Score High: Expert Tips for Excelling in Accounting Modules
8. Choosing cost drivers, activity-based costing,
Choosing cost drivers, activity-based costing, activity-based management. Pumpkin Bags (PB) is a designer of high quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year, and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows: Other budget information follows: 1. Identify the cost hierarchy level for each cost category. Required 2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver. 3. Calculate the budgeted cost per unit of cost driver for each cost category. 4. Calculate the budgeted total costs and cost per unit for each product line. 5. Explain how you could use the information in requirement 4 to reducecosts.
E4-4 (Single-Step Income Statement) The financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2014. Fortunately, the controller had kept certain statistical data related to the income statement as follows.
1. The beginning merchandise inventory was $92,000 and decreased 20% during the current year.
2. Sales discounts amount to $17,000.
3.20,000 shares of common stock were outstanding for the entire year.
4. Interest expense was $20,000.
5. The income tax rate is 30%.
6. Cost of goods sold amounts to $500,000.
7. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales.
8. Four-fifths of the operating expenses relate to sales active
From the foregoing, compute the following:
(a) Total net revenue,
(b) Net income,
(c) Dividends declared, and
(d) Income attributable to controlling stockholders.
10. Raner, Harris, & Chan is a consulting firm that specializes
Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics, The firm has two offices—one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company’s most recent year is given below: Required: 1. By how much would the company’s net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns. 2. Refer to the original data. Assume that sales in Chicago increase by $50,000 next year and that sale in Minneapolis remain unchanged. Assume no change in fixed costs. (a)Prepare a new segmented income statement for the company using the above format. Show both amounts and percentages. (b) Observe from the income statement you have prepared that the contribution margin ratio for Chicago has remained unchanged at 70% (the same as in the above data) but that the segment margin ratio has changed. How do you explain the change in the segment marginratio?
11. Regarding the choice of measurement basis used for valuing biological assets, IAS 41
Regarding the choice of measurement basis used for valuing biological assets, IAS 41
(a) Sets out several ways of measuring fair value.
(b) Recommends the use of historical cost.
(c) Recommends the use of current cost.
(d) Recommends the use of present value.
Ex. 193
Lester Company sells many products. Hackenberry is one of its popular items. Below is an analysis of the inventory purchases and sales of Hackenberry for the month of March. Lester Company uses the periodic inventory system.
Purchases Sales
UnitsUnit CostUnitsSelling Price/Unit
3/1Beginning inventory100$40
3/3Purchase60$50
3/4Sales70$80
3/10Purchase200$55
3/16Sales80$90
3/19Sales60$90
3/25Sales40$90
3/30Purchase40$65
Instructions
(a)Using the FIFO assumption, calculate the amount charged to cost of goods sold for March. (Show computations)
(b)Using the weighted average method, calculate the amount assigned to the inventory on hand on March 31. (Show computations)
(c)Using the LIFO assumption, calculate the amount assigned to the inventory on hand on March 31. (Show computations)
13. 1. In a sell or process further decision, which of the following costs are relevant
1. In a sell or process further decision, which of the following costs are relevant? I. A variable production cost incurred prior to the split-off point. II. An avoidable fixed production cost incurred after the split-off point. A) Only I. B) Only II. C) Both I and II. D) Neither I nor II.
14. In the unadjusted trial balance of its worksheet for the year ended December 31, 2010, Taitum...
In the unadjusted trial balance of its worksheet for the year ended December 31, 2010, Taitum Company reported Office Equipment of $120,000.The year-end adjusting entries require an adjustment of $15,000 for depreciation expense for the office equipment. After adjustment, the following adjusted amount should be reported:
a. A debit of $105,000 for Office Equipment in the balance sheet column.
b. A credit of $15,000 for Depreciation Expense— Office Equipment in the income statement column.
c. A debit of $120,000 for Office Equipment in the balance sheet column.
d. A debit of $15,000 for Accumulated Deprecation— Office Equipment in the balance sheet column.
15. Gary Stevens and Mary James are production managers in the Consumer Electronics Division of...
Gary Stevens and Mary James are production managers in the Consumer Electronics Division of General Electronics Company, which has several dozen plants scattered in locations throughout the world. Mary manages the plant located in Des Moines, Iowa, while Gary manages the plant in El Segundo, Califor...
16. Charles Chadwick opened a business called Charlie’s Detective Service in January 20--. Set up T...
Charles Chadwick opened a business called Charlie’s Detective Service in January 20--. Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital; Charles Chadwick, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions are recorded, foot and balance the accounts if necessary. (a) Invested cash in the business, $30,000. (b) Bought office supplies for cash, $300. (c) Bought office furniture for cash, $5,000. (d) Purchased computer and printer on account, $8,000. (e) Received cash from clients for services, $3,000. (f) Paid cash on account for computer and printer purchased in transaction (d), $4,000. (g) Earned professional fees on account during the month, $9,000. (h) Paid cash for office rent for January, $1,500. (i) Paid utility bills for the month, $800. (j) Received cash from clients billed in transaction (g), $6,000. (k) Withdrew cash for personal use, $3,000
17. 5-28 (Nominal interest rate and extending credit) As a jewelry store manager, you want to offer...
5-28 (Nominal interest rate and extending credit) As a jewelry store manager, you want to offer credit with interest on outstanding balances paid monthly. To carry receivables, you must borrow funds from your bank account at a nominal 6% monthly compounding. To offset your overhead, you want to charge your customers an EAR (or EFF%) that is 2% more than the bank is charging you. What APR rate should you charge your customers?
18. A soft drink bottler incurred the following factory utility cost: $3,536 for 850 cases bottled and $
A soft drink bottler incurred the following factory utility cost: $3,536 for 850 cases bottled and $3,636 for 1,300 cases bottled. Factory utility cost is a mixed cost containing both fixed and variable components. The variable factory utility cost per case bottled is closest to:
$0.22
$4.16
$2.80
$2.72
19. You are a summer intern at the office of a local tax-preparer.
You are a summer intern at the office of a local tax-preparer. To test your basic knowledge of financial statements, your manager, who graduated from your alma mater 2 years ago, gives you the following list of accounts and asks you to prepare a simple income statement using those accounts.
Depreciation 25
General and administrative expenses 22
Sales 345
Sales expenses 18
Cost of goods sold 255
Lease expense 4
Interest expense 3
a. Arrange the accounts into a well-labeled income statement. Make sure you label and solve for gross profit, operating profit, and net profit before taxes.
b. Using a 35% tax rate, calculate taxes paid and net. profit after taxes.
c. Assuming a dividend of $1.10 per share with 4.25 million shares outstanding, calculate EPS and additions to retained earnings.
E2-2 Explain why the income statement can also be called a ""profit and loss statement."" What exactly does the word ""balance"" mean in the title of the balance sheet? Why do we balance the two halves?
Problem: P14-5 -- Reporting Liabilities (Comprehensive Bond Problem) In each of the following independent cases the company closes its books on December 31. 1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2010. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2013. The bonds yield 12%. Give entries through December 31, 2011. 2. Titania Co. sells $400,000 of 12% bonds on June 1, 2010. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2014. The bonds yield 10%. On October 1, 2011. Titania buys back $120,000 worth of bonds for $126,000 (includes accrued interest). Give entries through December 1, 2012. Instructions Round to the nearest dollar.) For the two cases prepare all of the relevant journal entries from the time of sale until the date indicated. Use the effective-interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.)
21. capital rationing
In capital rationing, alternative proposals that survive initial and secondary screening are normally evaluated in terms of a. net income. b. nonfinancial factors. c. maximum cost. d. net cash flow.
22. standard cost system
Lab Corp. uses a standard cost system. Direct labor information for Product CER for the month of October follows: Standard direct labor rate $6.00 per hour Actual direct labor rate paid $6.10 per hour Standard hours allowed for actual production 1,500 hours Labor efficiency variance--unfavorable $600 Wha...
23. How do i work this type of problem?
Hercules Company purchased a computer for $4,800 on December 1. It is estimated that annual depreciation on the computer will be $960. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: Debit Depreciation Expense, $960; Credit Accumulated...
Finding operating and free cash flows Consider the balance sheets and selected data from the income statement of Keith Corporation that follow.
a. Calculate the firm’s accounting cash flow from operations for the year ended December 31, 2003, using Equation 3.1.
Equation 3.1
Cash flow from operations=
Net profits after taxes + Depreciation and other noncash charges
b. Calculate the firm’s operating cash flow (OCF) for the year ended December 31, 2003, using Equation 3.2.
Equation 3.2
OCF=EBIT-Taxes+ Depreciation
c. Calculate the firm’s free cash flow (FCF) for the year ended December 31, 2003, using Equation 3.3.
d. Interpret, compare, and contrast your cash flow estimates in parts a, b, and c.
Equation 3.3
FCF= OCF- Net fixed asset investment (NFAI)
- Net current asset investment (NCAI)
Keith Corporation Balance Sheets
December 31
Assets
2003
2002
Cash
$1,500
$1,000
Marketable securities
1,800
1,200
Accounts receivable
2,000
1,800
Inventories
2,900
2,800
Total current assets
$8,200
$6,800
Gross fixed assets
$29,500
$28,100
Less: Accumulated depreciation
14,700
13,100
Net fixed assets
$14,800
$15,000
Total assets
$23,000
$21,800
Liabilities and Stockholders’ Equity
Accounts payable
$1,600
$1,500
Notes payable
2,800
2,200
Accruals
200
300
Total current liabilities
$4,600
$4,000
Long-term debt
$5,000
$5,000
Common stock
$10,000
$10,000
Retained earnings
3,400
2,800
Total stockholders’ equity
$13,400
$12,800
Total liabilities and stockholders’ equity
$23,000
$21,800
Income Statement Data (2003)
Depreciation expense
$11,600
Earnings before interest and taxes (EBIT)
2,700
Taxes
933
Net profits after taxes
1,400
25. ?Helmer's Rockers manufactures two? models, Standard and Premium. Weekly demand is estimated ...
?Helmer's Rockers manufactures two? models, Standard and Premium. Weekly demand is estimated to be 100 units of the Standard Model and 70 units of the Premium Model. The following per unit data? apply: