total period cost for the month under the absorption costing approach 636585

Aug 30, 2021 | Uncategorized

Abbitt Company, which has only one product, has provided the following data concerning its

most recent month of operations:

What is the total period cost for the month under the absorption costing approach?

A) $137,700

B) $55,200

C) $41,400

D) $82,500

what is the net operating income for the month under variable costing 636586

Aug 30, 2021 | Uncategorized

Abbitt Company, which has only one product, has provided the following data concerning its

most recent month of operations:

What is the net operating income for the month under variable costing?

A) $4,900

B) $11,500

C) $6,600

D) ($11,100)

what is the net operating income for the month under absorption costing 636587

Aug 30, 2021 | Uncategorized

Abbitt Company, which has only one product, has provided the following data concerning its

most recent month of operations:

What is the net operating income for the month under absorption costing?

A) ($11,100)

B) $11,500

C) $6,600

D) $4,900

what is the unit product cost for the month under variable costing 636588

Aug 30, 2021 | Uncategorized

Feasal Company, which has only one product, has provided the following data concerning its most recent month of operations:

What is the unit product cost for the month under variable costing?

A) $71

B) $67

C) $95

D) $91

what is the unit product cost for the month under absorption costing 636589

Aug 30, 2021 | Uncategorized

Feasal Company, which has only one product, has provided the following data concerning its most recent month of operations:

What is the unit product cost for the month under absorption costing?

A) $71

B) $67

C) $95

D) $91

what is the net operating income for the month under absorption costing 636591

Aug 30, 2021 | Uncategorized

Feasal Company, which has only one product, has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under absorption costing?

A) $2,700

B) $7,500

C) $4,800

D) ($10,700)

what is the unit product cost for the month under variable costing 636592

Aug 30, 2021 | Uncategorized

Feheln Company, which has only one product, has provided the following data concerning its most recent month of operations:

What is the unit product cost for the month under variable costing?

A) $94

B) $86

C) $96

D) $104

what is the unit product cost for the month under absorption costing 636593

Aug 30, 2021 | Uncategorized

Feheln Company, which has only one product, has provided the following data concerning its most recent month of operations:

What is the unit product cost for the month under absorption costing?

A) $104

B) $94

C) $96

D) $86

what is the net operating income for the month under variable costing 636594

Aug 30, 2021 | Uncategorized

Feheln Company, which has only one product, has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under variable costing?

A) $1,000

B) $14,400

C) $13,400

D) $4,800

what is the unit product cost for the month under variable costing 636596

Aug 30, 2021 | Uncategorized

Jamil Company, which has only one product, has provided the following data concerning its most recent month of operations:

The company produces the same number of units every month, although the sales in units  vary from month to month. The company”s variable costs per unit and total fixed costs have been constant from month to month.

What is the unit product cost for the month under variable costing?

A) $49

B) $41

C) $53

D) $45

what is the unit product cost for the month under absorption costing 636597

Aug 30, 2021 | Uncategorized

Jamil Company, which has only one product, has provided the following data concerning its most recent month of operations:

The company produces the same number of units every month, although the sales in units  vary from month to month. The company”s variable costs per unit and total fixed costs have been constant from month to month.

What is the unit product cost for the month under absorption costing?

A) $45

B) $53

C) $41

D) $49

delphi s management has stipulated that the new product must earn a profit of at lea 636523

Aug 30, 2021 | Uncategorized

Delphi Company has developed a new product that will be marketed for the first time during the next fiscal year. Although the Marketing Department estimates that 35,000 units could be sold at $36 per unit, Delphi”s management has allocated only enough manufacturing capacity to produce a maximum of 25,000 units of the new product annually. The fixed expenses associated with the new product are budgeted at  $450,000 for the year. The variable expenses of the new product are $16 per unit.

Required:

a. How many units of the new product must Delphi sell during the next fiscal year in order to break even on the product?

b. What is the profit Delphi would earn on the new product if all of the manufacturing capacity allocated by management is used and the product is sold  for $36 per unit?

c. What is the degree of operating leverage for the new product if 25,000 units are  sold for $36 per unit?

d. The Marketing Department would like more manufacturing capacity to be devoted to the new product. What would be the percentage increase in net operating income for the new product if its unit sales could be expanded by 10% without any increase in fixed expenses and without any change in the unit selling price and unit variable expense?

e. Delphi”s management has stipulated that the new product must earn a profit of at least $125,000 in the next fiscal year. What unit selling price would achieve this  target profit if all of the manufacturing capacity allocated by management is usedand all of the output can be sold at that selling price?

what dollar sales must the company achieve in order to earn a net operating income o 636524

Aug 30, 2021 | Uncategorized

Parkins Company produces and sells a single product. The company”s income statement for the most recent month is given below:

There are no beginning or ending inventories.

Required:

a. Compute the company”s monthly break even point in units of product.

b. What would the company”s monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses?

c. What dollar sales must the company achieve in order to earn a net operating income of $50,000 per month?

d. The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 40 percent, but it will double the costs for fixed factory overhead. Compute the new break even point in units.

find the margin of safety in terms of dollars 636526

Aug 30, 2021 | Uncategorized

Penury Company offers two products. At present, the following represents the usual results of a month”s operations:

Required:

a. Find the break even point in terms of dollars.

b. Find the margin of safety in terms of dollars.

c. The company is considering decreasing product K”s unit sales to 80,000 and increasing product L”s unit sales to 180,000, leaving unchanged the selling price per unit, variable expense per unit, and total fixed expenses. Would you advise adopting this plan?

d. Refer to (c) above. Under the new plan, find the break even point in terms of dollars.

e. Under the new plan in (c) above, find the margin of safety in terms of dollars.

the inventory value shown on the balance sheet is generally higher under absorption 636528

Aug 30, 2021 | Uncategorized

1. The inventory value shown on the balance sheet is generally higher under absorption costing than under variable costing.

2. Under variable costing, inventoriable product costs consist of direct materials, direct labor, variable manufacturing overhead and variable selling and administration expenses.

3. Under variable costing, an increase in the fixed factory overhead will have no effect on the unit product cost.

4. Under the absorption costing method, a portion of fixed manufacturing overhead cost is allocated to each unit of product.

5. Under variable costing, it is possible to defer a portion of the fixed manufacturing overhead costs of the current period to future periods through the inventory account.

6. Under absorption costing, a portion of fixed manufacturing overhead cost is released from inventory when sales volume exceeds production volume.

7. Contribution margin and gross margin mean the same thing.

8. When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income.

9. If production equals sales for the period, absorption costing and variable costing will produce the same net operating income under LIFO.

10. When the number of units in inventories decrease between the beginning and end of the period, absorption costing net operating income will typically be greater than variable costing net operating income.

11. When viewed over the long term, accumulated net operating income will be the same for variable and absorption costing if there are no ending inventories at the end of the term.

12. Under absorption costing, the profit for a period is not affected by changes in inventory.

13. When using absorption costing, a company may be able to show a profit even if it is operating below the breakeven point.

14. Variable costing is more compatible with cost volume profit analysis than is absorption costing.

15. Just In Time (JIT) methods generally increase the difference between absorption and variable costing net operating income.

which of the following costs at a manufacturing company would be treated as a produc 636532

Aug 30, 2021 | Uncategorized

Which of the following costs at a manufacturing company would be treated as a product cost under both absorption costing and variable costing?

what is the unit product cost for the month under variable costing 636547

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the unit product cost for the month under variable costing?

A) $57

B) $53

C) $78

D) $82

what is the total period cost for the month under the variable costing approach 636548

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the total period cost for the month under the variable costing approach?

A) $179,000

B) $110,000

C) $115,000

D) $225,000

what is the total period cost for the month under the absorption costing approach 636550

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the total period cost for the month under the absorption costing approach?

A) $152,200

B) $83,300

C) $68,900

D) $58,800

what was the variable costing net operating income last year 636552

Aug 30, 2021 | Uncategorized

The following data pertain to last year”s operations at Tredder Corporation, a company that produces a single product:

What was the variable costing net operating income last year?

A) $12,000

B) $57,000

C) $2,000

D) $27,000

the total contribution margin for the month under the variable costing approach is 636554

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following  data concerning its most recent month of operations:

The total contribution margin for the month under the variable costing approach is:

A) $282,200

B) $74,700

C) $332,000

D) $12,500

the total gross margin for the month under the absorption costing approach is 636556

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following  data concerning its most recent month of operations:

The total gross margin for the month under the absorption costing approach is:

A) $245,100

B) $162,100

C) $142,500

D) $5,700

the total gross margin for the month under the absorption costing approach is 636557

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

The total gross margin for the month under the absorption costing approach is:

A) $81,200

B) $74,800

C) $64,600

D) $13,600

what is the net operating income for the month under variable costing 636558

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under variable costing?

A) $8,100

B) $15,700

C) $18,900

D) $3,200

what is the net operating income for the month under variable costing 636559

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under variable costing?

A) $7,300

B) $14,400

C) $13,700

D) $700

what is the net operating income for the month under absorption costing 636560

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under absorption costing?

A) $14,200

B) ($8,900)

C) $1,200

D) $15,400

what is the net operating income for the month under absorption costing 636561

Aug 30, 2021 | Uncategorized

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the net operating income for the month under absorption costing?

A) $17,000

B) $3,400

C) $5,800

D) $13,600

what is the total cost that would be assigned to cutterski s finished goods inventor 636569

Aug 30, 2021 | Uncategorized

Cutterski Corporation manufactures a propeller. Shown below is Cutterski’s cost structure:

In its first year of operations, Cutterski produced 60,000 propellers but only sold 54,000.

What is the total cost that would be assigned to Cutterski”s finished goods inventory at the end of the first year of operations under the variable costing method?

A) $765,000

B) $684,000

C) $804,000

D) $912,000

which costing method variable or absorption will generate a higher net operating inc 636571

Aug 30, 2021 | Uncategorized

Cutterski Corporation manufactures a propeller. Shown below is Cutterski’s cost structure:

In its first year of operations, Cutterski produced 60,000 propellers but only sold 54,000.

Which costing method (variable or absorption) will generate a higher net operating income in Cutterski”s first year of operations and by how much?

A) variable by $81,000

B) variable by $108,000

C) absorption by $81,000

D) absorption by $108,000

what is the unit product cost for the month under variable costing 636572

Aug 30, 2021 | Uncategorized

Abbey Company, which has only one product, has provided the following data concerning its most recent month of operations:

What is the unit product cost for the month under variable costing?

A) $87

B) $101

C) $112

D) $98

what is the unit product cost for the month under absorption costing 636573

Aug 30, 2021 | Uncategorized

Abbey Company, which has only one product, has provided the following data concerning its most recent month of operations:

What is the unit product cost for the month under absorption costing?

A) $101

B) $98

C) $87

D) $112

what would the net operating income be if sales increase by 25 636501

Aug 30, 2021 | Uncategorized

The following budgeted income statement was prepared by Fullton Corporation:

What would the net operating income be if sales increase by 25%?

A) $3,125

B) $3,750

C) $4,000

D) $5,000

what would be the sales at the break even point if fixed factory overhead increases 636502

Aug 30, 2021 | Uncategorized

The following budgeted income statement was prepared by Fullton Corporation:

What would be the sales at the break even point if fixed factory overhead increases by $1,700?

A) $6,700

B) $8,400

C) $8,666

D) $9,200

the break even point last year was 636503

Aug 30, 2021 | Uncategorized

Barnes Corporation manufactures skateboards and is in the process of preparing next year’s budget. The pro forma income statement for the current year is presented below.

The break even point (rounded to the nearest dollar) for Barnes Corporation for the current year is
A. $146,341.
B. $636,364.
C. $729,730.
D. $181,818.
E. $658,537.

the management of barnes corporation anticipates a 10 percent increase in total sale 636504

Aug 30, 2021 | Uncategorized

Barnes Corporation manufactures skateboards and is in the process of preparing next year’s budget. The pro forma income statement for the current year is presented below.

For the coming year, the management of Barnes Corporation anticipates a 10 percent increase in sales, a 12 percent increase in variable costs, and a $45,000 increase in fixed expenses.
The break even point for next year would be
A. $729,027.
B. $862,103.
C. $214,018.
D. $474,000.
E. $700,000.

if the dollar contribution margin per unit is increased by 10 and if total fixed exp 636505

Aug 30, 2021 | Uncategorized

Holger Incorporated, which produces and sells a single product, has provided the following

data:

Consider each of the following questions independently.

If the dollar contribution margin per unit is increased by 10% and if total fixed expense is decreased by 20%, net operating income is expected to:

A) increase by $2,000

B) increase by $12,000

C) increase by $8,000

D) increase by $16,000

if the sales volume decreases by 25 and the variable expense per unit increases by 1 636506

Aug 30, 2021 | Uncategorized

Holger Incorporated, which produces and sells a single product, has provided the following

data:

Consider each of the following questions independently.

If the sales volume decreases by 25% and the variable expense per unit increases by 15%, net operating income is expected to:

A) decrease by $19,000

B) decrease by $1,000

C) increase by $1,750

D) decrease by $15,000

consider each of the following questions independently 636507

Aug 30, 2021 | Uncategorized

Holger Incorporated, which produces and sells a single product, has provided the following

data:

Consider each of the following questions independently.

If the company”s fixed expenses increased by $8,000, how many units must be sold to  reach a target net operating income of $36,000:

A) 1,400 units

B) 2,200 units

C) 2,400 units

D) 3,200 units

if the company s sales volume in units decreases by 30 and if it desires a targeted 636508

Aug 30, 2021 | Uncategorized

Holger Incorporated, which produces and sells a single product, has provided the following

data:

Consider each of the following questions independently.

If the company”s sales volume in units decreases by 30%, and if it desires a targeted net operating income of $29,000, then the selling price should be:

A) $58.85

B) $60.75

C) $64.50

D) $75.00

if sales decrease by 500 units by how much would fixed expenses have to be reduced t 636509

Aug 30, 2021 | Uncategorized

Given the following data:

If sales decrease by 500 units, by how much would fixed expenses have to be reduced to maintain current net operating income?

A) $5,000

B) $3,000

C) $1,500

D) $2,000

the company has an opportunity to secure a special order of 800 units if it is willi 636510

Aug 30, 2021 | Uncategorized

Given the following data:

The company has an opportunity to secure a special order of 800 units if it is willing to  drop the selling price on these units to $9. In addition to the usual variable expenses, the costs of securing the special order would be $1,000. The company”s regular sales  would not be affected by the special order. If the special order is accepted, the company”s overall net operating income will:

A) increase $2,400

B) increase $1,400

C) increase $2,200

D) decrease $2,200

what is the company s break even point in sales dollars 636511

Aug 30, 2021 | Uncategorized

Junior Bodway, Inc., has provided the following budgeted data:

What is the company”s break even point in sales dollars?

A) $450,000

B) $180,000

C) $300,000

D) $500,000

how many units would the company have to sell in order to have a net operating incom 636512

Aug 30, 2021 | Uncategorized

Junior Bodway, Inc., has provided the following budgeted data:

How many units would the company have to sell in order to have a net operating income of $40,000?

A) 20,000 units

B) 9,000 units

C) 11,000 units

D) 7,333 units

at the budgeted sales level of 10 000 units what is the company s degree of operatin 636513

Aug 30, 2021 | Uncategorized

Junior Bodway, Inc., has provided the following budgeted data:

At the budgeted sales level of 10,000 units, what is the company”s degree of operating leverage?

A) 10.0

B) 6.0

C) 22.5

D) 5.0

the break even point last year was 636514

Aug 30, 2021 | Uncategorized

Pricher Corporation”s income statement for last year appears below:

The break even point last year was:

A) $1,500,000

B) $2,571,429

C) $1,250,000

D) $900,000

the degree of operating leverage last year was 636515

Aug 30, 2021 | Uncategorized

Pricher Corporation”s income statement for last year appears below:

The degree of operating leverage last year was:

A) 0.33

B) 2.33

C) 4.00

D) 3.33

if fixed selling and administrative expenses increase by 60 000 and sales remain at 636516

Aug 30, 2021 | Uncategorized

Pricher Corporation”s income statement for last year appears below:

If fixed selling and administrative expenses increase by $60,000 and sales remain at the $2,000,000 level, what is the margin of safety in sales dollars:

A) $300,000

B) $200,000

C) $500,000

D) $400,000

how many units would the company have to sell in order to have a net operating incom 636518

Aug 30, 2021 | Uncategorized

Highjinks Inc. has provided the following budgeted data:

How many units would the company have to sell in order to have a net operating income equal to 5% of total sales dollars?

A) 18,000 units

B) 20,000 units

C) 15,333 units

D) 14,286 units

the break even in sales dollars for the expected sales mix is closest to 636519

Aug 30, 2021 | Uncategorized

Douglas Corporation produces and sells two models of vacuum cleaners, Standard and Deluxe. Company records show the following data relating to these two products:

The company”s total monthly fixed expense is $15,000.

The break even in sales dollars for the expected sales mix is closest to:

A) $140,000

B) $85,000

C) $107,000

D) $98,000

if the expected monthly sales in units were divided equally between the two models 9 636520

Aug 30, 2021 | Uncategorized

Douglas Corporation produces and sells two models of vacuum cleaners, Standard and Deluxe. Company records show the following data relating to these two products:

The company”s total monthly fixed expense is $15,000.

If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe), the break even level of sales would be:

A) the same as with the expected sales mix.

B) higher than with the expected sales mix.

C) lower than with the expected sales mix.

D) cannot be determined with the available data.

what is your recommendation to management concerning which manufacturing method shou 636522

Aug 30, 2021 | Uncategorized

Candice Corporation has decided to introduce a new product. The product can be manufactured using either a capital intensive or labor intensive method. The manufacturing method will not affect the quality or sales of the product. The estimated manufacturing costs of the two methods are as follows:

The company”s market research department has recommended an introductory selling  price of $30 per unit for the new product. The annual fixed selling and administrative expenses of the new product are $500,000. The variable selling and administrative expenses are $2 per unit regardless of how the new product is manufactured.

Required:

a. Calculate the break even point in units if Candice Corporation uses the:

1. capital intensive manufacturing method.

2. labor intensive manufacturing method.

b. Determine the unit sales volume at which the net operating income is the same for the two manufacturing methods.

c. Assuming sales of 250,000 units, what is the degree of operating leverage if the company uses the:

1. capital intensive manufacturing method.

2. labor intensive manufacturing method.

d. What is your recommendation to management concerning which manufacturing method should be used?

obtain the most recently issued annual report of a publicly owned manufacturing or m 636390

Aug 30, 2021 | Uncategorized

Obtain an annual report Throughout this course, you will be asked to relate the material being studied to actual financial statements. After you complete this course, you will be able to use an organization’s financial statements to make decisions and informed judgments about that organization. The purpose of this assignment is to provide the experience of obtaining a company’s annual report. You may wish to refer to the financial statements in the report during the rest of the course.

Required:

a. Obtain the most recently issued annual report of a publicly owned manufacturing or merchandising corporation of your choice. Do not select a bank, insurance company, financial institution, or public utility. It would be appropriate to select a firm that you know something about or have an interest in. If you don’t know the name or title of a specific individual to contact, address your request to the Shareholder Relations Department. Company addresses are available from several sources, including the following reference books in the library:

Standard & Poor’s Register of Corporations, Directors and Executives,

Vol. 1–Corporations.

Moody’s Handbook of Common Stocks.

Standard & Poor’s Corporation Stock Market Encyclopedia.

Moody’s Industrial Manual.

b. Alternatively, you may be able to obtain an annual report by using information about annual report ordering. By using Intel as your firm name, for example, you will discover that the most recent financial statements can be downloaded into Microsoft Excel files for subsequent manipulation.

find read outline and prepare to discuss a brief article from a general audience or 636391

Aug 30, 2021 | Uncategorized

Read and outline an article The accounting profession is frequently in the news, not always in the most positive light. The purpose of this assignment is to increase your awareness of an issue facing the profession.

Required:

Find, read, outline, and prepare to discuss a brief article from a general audience or business audience publication about accounting and/or the accounting profession.

The article should have been published within the past eight months and should relate to accounting or the accounting profession in general; it should not be about some technical accounting issue. The appropriate topical headings to use in the Business Periodicals Index or the computer based retrieval system to which you have access are accountants, accounting, and/or accounting (specific topic).

find financial information from the set of financial statements acquired for e1 1 de 636393

Aug 30, 2021 | Uncategorized

Identify information used in making an informed decision Charlie and Maribelle Brown have owned and operated a retail furniture store for more than 30 years. They have employed an independent CPA during this time to prepare various sales tax, payroll tax, and income tax returns, as well as financial statements for themselves and the bank from which they have borrowed money from time to time. They are considering selling the store but are uncertain about how to establish an asking price.

Required:

What type of information is likely to be included in the material prepared by the CPA that may help the Browns establish an asking price for the store?

Auditor independence Using the search engine you are most comfortable with, identify at least five sources on the general topic of auditor independence. Write a brief memo to provide an update on the current status of the auditor independence tandard setting process. The Business in Practice box on page 12 should serve as the starting point for this exercise. Note: You might find it useful to contrast the opinions expressed by any of the Big 4 accounting firms to those expressed by non accounting professionals.

Find financial information From the set of financial statements acquired for E1.1, determine the following:

a. Who is the chief financial officer?

b. What are the names of the directors?

c. Which firm conducted the audit? Have the auditors reviewed the entire report?

d. What are the names of the financial statements provided?

e. How many pages of explanatory notes accompany the financial statements?

f. In addition to the financial statements, are there other reports? If so, what are they?

match the appropriate letter for the key term or concept to each definition provided 636396

Aug 30, 2021 | Uncategorized

Match the appropriate letter for the key term or concept to each definition provided (items 1–15). Note that not all key terms and concepts will be used.

1. The difference between the total amount invested by the owners and the par value or stated value of the stock issued.

2. Outflows or using up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s major operations.

3. The financial statement that is a list of the entity’s assets, liabilities, and owners’ equity at a point in time.

4. A document distributed to stockholders that contains the financial statements for the fiscal year of the reporting firm with the report of the external auditor’s examination of the financial statements.

5. A distribution of earnings to the owners of a corporation.

6. An arbitrary value assigned to a share of stock when the corporation is organized.

7. Net income available to the common stockholders divided by the average number of shares of common stock outstanding during the period.

8. Items held by an entity for sale to potential customers in the normal course of business.

9. Inflows of cash or increases in other assets, or settlement of liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity’s major operations.

10. Cash and those assets likely to be converted to cash or used to benefit the entity within one year of the balance sheet date.

11. Cumulative net income that has not been distributed to the owners of a corporation as dividends.

12. The difference between gross profit and operating expenses. Also referred to as operating income and earnings from operations.

13. Increases in net assets from incidental transactions and other events affecting an entity during a period except those that result from revenues or investments by owners.

14. A presumption that the entity will continue in existence for the indefinite future.

15. Net sales less cost of goods sold.

identify accounts by category and financial statement s listed here are a number of 636407

Aug 30, 2021 | Uncategorized

Identify accounts by category and financial statement(s) Listed here are a number of financial statement captions. Indicate in the spaces to the right of each caption the category of each item and the financial statement(s) on which the item can usually be found. Use the following abbreviations:

indicate in the spaces to the right of each caption the category of each item and th 636408

Aug 30, 2021 | Uncategorized

Identify accounts by category and financial statement(s) Listed here are a number of financial statement captions. Indicate in the spaces to the right of each caption the category of each item and the financial statement(s) on which the item can usually be found. Use the following abbreviations:

understanding financial statement relationships the information presented here repre 636410

Aug 30, 2021 | Uncategorized

Understanding financial statement relationships The information presented here represents selected data from the December 31, 2010, balance sheets and income statements for the year then ended for three firms:

Required:

Calculate the missing amounts for each firm.

calculate retained earnings from the following data calculate the retained earnings 636411

Aug 30, 2021 | Uncategorized

Calculate retained earnings From the following data, calculate the retained earnings balance as of December 31, 2010:

calculate retained earnings from the following data calculate the retained earnings 636412

Aug 30, 2021 | Uncategorized

Calculate retained earnings From the following data, calculate the retained earnings balance as of December 31, 2009:

briefly explain why the amount of cash available to stockholders computed in part a 636416

Aug 30, 2021 | Uncategorized

Calculate cash available upon liquidation of business Kimber Co. is in the process of liquidating and going out of business. The firm’s accountant has provided the following balance sheet and additional information:

It is estimated that all but 12% of the accounts receivable can be collected, and that the merchandise inventory can be disposed of in a liquidation sale for 85% of its cost. Buildings and equipment can be sold at $40,000 above book value (the difference between original cost and accumulated depreciation shown on the balance sheet), and the land can be sold at its current appraisal value of $65,000. In addition to the liabilities included in the balance sheet, $2,400 is owed to employees for their work since the last pay period, and interest of $5,250 has accrued on notes payable and long term debt.

Required:

a. Calculate the amount of cash that will be available to the stockholders if the accounts receivable are collected, the other assets are sold as described, and all liabilities and other claims are paid in full.

b. Briefly explain why the amount of cash available to stockholders (computed in part a ) is different from the amount of total owners’ equity shown in the balance sheet.

what was the average income tax rate for pope rsquo s garage for 2010 636417

Aug 30, 2021 | Uncategorized

Understanding and analyzing financial statement relationships—sales / service organization Pope’s Garage had the following accounts and amounts in its financial statements on December 31, 2010. Assume that all balance sheet items reflect account balances at December 31, 2010, and that all income statement items reflect activities that occurred during the year then ended.

Required:

a. Calculate the total current assets at December 31, 2010.

b. Calculate the total liabilities and owners’ equity at December 31, 2010.

c. Calculate the earnings from operations (operating income) for the year ended December 31, 2010.

d. Calculate the net income (or loss) for the year ended December 31, 2010.

e. What was the average income tax rate for Pope’s Garage for 2010?

f. If $16,000 of dividends had been declared and paid during the year, what was the January 1, 2010, balance of retained earnings?

calculate the difference between current assets and current liabilities for gary rsq 636418

Aug 30, 2021 | Uncategorized

Understanding and analyzing financial statement relationships— merchandising organization Gary’s TV had the following accounts and amounts in its financial statements on December 31, 2010. Assume that all balance sheet items reflect account balances at December 31, 2010, and that all income statement items reflect activities that occurred during the year then ended.

Required:

a. Calculate the difference between current assets and current liabilities for Gary’s TV at December 31, 2010.

b. Calculate the total assets at December 31, 2010.

c. Calculate the earnings from operations (operating income) for the year ended December 31, 2010.

d. Calculate the net income (or loss) for the year ended December 31, 2010.

e. What was the average income tax rate for Gary’s TV for 2010?

f. If $256,000 of dividends had been declared and paid during the year, what was the January 1, 2010, balance of retained earnings?

what is the company rsquo s average income tax rate 636419

Aug 30, 2021 | Uncategorized

Prepare an income statement, balance sheet, and statement of changes in owners’ equity; analyze results The following information was obtained from the records of Breanna, Inc.:

Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2010, and that all income statement items reflect activities that occurred during the year ended December 31, 2010. There were no changes in paid in capital during the year.

Required:

a. Prepare an income statement and statement of changes in owners’ equity for the year ended December 31, 2010, and a balance sheet at December 31, 2010, for Breanna, Inc.

Based on the financial statements that you have prepared for part a, answer the questions in parts b–e. Provide brief explanations for each of your answers and state any assumptions you believe are necessary to ensure that your answers are correct.

b. What is the company’s average income tax rate?

c. What interest rate is charged on long term debt?

d. What is the par value per share of common stock?

e. What is the company’s dividend policy (i.e., what proportion of the company’s earnings are used for dividends)?

what interest rate is charged on long term debt 636420

Aug 30, 2021 | Uncategorized

Prepare an income statement, balance sheet, and statement of changes in owners’ equity; analyze results The following information was obtained from the records of Shae, Inc.:

Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2010, and that all income statement items reflect activities that occurred during the year ended December 31, 2010. There were no changes in paid in capital during the year.

Required:

a. Prepare an income statement and statement of changes in owners’ equity for the year ended December 31, 2010, and a balance sheet at December 31, 2010, for Shae, Inc.

Based on the financial statements that you have prepared for part a, answer the questions in parts b–e. Provide brief explanations for each of your answers and state any assumptions you believe are necessary to ensure that your answers are correct.

b. What is the company’s average income tax rate?

c. What interest rate is charged on long term debt?

d. What is the par value per share of common stock?

e. What is the company’s dividend policy (i.e., what proportion of the company’s earnings is used for dividends)?

indicate the amount and effect or minus of each transaction on total assets total li 636422

Aug 30, 2021 | Uncategorized

Transaction analysis—quantitative; analyze results Kenisha Morgan owns and operates Morgan’s Furniture Emporium, Inc. The balance sheet totals for assets, liabilities, and owner’s equity at August 1, 2010, are as indicated. Described here are several transactions entered into by the company throughout the month of August.

Required:

a. Indicate the amount and effect (+ or −) of each transaction on total assets, total liabilities, and total owner’s equity, and then compute the new totals for each category. The first transaction is provided as an illustration.

b. What was the amount of net income (or loss) during August? How much were total revenues and total expenses during August?

c. What were the net changes during the month of August in total assets, total liabilities, and total owner’s equity?

d. Explain to Kenisha Morgan which transactions caused the net change in her owner’s equity during August.

e. Explain why dividend payments are not an expense, but interest is an expense.

f. Explain why the money borrowed from the bank increased assets but did not increase net income.

g. Explain why paying off accounts payable and collecting accounts receivable do not affect net income.

complete the balance sheet at december 31 2010 636424

Aug 30, 2021 | Uncategorized

Complete the balance sheet using cash flow data Following is a partially completed balance sheet for Epsico, Inc., at December 31, 2010, together with comparative data for the year ended December 31, 2009. From the statement of cash flows for the year ended December 31, 2010, you determine the following:

Net income for the year ended December 31, 2010, was $26.

Dividends paid during the year ended December 31, 2010, were $8.

Cash increased $8 during the year ended December 31, 2010.

The cost of new equipment acquired during 2010 was $15; no equipment was disposed of.

There were no transactions affecting the land account during 2010, but it is estimated that the fair market value of the land at December 31, 2010, is $42.

Required:

Complete the balance sheet at December 31, 2010.

calculate the missing amounts for each year 636425

Aug 30, 2021 | Uncategorized

Understanding income statement relationships—Levi Strauss & Co. Following are selected data from the November 30, 2008, and November 25, 2007, consolidated balance sheets and income statements for the years then ended for Levi Strauss & Co. and Subsidiaries. All amounts are reported in thousands.

Required:

Calculate the missing amounts for each year.

explain how your projected income statement for the semester is likely to impact you 636427

Aug 30, 2021 | Uncategorized

Prepare a personal balance sheet and projected income statement; explain financial statement relationships.

a. Prepare a personal balance sheet for yourself as of today. Work at identifying your assets and liabilities; use rough estimates for amounts.

b. Prepare a projected income statement for yourself for the current semester. Work at identifying your revenues and expenses, again using rough estimates for amounts.

c. Explain how your projected income statement for the semester is likely to impact your financial position (i.e., balance sheet) at the end of the semester. (Note: You are not required to prepare a projected balance sheet.)

d. Identify the major sources (and uses) of cash that you are expecting to receive (and spend) this semester. (Note: You are not required to prepare a projected statement of cash flows.)

e. Give three possible explanations why a full time college student might incur a substantial net loss during the fall semester of her junior year, yet have more cash at the end of the semester than she had at the beginning.

the break even point for the expected sales mix is round to nearest whole unit 636495

Aug 30, 2021 | Uncategorized

Mark Corporation produces two models of calculators. The Business model sells for $60, and the Math model sells for $40. The variable expenses are given below:

The fixed expenses are $75,000 per month. The expected monthly sales of each model are: Business, 1,000 units; Math, 500 units.

The break even point for the expected sales mix is (round to nearest whole unit):

A) 833 of each

B) 1,667 Business and 833 Math

C) 1,667 of each

D) 833 Business and 1,667 Math

how many units would have to be sold to break even 636500

Aug 30, 2021 | Uncategorized

The following budgeted income statement was prepared by Fullton Corporation:

How many units would have to be sold to break even?

A) 50

B) 58

C) 68

D) 75

cash flow analysis cash flows from operating activities are 635956

Aug 30, 2021 | Uncategorized

Cash Flow Analysis Cash flows from operating activities are

a. $91

b. $128

c. $140

d. $175

cash flow analysis cash flows from investing activities are 635957

Aug 30, 2021 | Uncategorized

Cash Flow Analysis Cash flows from investing activities are

a. $(67)

b. $(48)

c. $(18)

d. $(10)

cash flow analysis cash flows from financing activities are 635958

Aug 30, 2021 | Uncategorized

Cash Flow Analysis Cash flows from financing activities are

a. $(81)

b. $(69)

c. $(49)

d. $(37)

how do you interpret this amount does it mean that starbucks has 2 2 billion in cash 635964

Aug 30, 2021 | Uncategorized

Retained Earnings Take a look at the balance sheet for Starbucks. On it, retained earnings are about $2.2 billion. How do you interpret this amount? Does it mean that Starbucks has $2.2 billion in cash available to spend?

Price Ratios Peninsular Research has a client who has inquired about the valuation method best suited for comparison of companies in an industry that has the following characteristics:

Principal competitors within the industry are located in the United States, France, Japan, and Brazil.

The industry is currently operating at a cyclical low, with many firms reporting losses. The industry is subject to rapid technological change.

John Jones, CFA, recommends that the client consider the price earnings ratio, price book value ratio, and price sales ratio. Determine which one of the three valuation ratios is most appropriate for comparing companies in this industry. Support your answer with two reasons that make that ratio superior to either of the other two ratios.

what are retained earnings for the year 635965

Aug 30, 2021 | Uncategorized

Income Statements Given the following information for Smashville, Inc., construct an income statement for the year:

What are retained earnings for the year?

balance sheets given the following information for smashville inc construct a balanc 635966

Aug 30, 2021 | Uncategorized

Balance Sheets Given the following information for Smashville, Inc., construct a balance sheet:

debt and equity are not no dividends are paid next year rsquo s sales are projected 635968

Aug 30, 2021 | Uncategorized

Calculating EFN The most recent financial statements for Bradley, Inc., are shown here (assuming no income taxes):

Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s sales are projected to be $5,616. What is the external financing needed?

cash flow statement given the following information for hetrich inc calculate the op 635970

Aug 30, 2021 | Uncategorized

Cash Flow Statement Given the following information for Hetrich, Inc., calculate the operating cash flow, investment cash flow, financing cash flow, and net cash flow:

a dividend of 1 050 was paid and martin wishes to maintain a constant payout ratio n 635971

Aug 30, 2021 | Uncategorized

EFN The most recent financial statements for Martin, Inc., are shown here:

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,050 was paid, and Martin wishes to maintain a constant payout ratio. Next year’s sales are projected to be $31,000. What is the external financing needed?

what will be the price of the stock on the ex dividend date if the dividend is decla 636206

Aug 30, 2021 | Uncategorized

The Mann Company belongs to a risk class for which the appropriate discount rate is 10 percent. Mann currently has 100,000 outstanding shares selling at $100 each. The firm is contemplating the declaration of a $5 dividend at the end of the fiscal year that just began. Answer the following questions based on the Miller and Modigliani model, which is discussed in the text.

a. What will be the price of the stock on the ex dividend date if the dividend is declared?

b. What will be the price of the stock at the end of the year if the dividend is not declared?

c. If Mann makes $2 million of new investments at the beginning of the period, earns net income of $1 million, and pays the dividend at the end of the year, how many shares of new stock must the firm issue to meet its funding needs?

d. Is it realistic to use the MM model in the real world to value stock? Why or why not?

what is the ex dividend price of novis s stock if the board follows its current poli 636209

Aug 30, 2021 | Uncategorized

The net income of Novis Corporation, which has 10,000 outstanding shares and a 100 percent payout policy, is $32,000. The expected value of the firm one year hence is $1,545,600. The appropriate discount rate for Novis is 12 percent.

a. What is the current value of the firm?

b. What is the ex dividend price of Novis’s stock if the board follows its current policy?

c. At the dividend declaration meeting, several board members claimed that the dividend is too meager and is probably depressing Novis’s price. They proposed that Novis sell enough new shares to finance a $4.25 dividend.

i. Comment on the claim that the low dividend is depressing the stock price. Support your argument with calculations.

ii. If the proposal is adopted, at what price will the new shares sell and how many will be sold?

should the cash be paid today or in three years which of the two options generates t 636211

Aug 30, 2021 | Uncategorized

Taxes, Issuances Costs, and Dividends

National Business Machine Co. (NBM) has $2 million of extra cash. NBM has two choices to make use of this cash. One alternative is to invest the cash in financial assets. The resulted investment income will be paid out as a special dividend at the end of three years. In this case, the firm can invest in Treasury bills yielding 7 percent, or an 11 percent preferred stock. Only 30 percent of the dividends from investing in preferred stock would be subject to corporate taxes. Another alternative is to pay out the cash as dividends and let the shareholders invest on their own in Treasury bills with the same yield. The corporate tax rate is 35 percent, and the individual tax rate is 31 percent. Should the cash be paid today or in three years? Which of the two options generates the highest after tax income for the shareholders?

do the results of elton and gruber s study imply that firms will maximize shareholde 636213

Aug 30, 2021 | Uncategorized

In their 1970 paper on dividends and taxes, Elton and Gruber reported that the exdividend– date drop in a stock’s price as a percentage of the dividend should equal the ratio of 1 minus the ordinary income tax rate to 1 minus the capital gains rate; that is,

P_e – p_b/D =1 T_o/1 T_c

where

Pe _ The ex dividend stock price

Pb _ The stock price before it trades ex dividend

D _ The amount of the dividend

To _ The tax rate on ordinary income

Tc _ The effective tax rate on capital gains

Note: As we pointed out in the text, effective tax rate of capital gains is less than the actual tax rate, because their realization may be postponed. Indeed, because investors could postpone their realizations indefinitely, the effective rate could be zero.

a. If To = Tc = 0, how much will the stock’s price fall?

b. If To ≠ 0 and Tc = 0, how much will it fall?

c. Explain the results you found in (a) and (b).

d. Do the results of Elton and Gruber’s study imply that firms will maximize shareholder wealth by not paying dividends?

suppose the only investment choice is stock that yields 12 percent what personal tax 636214

Aug 30, 2021 | Uncategorized

After completing its capital spending for the year, Carlson Manufacturing has $1,000 extra cash. Carlson’s managers must choose between investing the cash in Treasury bonds that yield 8 percent or paying the cash out to investors who would invest in the bonds themselves.

a. If the corporate tax rate is 35 percent, what tax rate on ordinary income would make the investors equally willing to receive the dividend and to let Carlson invest the money?

b. Is the answer to part (a) reasonable? Why or why not?

c. Suppose the only investment choice is stock that yields 12 percent. What personal tax rate will make the stockholders indifferent to the outcome of Carlson’s dividend decision?

d. Is this a compelling argument for a low dividend payout ratio? Why or why not?

the bonds were sold at par what is their yield to maturity 636218

Aug 30, 2021 | Uncategorized

Suppose the Du Pont Company currently has outstanding series 4.50, nonconvertible preferred stock that pays an annual dividend of $4.50. Du Pont has also issued 11 percent bonds that will mature in 10 years. The stock and bonds have about the same risk.

a. The current price of the 4.50 preferred stock is 50 1⁄2. What is its dividend yield?

b. The bonds were sold at par. What is their yield to maturity?

c. As a financial consultant, you want to know the after tax yields for each of these investments. The corporate tax rate is 34 percent and the personal tax rate is 28 percent. Compute the after tax yields on Du Pont’s preferred stock and its bonds for each of the following groups:

i. General Motors’s tax exempt pension.

ii. General Motors Corporation.

d. Which group do you believe owns the most Du Pont stock?

she is willing to buy and sell in order to maximize her after tax returns and she ha 636220

Aug 30, 2021 | Uncategorized

1. Your aunt is in a high tax bracket and would like to minimize the tax burden of her investment portfolio. She is willing to buy and sell in order to maximize her after tax returns and she has asked for your advice. What would you suggest she do?

A Resolution of Real World Factors?

2. In the May 4, 1981, issue of Fortune, an article entitled “Fresh Evidence That Dividends Don’t Matter” stated, “All told, 115 companies of the 500 [largest industrial corporations] raised their payout every year during the period [1970–1989]. Investors in this . . . group would have fared somewhat better than investors in the 500 as a whole: the median total [annual compound] return of the 115 was 10.7% during the decade versus 9.4% for the 500.” Is this evidence that investors prefer dividends to capital gains? Why or why not?

the term of the lease is five years mercer leasing corp is in the 35 percent tax bra 636228

Aug 30, 2021 | Uncategorized

Super Sonics Entertainment is considering borrowing money at 11 percent and purchasing a machine that costs $350,000. The machine will be depreciated over five years by the straight line method and will be worthless in five years. Super Sonics can lease the machine with the year end payments of $94,200. The corporate tax rate is 35 percent. Should Super Sonics buy or lease?

2. Maxwell, Inc., is entering negotiations for the lease of equipment that has a $200,000 purchase price. Maxwell’s effective tax rate is zero. Maxwell will be negotiating the lease with Mercer Leasing Corp. The term of the lease is five years. Mercer Leasing Corp. is in the 35 percent tax bracket. There are no transaction costs to the lease. Each firm can borrow at 10 percent. What is the negotiating range of the lease?

high electricity costs have made farmer corporation s chicken plucking machine econo 636231

Aug 30, 2021 | Uncategorized

High electricity costs have made Farmer Corporation’s chicken plucking machine economically worthless. There are only two machines available to replace it. The International Plucking Machine (IPM) model is available only on a lease basis. The annual, end of year payments are $2,100 for five years. This machine will save Farmer $6,000 per year through reductions in electricity costs in each of the five years. As an alternative, Farmer can purchase a more energy efficient machine from Basic Machine Corporation (BMC) for $15,000. This machine will save $9,000 per year in electricity costs. A local bank has offered to finance the machine with a $15,000 loan. The interest rate on the loan will be 10 percent on the remaining balance and five annual principal payments of $3,000. Farmer has a target debt to asset ratio of 67 percent. Farmer is in the 34 percent tax bracket. After five years, both machines are worthless. Only straight line depreciation is allowed for chicken plucking machines. The savings that Farmer will enjoy are known with certainty, because Farmer has a long term chicken purchase agreement with State Food Products, Inc., and a four year backlog of orders.

a. Should Farmer lease the IPM machine or purchase the more efficient BMC machine?

b. Does your answer depend on the form of financing for direct purchase?

c. How much debt is displaced by this lease?

what is the annual lease payment that will make wolfson indifferent to whether it le 636233

Aug 30, 2021 | Uncategorized

Wolfson Corporation has decided to purchase a new machine that costs $3 million. The machine will be worthless after three years. Only straight line method is allowed by the IRS for this type of machine. Wolfson is in the 35 percent tax bracket. The Sur Bank has offered Wolfson a three year loan for $3 million. The repayment schedule is three yearly principal repayments of $1 million and an interest charge of 12 percent on the outstanding balance of the loan at the beginning of each year. Twelve percent is the marketwide rate of interest. Both principal repayments and interest are due at the end of each year.

Cal Leasing Corporation offers to lease the same machine to Wolfson. Lease payments of $1.2 million per year are due at the end of each of the three years of the lease.

a. Should Wolfson lease the machine or buy it with bank financing?

b. What is the annual lease payment that will make Wolfson indifferent to whether it leases the machine or purchases it?

match the appropriate letter for the key term or concept to each definition provided 636383

Aug 30, 2021 | Uncategorized

Match the appropriate letter for the key term or concept to each definition provided (items 1–10). Note that not all key terms and concepts will be used.

1. The process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions or informed judgments.

2. Accounting that recognizes revenues and expenses as they occur, even though cash receipts from revenues and cash disbursements related to expenses may occur before or after the event that causes revenue or expense recognition.

3. The process of examining the financial statements of an entity by an independent third party with the objective of expressing an opinion about the fairness of the presentation of the entity’s financial position, results of operations, changes in financial position, and cash flows.

4. Procedures that are used to keep track of an entity’s financial transactions and to accumulate the results of its operations.

5. Pronouncements of the Financial Accounting Standards Board (FASB) that constitute generally accepted accounting principles.

6. Accounting that is concerned with the use of economic and financial information to plan and control the activities of an entity and to support the management decision making process.

7. An organization, individual, or group of organizations or individuals for which accounting services are performed.

8. A unit of the federal government that is responsible for establishing regulations and ensuring that full disclosure is made to investors about large companies and their securities traded in interstate commerce.

9. Pronouncements of the Financial Accounting Standards Board and its predecessors that constitute appropriate accounting for various business transactions (principles used for reporting financial position and results of operations to investors and creditors).

10. The personal characteristic of honesty, including being forthright in dealings and communications with others.

the contribution margin reveals a positive outcome of 80 000 while the gross margin 635753

Aug 30, 2021 | Uncategorized

Dude Skis wants to create an entirely new line of skis that can be used separately to ski uphill, and then lock together into a single monoski for downhill use. It is called the Chump Ski. The company projects incremental revenues from the new line of skis of $1,000,000, as well as incremental labor costs of $200,000, incremental material costs of $400,000, overhead that is directly traceable to the new product of $120,000, and a general manufacturing overhead allocation of $80,000. The existing production equipment can accommodate the new product with no changes. The calculation of the margin on the Chump Ski line is:

The contribution margin reveals a positive outcome of $80,000, while the gross margin calculation (which includes the general overhead allocation) shows no profit at all. If management only saw the gross margin calculation, it might elect to avoid rolling out the Chump Ski line, whereas the contribution margin might be sufficiently positive to encourage an alternative course of action.

dude skis plans to acquire an automated graphics lamination machine which it will us 635754

Aug 30, 2021 | Uncategorized

Dude Skis plans to acquire an automated graphics lamination machine, which it will use to laminate graphics onto its high end skis. It plans to eliminate three direct labor positions and add one maintenance technician as a result of this change. The lamination machine costs $100,000 and will be depreciated over five years. The fully burdened cost of all three direct labor positions is $90,000, while the fully burdened cost of the new maintenance technician is $55,000. Dude’s cost accountant constructs the following table to summarize the situation:

The table reveals that Dude should install the machine, since there will be a net decline in direct costs. Additional factors to consider might be any history of machine breakdowns that could lead to the rehire of the laid off workers, as well as the risk that the machine’s manufacturer will go out of business and can therefore no longer support the machine. These are qualita tive risk factors.

dude skis closely tracks the direct cost of its skis and does so by comparing actual 635755

Aug 30, 2021 | Uncategorized

Dude Skis closely tracks the direct cost of its skis, and does so by comparing actual variable costs per unit to budgeted costs. The following report shows its direct cost analysis for January production of its low cost line of children’s introductory skis. Actual unit production = 2,703 ski pairs

The report does not include direct labor, since Dude’s management does not feel that labor costs vary sufficiently with production volumes to warrant being included in the report.

in the table there is no customer service cost at all for stuffy skis since no custo 635756

Aug 30, 2021 | Uncategorized

Dude Skis sells to Stuffy Skis, which is a high end retailer of the most expensive all mountain skis, as well as Warehouse Sports, which retails the lowest cost skis through many outlets to beginner skiers. The skis that Dude sells to Stuffy have thehighest margins, and Stuffy requires little administrative support. Warehouse buys in massive volume, but only buys low margin items, and returns 20% of its purchases under various pretexts in order to clear out its inventory at the end of the season. Dude’s management wants to know how much it earns from each customer, and whether it should drop either one. Dude’s cost accountant constructs the following table:

In the table, there is no customer service cost at all for Stuffy Skis, since no customer service positions would be eliminated if Dude were to drop Stuffy as a customer. On the other hand, there are four customer service employees assigned to the Warehouse Sports account who would be laid off if Dude were to drop that account.

The analysis reveals that Stuffy Skis produces far more contribution margin than Warehouse Sports, despite much lower revenues. However, this does not mean that Dude should eliminate Warehouse as a customer, since it still produces $110,000 of contribution margin. If Dude has a considerable amount of overhead to cover, it may be quite necessary to continue dealing with Warehouse Sports in order to retain the associated amount of contribution margin.

however expanding by yet another 10 000 units may be a bad idea since the company mu 635757

Aug 30, 2021 | Uncategorized

Dude Skis is conducting its annual budgeting process, and the cost accountant is called upon to create a profit volume table that shows the amount of profit before taxes that Dude is likely to earn at different unit volume sales levels. The company currently produces 50,000 pairs of skis per year, and this figure is unlikely to decline. He learns that the company can produce an additional 10,000 pairs of skis without incurring any additional overhead costs. However, if the company expands production by an additional 20,000 pairs, it will incur an additional $750,000 in annual overhead expenses, and will likelyalso have to reduce its prices by 10% in order to achieve that volume level. Based on this information, he constructs the following table:

The analysis reveals that Dude should certainly make every effort to increase its sales by an additional 10,000 units, since this will result in a significant improvement in its profitability. However, expanding by yet another 10,000 units may be a bad idea, since the company must accept lower per unit prices as well as more overhead. In fact, the additional growth by 20,000 units, when coupled with an increased need for working capital and reduced profitability, may put the company in serious operating difficulties.

however the accounts receivable investment is assumed to increase since the company 635758

Aug 30, 2021 | Uncategorized

To continue with the preceding example, the management of Dude Skis is concerned about the working capital impact of expanding the business by 20,000 pairs of skis, and so it asks the cost accountant for a revised analysis that includes projected working capital costs for the baseline scenario of 50,000 units, and for the highest volume scenario of 70,000 units. The following table presents this information:

The working capital assumptions in the table are that the same proportions of inventory and accounts payable will carry forward from the 50,000 unit activity level to the 70,000 unit activity level. However, the accounts receivable investment is assumed to increase, since the company will be making many of the incremental sales to a new group of retailers who are assumed to pay slower than the current group of retailers.

The working capital analysis reveals that Dude Skis would have to invest an extra $1,400,000 in its business in order to grow to a 70,000 unit level, while earning a somewhat lower profit. Clearly, the company should avoid this expansion, though the 60,000 unit sales level noted in the preceding example has a much better payoff, and should be considered.

dude skis currently has a small plastic injection molding operation in house from wh 635759

Aug 30, 2021 | Uncategorized

Dude Skis currently has a small plastic injection molding operation in house, from which it molds the tip and tail guards for its skis. A local plastic injection molding firm visits Dude Skis and offers to produce these items for $0.41 per set. Manage ment asks the cost accountant to determine whether this will result in improved profits for the company, using the assumption that the company would sell its injection molding machine if the supplier’s offer is accepted.

According to Dude’s cost records, the cost of a set of tip and tail guards is $0.56, which is comprised of the following items:

In the preceding table, the injection molder depreciation cost of $0.03 per unit would not have been included if the company had chosen to keep the machine. However, since it plans to sell the machine if it accepts the supplier’s offer, the depreciation is directly related to the decision, and so is a direct cost.

The costs comprising the overhead allocations will not decline if the company outsources this component, so the overhead is not a direct cost.

The table reveals that the direct costs associated with the analysis are lower than the supplier’s offered price, so the company should reject the outsourcing option and continue to produce the tip and tail guards in house. This decision is also reasonable from a risk management perspective, since Dude Skis would otherwise be permanently eliminating its capability to produce the part in house, which could potentially leave it at the mercy of any price increases later imposed by the supplier.

the total revenue from the proposed deal is 1 000 000 and dude rsquo s direct cost i 635760

Aug 30, 2021 | Uncategorized

Dude Skis has received an inquiry from a Japanese ski manufacturer that wants to outsource a production run of 5,000 skis. The total revenue from the proposed deal is $1,000,000 and Dude’s direct cost is projected to be $800,000, which is based on the $700,000 of materials and $100,000 of labor required to manufacture the skis. Initially, it therefore appears that Dude can earn $200,000 on the deal.

However, Dude’s production equipment is fully utilized during its single shift of operation, so this order will require employing a second shift that is paid a 10% shift differential, as well as an on site supervisor and maintenance technician. There will also be an assumed 10% scrap rate caused by having a less well trained work force on that shift. These additional costs are:

Given that these additional costs leave a paltry $10,000 profit, Dude should either reject the inquiry or negotiate a higher price. The increased costs caused by the production being outside of Dude’s normal operating range caused the deal (as proposed) to fail.

dude skis is considering an expansion of is prototype skiing platform for disabled s 635762

Aug 30, 2021 | Uncategorized

Dude Skis is considering an expansion of is prototype skiing platform for disabled skiers. It constructed 100 units as a pilot project, and sold them easily at a price of $2,000 and a direct cost of $750 each. Initial forecasts indicate that Dude could sell 5,000 units per year. Thus, the initial analysis indicates that Dude could earn a contribution margin of $6,250,000 on this new opportunity.

The trouble is that the direct costing analysis is based on the costs incurred during a pilot project. Launching a fully equipped and properly managed product line will introduce an additional $1,000,000 per year of depreciation costs, as well as $4,000,000 of overhead costs that are directly related to the product. Consequently, the new product will be more likely to earn $1,250,000 per year than the $6,250,000 that was initially indicated.

doing so will require an investment in new machinery that will add 50 000 of depreci 635765

Aug 30, 2021 | Uncategorized

Lowry Locomotion produces toy cars. Its engineering manager is considering installing an automated packaging machine on one production line located in its Chicago facility that makes toy fire trucks. Doing so will require an investment in new machinery that will add $50,000 of depreciation to overhead, and will eliminate $1.50 per unit of direct labor. The company currently allocates overhead based on the amount of direct labor consumed.

After the installation is complete, the total amount of overhead has increased from $450,000 to $500,000, while the total amount of direct labor consumed by a toy fire truck has declined from $6.00 to $4.50. The total direct labor used throughout the Chicago facility has declined from $400,000 to $350,000. The calculation of its overhead allo cation before and after the installation of automated equipment is:

Before automation, the toy fire truck consumed $6.00 of direct labor, so the amount of overhead assigned to each truck was $6.78 ($6.00 direct labor x $1.13 overhead allocation). After automation, the toy fire truck consumes $4.50 of direct labor, so the amount of overhead assigned to each truck declines to $6.44 ($4.50 direct labor x $1.43 overhead allocation). Consequently, the method of overhead allocation drives down the full cost of the fire truck.

After automation, the entire Chicago facility still uses $350,000 of direct labor, of which $250,000 is used on anoth er production line that manufactures toy racing cars. Prior to the automation, the racing car line had a total overhead allocation of $282,500 ($250,000 direct labor x $1.13 overhead allocation). Following automation, the racing car line still uses the same amount of labor, but its overhead allocation has increased to $357,500 ($250,000 direct labor x $1.43 overhead allocation).

Thus, the overhead allocation to the fire truck has declined, because its allocation base has declined, while the addition al overhead has now shifted to the racing car product, simply because its allocation base did not decline. The shift in al location between the two product lines is so extreme that the racing car line is now absorbing an additional $75,000 of overhead, even though the total amount of overhead only increased by $50,000; this is because the racing car line has proportionally more of the allocation base than it did before the automation project was completed.

lowry locomotion rsquo s cost accountant has not installed an abc system before and 635766

Aug 30, 2021 | Uncategorized

Lowry Locomotion’s cost accountant has not installed an ABC system before, and is overcome with zeal to create a highly detailed system with many cost pools and associated activity drivers. His first iteration of the implementation plan calls for data collection in the following areas:

Purchasing. Track the number of purchase orders issued, reminder contacts made to suppliers, and supplier visits.

Manufacturing. Track the number of machine minutes per batch, the number of machine setups, and the amount of time spent on rework.

Engineering. Track the time spent on production line layouts, engineering change orders, and research and devel opment.

Marketing. Track the time spent on designing new ad campaigns, the number of ad placements, and the time spent on target costing projects.

In short, the cost accountant wants to track everything about everyone. The best estimate of the cost of tracking the time usage of the 300 affected employees is one hour per week, at an average cost per hour of $30. The total data collection cost is therefore $468,000 (300 employees x $30/hour x 52 weeks). After learning of the projected data entry cost, the president prevails upon the cost accountant to begin with a pilot project that only encompasses the purchase order activity in the purchasing department. Since the purchasing department already tracks the number of purchase orders created, there is no additional data entry cost at all.

the company experiences a wide range of customer support issues with each customer w 635768

Aug 30, 2021 | Uncategorized

Lowry Locomotion’s Chicago facility has several thousand customers, most of which are retail stores and distributors. The company experiences a wide range of customer support issues with each customer, with some demanding rapid restocking intervals, cooperative marketing reimbursements, and early payment discounts. After conducting an ABC analysis that is focused on the cost of customers, Lowry arrives at the following results:

The analysis shows that Lowry should drop the 204 customers in its lowest 10th percentile, since it is losing money on them, even though it will give up $1,500,000 of revenues by doing so. This will also allow Lowry to spend more time focusing on the customers in its highest percentile, who are generating one half of the company’s profits. Also, eliminating the bottom percentile of customers will create additional production capacity, which Lowry may be able to use to bring in more profitable business.

sales through the internet are at full retail price but comprise only a small propor 635769

Aug 30, 2021 | Uncategorized

Lowry Locomotive’s Memphis facility has three distribution channels, which are Internet sales, distributors, and catalog sales. Sales through the Internet are at full retail price, but comprise only a small proportion of total sales. Distributors buy in large quantities, but also receive a 35% discount from the retail price. The catalog sales are at full retail price and have large sales volume, but the cost of creating and mailing the catalogs has increased recently. The marketing manager commissions an ABC study to examine the full cost of each channel. The results are shown in the following table:

The analysis reveals that the overhead allocated to the catalog channel is so large that its net profitability has declined to near zero. In fact, the Internet channel absorbs so much less overhead that it now generates more profit than the catalog channel, despite having six times less revenue.

however costs have not declined at all upon further investigation lowry rsquo s mana 635771

Aug 30, 2021 | Uncategorized

Lowry Locomotion conducts a targeted ABC analysis of its customer service function, and concludes that it costs $10 every time a customer calls with a complaint. The cost pool is comprised of the cost of 10 customer service representatives, as well as the cost of the facility in which they are located, depreciation on their cubicles, and a fixed monthly charge for their 10 telephone lines. The entire annual cost of this cost pool is $425,000.

Lowry receives 42,500 calls per year. Management elects to reduce the cost of customer service by reducing a variety of issues about which customers are calling. After three months, the company has reduced the number of calls by 3,800, or 9 percent of the total number of calls. However, costs have not declined at all. Upon further investigation, Lowry’s manage ment realizes that it has to reduce costs by 10 percent to eliminate one customer service employee, along with the cost of the phone line associated with that position. The cost of cubicle depreciation will not decline, since it is not practical to eliminate a single cubicle. Further, the cost of facility rent will not be eliminated under any circumstances, since the company has committed to a five year lease.

Lowry eliminates another 450 customer calls, which drops the total number of calls by 10 percent, and is able to lay off one worker and eliminate one phone line. Management now realizes that it only reduces overhead costs when it reduces customer calls in increments of 4,250 calls.

margin calculations use the following income statement for paul bunyan lumber co to 635943

Aug 30, 2021 | Uncategorized

Margin Calculations Use the following income statement for Paul Bunyan Lumber Co. to calculate gross and operating margins.

return calculations use the following balance sheet for paul bunyan lumber co along 635944

Aug 30, 2021 | Uncategorized

Return Calculations Use the following balance sheet for Paul Bunyan Lumber Co. along with the income statement in the previous question to calculate return on assets and return on equity.

based on the information above what was white co rsquo s net amount of property plan 635946

Aug 30, 2021 | Uncategorized

Balance Sheet Assets White Company assets as of December 31, 2007:

White Co. experienced the following events in 2008:

Old equipment that cost $120 and that was fully depreciated was scrapped Depreciation expense was $125

Cash payments for new equipment were $200

Based on the information above, what was White Co.’s net amount of property, plant, and equipment at the end of 2008?

a. $1,415

b. $1,535

c. $1,655

d. $1,660

cash flow analysis operating cash flow is 635952

Aug 30, 2021 | Uncategorized

Cash Flow Analysis Operating cash flow is

a. $20

b. $16

c. $12

d. $30

cash flow analysis investing cash flow is 635953

Aug 30, 2021 | Uncategorized

Cash Flow Analysis Investing cash flow is

a. $2

b. $(2)

c. $12

d. $(12)

cash flow analysis financing cash flow is 635954

Aug 30, 2021 | Uncategorized

Cash Flow Analysis Financing cash flow is

a. $8

b. $(8)

c. $4

d. $(4)

the production manager of colossal furniture mr mammoth will receive a bonus if the 635720

Aug 30, 2021 | Uncategorized

The production manager of Colossal Furniture, Mr. Mammoth, will receive a bonus if the company records a profit of $10,000 in November. The company uses a hybrid accounting system for its production of high chairs for oversized infants. Mr. Mammoth has control over the percentage of completion for units in process in the process costing portion of the cost accounting system.

The actual percentage of completion for units in process is 42%, but Mr. Mammoth calculates that if he authorizes a change to 45% completion, this will cause a higher allocation of costs to work in process, and thereby increases profits just enough to earn him the bonus.

The cost accounting manager is not aware of the bonus situation, and does not complain about what appears to be a minor increase in the percentage of completion. Mr. Mammoth receives his bonus.

the internal audit staff of colossal furniture recommends to senior management that 635721

Aug 30, 2021 | Uncategorized

The internal audit staff of Colossal Furniture recommends to senior management that the percentage of completion used in its process costing calculation be fixed at 50%, thereby eliminating the type of manipulation described in the preceding example.

In December, the production manager (still Mr. Mammoth, despite his earlier manipulations) can earn yet another bonus if the company records a profit of $20,000. Near the end of the month, it appears that the company will be $5,000 short of its profit goal. To meet his target, Mr. Mammoth releases a large amount of work into the production area on December 31. No work is actually performed on any of these new projects, but because they are now categorized as work in process, the cost accountant must apply the standard percentage of completion to them.

The cost accountant allocates $5,000 of conversion costs to the new work in process items, which shifts these costs into the balance sheet as assets, thereby reducing the cost of goods sold by $5,000. Mr. Mammoth again earns his bonus.

used when there are modifications beyond a common processing point 635723

Aug 30, 2021 | Uncategorized

1. A hybrid costing system is not:

a. An operation costing system

b. Used when there are modifications beyond a common processing point

c. Used in a pure process costing environment

d. An amalgam of process and job costing systems

2. Process costing treats an entire production process as:

a. A single job

b. A large number of separate jobs

c. A single work center

d. A large number of work centers

3. The largest problem with process costing is:

a. Assigning costs to products in an efficient manner

b. Assigning costs where individual products cannot be differentiated

c. Using an estimated percentage of completion

d. Assigning costs to identical products

california chardonnay corporation operates several wineries that press their own gra 635724

Aug 30, 2021 | Uncategorized

California Chardonnay Corporation operates several wineries that press their own grapes. During this process, there is a split off point that produces an abundant amount of grape seed oil. The company may then sell the grape seed oil to various cooking oil manufacturers, or it may engage in several straining operations to further refine the grape seed oil into a more pure form that it can then sell to cosmetics manufacturers as the primary ingredient in skin moisturizers; alternatively, the company can then add a stabilizer to the purified oil and sell it to a shaving cream manufacturer as a face shaving lubricant.

California Chardonnay has two split off points – one where the grape seed oil is separated, and another where the purified oil is split off for sale as a skin moisturizer ingredient.

each spoiled carton consumes plastic resin having a cost of 0 25 henderson rsquo s c 635729

Aug 30, 2021 | Uncategorized

Henderson Industrial manufactures plastic cartons for local dairies. The historical amount of spoilage that it experiences is 1% of all production. Each spoiled carton consumes plastic resin having a cost of $0.25. Henderson’s cost accountant includes the cost of this resin in the carton bill of materials. The line items in the bill of materials are:

The spoilage line item in the bill of materials is calculated as:

1% Probability of occurrence x $0.25 cost per unit

Henderson then multiplies the total cost in the bill of materials by the number of units produced in the period to calculate its cost of goods sold, thereby incorporating the cost of spoilage into its cost of goods.

to continue with the preceding example henderson industrial decides to stop recordin 635730

Aug 30, 2021 | Uncategorized

To continue with the preceding example, Henderson Industrial decides to stop recording normal spoilage in its bills of material, and instead records the actual cost of spoilage in a manufacturing overhead cost pool. It calculates this cost by adding up the number of spoiled cartons and multiplying by the component cost of each one. In May, the calculation is:

1,500 spoiled cartons x $0.25/unit resin cost = $375

Henderson’s cost accountant includes this cost in the manufacturing overhead cost pool, which is comprised of the following costs in May:

During May, Henderson manufactured 10,000,000 cartons. The amount of the overhead cost pool allocated to each carton is:

$205,375 / 10,000,000 cartons = $0.021 per carton

quest clothiers makers of rugged outdoor wear experiences abnormal spoilage when it 635731

Aug 30, 2021 | Uncategorized

Quest Clothiers, makers of rugged outdoor wear, experiences abnormal spoilage when it uses substandard thread on some of its outerwear, resulting in burst seams. The cost of the spoilage is $20,000, which it records as follows:

to continue with the preceding example quest clothiers sells a group of garments tha 635732

Aug 30, 2021 | Uncategorized

To continue with the preceding example, Quest Clothiers sells a group of garments that were subject to abnormal spoilage, in the amount of $2,000. Quest rarely experiences abnormal spoilage, and so prefers to account for the sale as a one time event, electing to net it against the cost of spoilage with the following entry:

micron metallic runs a large metal stamping machine that creates parts for washing m 635734

Aug 30, 2021 | Uncategorized

Micron Metallic runs a large metal stamping machine that creates parts for washing machines. In the June reporting period, it recorded $80,000 of scrap from its stamping operations. Since this amount usually represents about 5% of Micron’s cost of goods sold, which is a material amount, the controller always records scrap in a separate account. At the end of each month, a scrap hauler takes away the scrap metal and pays Micron based on the weight of the metal removed. The June payment from the scrap hauler is $800, which the controller records with the following entry:

however it would soon go out of business if it were to do so for an extended period 635737

Aug 30, 2021 | Uncategorized

Snyder Corporation manufactures small, compact global positioning satellites. All of the personnel involved in their production are so highly qualified that the company will retain them even if production levels decline. The product requires a great deal of research and development expenditures, as well as prolonged quality testing. The cost breakdown for a satellite is:

The totally variable cost of a single satellite is only $125,000, so Snyder could theoretically make money by pricing its satellites in short term pricing situations for any amount over $125,000. However, it would soon go out of business if it were to do so for an extended period of time, since the company must also pay for a significant amount of overhead costs. IfSnyder hopes to be in business for any length of time, it will need to use the long term cost per satellite of $1 million as the minimum threshold for setting prices (not including a profit margin).

however it requires substantial downtime for cleaning so the paint shop is really on 635738

Aug 30, 2021 | Uncategorized

Horton Corporation currently has four products that it is processing through its paint shop, which is its bottleneck operation. The paint shop is available for use 24 hours a day, which is 1,440 minutes per day. However, it requires substantial downtime for cleaning, so the paint shop is really only available for 1,200 minutes per day. The following production schedule shows the jobs that are scheduled to run through the paint shop during the next month, in descending order by throughput per minute.

The table shows that the paint shop bottleneck is fully utilized, and that the minimum amount of throughput per minute scheduled through it is three hundred minutes of time to paint blue widgets, at $5 of throughput per minute.

from a profit maximization perspective the sales manager should give priority to sel 635740

Aug 30, 2021 | Uncategorized

1. What is considered an acceptable method for allocating overhead?

a. The number of units of the basis of allocation is very small

b. The number of units of the basis of allocation is very large

c. There should be as many cost pools as possible

d. You should alter the allocation method every month

2. What costs should not be considered when setting a long term price?

a. Variable costs

b. Allocated manufacturing overhead

c. Salesperson commissions

d. A fair profit margin

3. From a profit maximization perspective, the sales manager should give priority to selling products:

a. That the company is selling at a discount

b. That have a large amount of throughput

c. That have a large gross margin

d. That will become obsolete soon

skips conducts a marketing survey to decide upon the features it needs to include in 635741

Aug 30, 2021 | Uncategorized

SkiPS is a maker of global positioning systems (GPS) for skiers, which they use to log how many vertical feet they ski each day. SkiPS conducts a marketing survey to decide upon the features it needs to include in its next generation of GPS device, and finds that skiers want a device they can strap to their arm or leg, and which does not require recharging during a multi day vacation.

The survey indicates that skiers are willing to pay no more than $150 for the device, while the first review of costs indicates that it will cost $160 to manufacture. At a mandated gross margin percentage of 40%, this means that the device must attain a target cost of $90 ($150 price x (1 – 40% gross margin). Thus, the design team must reduce costs from $160 to $90.

The team decides that the GPS unit requires no display screen at all, since users can plug the device into a computer to download information. This eliminates the LCD display and one computer chip. It also prolongs the battery life, since the unit no longer has to provide power to the display. The team also finds that a new microprocessor requires less power; given these reduced power requirements, the team can now use a smaller battery.

Finally, the team finds that the high impact plastic case is over engineered, and can withstand a hard impact with a much thinner shell. After the team incorporates all of these changes, it has reached the $90 cost target. SkiPS can now market a new device at a price point that allows it to earn a generous gross profit.

milagro conducts market research and concludes that the product cannot sell for more 635742

Aug 30, 2021 | Uncategorized

Milagro Corporation is developing a new espresso machine that only works with its specially developed strain of coffee bean. Milagro conducts market research and concludes that the product cannot sell for more than $200. At the company’s required gross margin of 40%, this means that the target cost of the product is $120. Management sets a maximum design duration of six months, with milestone reviews at one month intervals. The results of the month end milestone reviews are:

As the table reveals, the Milagro project team was able to stay ahead of the cost target at the end of the first two months, but then was barely able to meet the allowable variance in the third month, and finally fell behind in the fourth month. Manage ment then cancelled the project, saving itself the cost of continuing the project team for several more months when it was becoming obvious that the team would not be able to achieve the target cost.

since the total cost of the treadmill is projected to be 500 this difference represe 635743

Aug 30, 2021 | Uncategorized

Active Exercise Machines is designing a new treadmill for the home exercise market, and is having trouble pricing the laminated rubber conveyor belt. Since Active is creating a treadmill in a non standard length, the conveyor belt supplier will incur a setup cost, and must spread this cost over the projected number of treadmills to be produced. Since the setup cost is significant, the cost per unit will decline dramatically if Active orders more conveyor belts. The cost is $95 per unit if Active only orders 5,000 belts, and drops to $50 if Active orders 10,000 belts. Since the total cost of the treadmill is projected to be $500, this difference represents 9% of the total cost, which is significant enough to bring to the attention of management. Consequently, the cost accountant presents management with two projected costs for the treadmill – one at a unit volume of 5,000, and another at a unit volume of 10,000.

which activities are elements of value engineering 635745

Aug 30, 2021 | Uncategorized

1. Which activities are elements of value engineering?

a. Reducing durability

b. Reducing product features

c. Reducing the number of parts

d. All of the above

2. Why is there a milestone review in target costing?

a. To review the expenses incurred by the target costing team

b. To see if product prices have changed since the project began

c. To examine changes in product technology

d. To compare the designed cost of a product to its target cost

3. The role of a cost accountant on a target costing team does not include:

a. Compiling the cost of the product

b. Evaluating the performance of the team

c. Cost variance analysis

d. Obtaining cost information from suppliers

entwhistle electric makes compact batteries for a variety of mobile applications it 635746

Aug 30, 2021 | Uncategorized

Entwhistle Electric makes compact batteries for a variety of mobile applications. It was recently purchased by Razor Holdings, which also owns Green Lawn Care, maker of low emission lawn mowers. The reason for Razor’s purchase of Entwhistle was to give Green an assured supply of batteries for Green’s new line of all electric lawn mowers. Razor’s corporate planning staff mandates that Entwhistle set a transfer price for batteries shipped to Green that equals its cost, and also requires that Entwhistle fulfill all of Green’s needs before it can sell to any other customers. Green’s orders are highly seasonal, so Entwhistle finds that it cannot fulfill orders from its other customers at all during the high point of Green’s production season. Also, because the transfer price is set at cost, Entwhistle’s management finds that it no longer has a reason to drive down its costs, and so its production efficiencies stagnate.

After a year, Razor’s corporate staff realizes that Entwhistle has lost 80% of its previous customer base, and is now essential ly relying upon its sales to Green to stay operational. Entwhistle’s profit margin has vanished, since it can only sell at cost, and its original management team, faced with a contracting business, have all left to work for competitors.

entwhistle electric creates five tons per year of black plastic shavings as part of 635747

Aug 30, 2021 | Uncategorized

Entwhistle Electric creates five tons per year of black plastic shavings as part of its production of battery casings. Since there is no market for black plastic scrap, the company has traditionally thrown it into the trash. The annual trash haulage and environmental disposal fees associated with this scrap are about $1,000.

Entwhistle’s fellow corporate subsidiary, Green Lawn Care, learns of the black plastic scrap situation, and offers to buy it from Entwhistle for a token $10 a ton, as well as haul it away for free. Green can melt down this scrap and use it in the black plastic trim on its electric lawn mowers.

Entwhistle agrees to the deal, not only because of the minor $50 in annual revenues, but also because of the eliminated disposal fees and the mitigated risk of having any environmental issues related to the scrap.

razor holdings adopts a transfer pricing policy under which each of its subsidiaries 635748

Aug 30, 2021 | Uncategorized

Razor Holdings adopts a transfer pricing policy under which each of its subsidiaries can add a 30% margin to the additional costs transferred to buying subsidiaries. In the following scenario, its Lead Supply subsidiary sends lead components to Entwhistle Electric, which incorporates the lead into its batteries. Entwhistle sends the batteries to Green Lawn Care, which includes the batteries in its electric lawn shears.

Unfortunately, the market price for electric lawn shears is $30, so the Green Lawn Care subsidiary will only earn a profit of $1.02, or 3%, on each sale. However, the company as a whole will earn a profit of $4.25 ($1.35 for Lead Supply + $1.88 for Entwhistle + $1.02 for Green), or 14%.

Thus, Green Lawn Care likely questions why it is bothering to sell electric lawn shears, while corporate management is somewhat more pleased with the overall result.

the management of dude skis wants to know how much it will cost to increase producti 635752

Aug 30, 2021 | Uncategorized

The management of Dude Skis wants to know how much it will cost to increase production of its Drag Knuckle Skis from 5,000 units to 8,000 units, so that it can sell the additional 3,000 skis for a wholesale price (in aggregate) of $900,000. The most obvious direct cost is the cost of the wood core and graphite laminate used in the skis, at a cost of $150 per pair of skis. In addition, the company will require three additional staff whose labor cost will be $25 per pair of skis. Finally, the company must lease a lamination machine for $30,000, which it can then return to the lessor after the production run is complete.

For the purposes of this specific production increase decision, then, the associated direct costs are:

the company s break even in unit sales is closest to 635681

Aug 30, 2021 | Uncategorized

A manufacturer of tiling grout has supplied the following data:

The company”s break-even in unit sales is closest to:

A) 43,774

B) 237,143

C) 76,615

D) 80,606