Answer:
SUV Company
The incremental revenue generated from the potential project is:
= $409,940,000.
Explanation:
a) Data and Calculations:
Selling price of Standard SUVs = $45,400
Number of Standard SUVs sold annually = 4,200
Luxury SUVs' price per unit = $80,500
Number of Luxury SUVs expected to be sold = 5,600
Reduced number of Standard SUVs sold as a result = 3,300
Lost sales of Standard SUVs = 900 (4,200 - 3,300)
The incremental revenue generated from the potential project is:
Sale revenue from Luxury SUVs = $450,800,000 ($80,500 * 5,600)
Lost revenue from lost sale of
Standard SUVs = 40,860,000 ($45,400 * 900)
Incremental revenue generated = $409,940,000
b) The incremental revenue is the additional revenue generated from the introduction of the Luxury SUVs, excluding the lost revenue from the non-sale of Standard SUVs as a result of the introduction.
Journalizing Sales Transactions Enter the following transactions in a general journal. Use a 6% sales tax rate. May 1 Sold merchandise on account to J. Adams, $2,000 plus sales tax. Sale No. 488. 4 Sold merchandise on account to B. Clark, $1,800 plus sales tax. Sale No. 489. 8 Sold merchandise on account to A. Duck, $1,500 plus sales tax. Sale No. 490. 11 Sold merchandise on account to E. Hill, $1,950 plus sales tax. Sale No. 491. If an amount box does not require an entry, leave it blank.
Answer:
See the journal entries below.
Explanation:
The journal entries will look as follows:
Date Description Debit ($) (Credit)
May 1 Accounts receivable - J. Adams 2,120
Sales 2,000
Sales tax payable (6% * $2,000) 120
(To record Sale No. 488.)
May 4 Accounts receivable - B. Clark 1,908
Sales 1,800
Sales tax payable (6% * $1,800) 108
(To record Sale No. 489.)
May 8 Accounts receivable - A. Duck 1,590
Sales 1,500
Sales tax payable (6% * $1,500) 90
(To record Sale No. 490.)
May 11 Accounts receivable - E. Hill 2,067
Sales 1,950
Sales tax payable (6% * $1,950) 117
(To record Sale No. 491.)
The following information pertains to Sandhill Company.
1. Cash balance per books, August 31, $7,374.
2. Cash balance per bank, August 31, $7,338.
3. Outstanding checks, August 31, $708.
4. August bank service charge not recorded by the depositor $60.
5. Deposits in transit, August 31, $3,710.
In addition, $3,026 collected for Sandhill Company in August by the bank through electronic funds transfer. The accounts receivable collection has not been recorded Sandhill Company.
1. Prepare a bank reconciliation at August 31, 2022. (List items that increase balance as per bank & books first.)
CULLUMBER COMPANY
Bank Reconciliation
2. Journalize the adjusting entries at August 31 on the books of Cullumber Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date Account Titles and Explanation Debit Credit
July 31 (To record electronic funds transfer received by bank)
July 31 (To record bank service charge)
Answer:
Sandhill Company
Bank Reconciliation Statement for August
$
Cash balance per books 7374
Outstanding checks 708
August bank service charge (60)
Deposits in transit (3710)
Electronic funds transfer 3026
Balance per bank 7338
Adjusting entries
August bank service charge
Dr Bank charge $60
Cr Cash account $60
Being entries to record the bank charge for August
Electronic funds transfer
Dr Cash Account $3026
Cr Accounts receivable $3026
Being entries to record cash received from a customer
Explanation:
The bank reconciliation statement identifies transactions that have been correctly recorded by the bank but are yet to be correctly recorded in the books (if recorded).
Considering the given transactions;
Outstanding checks have been deducted from the cash book but are yet to be deducted from the bank.
The bank charge has been deducted from the bank balance but is yet to be recorded in the cash book.
Deposits in transit has been added to the cash book balance but is yet to be added to the bank balance hence it is deducted from the cash book balance to reconcile it to the bank balance.
Electronic funds transfer has been added to the bank balance and will be added to the cash book balance.
Only the bank charge and electronic transfer are yet to be adjusted for in the books hence adjusting entries are required for these 2 items.
ZIP Company owns 46,000 shares of the common stock of PIK Company. ZIP decided to divest itself of this investment by distributing the PIK shares in the form of a property dividend. The dividend ratio is one share of PIK for every four shares of ZIP common held by shareholders. ZIP has 184,000 common shares outstanding. On April 15, 2016, the date of declaration, PIK stock had a par value of $5 per share, a book value of $12.6 per share, and a market value of $17.6 per share.
Required:
1. Prepare any necessary journal entries. The shares were distributed on May 15, 2016, to stockholders of record on May 1, 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
2. Record appreciation of investment.
3. Record declaration of property dividend.
4. Record the entry on date of record.
5. Record the payment of the property dividend.
Answer and Explanation:
The journal entries are shown below:
2 On April 15,2016
Investment in PK common stock Dr (46,000 × ($17.6 - $12.6)) $230,000
To Gain on investment $230,000
(Being appreciation of investment is recorded)
3. On April 15,2016
Retained earnings Dr (184,000 ÷ 4 × $17.6) $809,600
To Property dividend payable $809,600
(Being declaration of property dividend)
4. No journal entry is required for date of record
5. Property dividend payable Dr $809,600
To Investment in PK common stock $809,600
(Being the payment of the property dividend is recorded)
Prepare summary journal entries to record the following transactions and events a through g for a company in its first month of operations.
a. Raw materials purchased on account, $92,000.
b. Direct materials used in production, $40,000. Indirect materials used in production, $25,000.
c. Paid cash for factory payroll, $65,000. Of this total, $45,000 is for direct labor and $20,000 is for indirect labor.
d. Paid cash for other actual overhead costs, $7,750.
e. Applied overhead at the rate of 120% of direct labor cost.
f. Transferred cost of jobs completed to finished goods, $69,000.
g. Jobs that had a cost of $69,000 were sold.
h. Sold jobs on account for $98,000.
Answer:
Journal Entries:
a. Debit Raw materials $92,000
Credit Accounts payable $92,000
To record the purchase of raw materials on account.
b. Debit Work-in-Process $40,000
Debit Manufacturing overhead $25,000
Credit Raw materials $65,000
To record direct and indirect materials.
c. Debit Payroll Expense $65,000
Credit Cash $65,000
To record the payment of payroll.
Debit Work-in-Process $45,000 (direct labor)
Debit Manufacturing overhead $20,000 (indirect labor)
Credit Payroll Expenses $65,000
To record the payment of direct and indirect labor.
d. Debit Manufacturing overhead $7,750
Credit Cash $7,750
To record the payment for other overhead costs.
e. Debit Work-in-Process $54,000
Credit Manufacturing overhead $54,000
To record overhead applied at the rate of 120% of direct labor cost.
f. Debit Finished goods $69,000
Credit Work-in-Process $69,000
To record the transfer of completed jobs to finished goods inventory.
g. Debit Cost of goods sold $69,000
Credit Finished goods $69,000
To record the cost of goods sold.
h. Debit Accounts receivable $98,000
Credit Sales revenue $98,000
To record the sale of goods on account.
Explanation:
a. Raw materials $92,000 Accounts payable $92,000
b. Work-in-Process $40,000 Manufacturing overhead $25,000 Raw materials $65,000
c. Payroll Expense $65,000 Cash $65,000 Work-in-Process $45,000 (direct labor) Manufacturing overhead $20,000 (indirect labor) Payroll Expenses $65,000
d. Manufacturing overhead $7,750 Cash $7,750
e. Work-in-Process $54,000 Manufacturing overhead $54,000 (at the rate of 120% of direct labor cost)
f. Finished goods $69,000 Work-in-Process $69,000
g. Cost of goods sold $69,000 Finished goods $69,000
h. Accounts receivable $98,000 Sales revenue $98,000
Pittman Framing's cost formula for its supplies cost is $1,110 per month plus $11 per frame. For the month of November, the company planned for activity of 621 frames, but the actual level of activity was 611 frames. The actual supplies cost for the month was $8,250. The spending variance for supplies cost in November would be closest to:
Answer:
See below
Explanation:
Spending variance for supplies = Standard cost - Actual cost
Standard cost formulae = $1,110 per month + $11 per frame
Standard cost for actual output = $1,110 + ($11 × 611)
= $1,110 + $6,721
= $7,831
But actual cost = $8,250
Therefore,
Spending variance would be
= $7,831 - $8,250
= $419 unfavourable
The spending variance for supplies cost in November is closest to $419 unfavourable
Assume the following: The standard price per pound is $2.00. The standard quantity of pounds allowed per unit of finished goods is 4 pounds. The actual quantity of materials purchased and used in production is 50,800 pounds. The actual purchase price per pound of materials was $2.20. The company produced 13,000 units of finished goods during the period. What is the materials price variance
Answer:
Direct material price variance =$10,160 unfavorable
Explanation:
Direct material price variance occurs when the actual quantity of materials are purchased at an actual price per unit higher or lower than the standard price.
Direct material price variance $
50,800 pounds should have cost (50,800× $2) = 101,600
but did cost (50,800× $2.20) = 111,760
Direct material price variance 10,160 unfavorable
Direct material price variance =$10,160 unfavorable
The materials price variance is $10,160 Unfavorable.
The difference between the standard cost and actual cost for the purchased actual quantity of material is the direct material price variance
The formulae for the direct Materials price variance is (Standard price – Actual price) * Actual quantity purchasedDirect Materials price variance = ($2.00 per pound – $2.20per pound) * 50800 pounds
Direct Materials price variance = ($0.20 * 50,800 pounds) Unfavorable
Direct Materials price variance = $10,160 Unfavorable
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Using Firm Guidance to Research a Revenue Question
•You are an accountant working for Hotel Co. Your supervisor has asked you to research what amount of revenue Hotel Co. should recognize for transactions booked by customers on Expedia.com.
•Expedia generally collects the full transaction price from the customer, then withholds a small fee (say, $10) from each transaction and remits the balance to Hotel Co.
•Should Hotel Co. record the gross transaction fee or only the net amount it receives from Expedia.com? Use nonauthoritative firm guidance to assist in your response.
•Start off with the codifications (606?), then move to the non-auth. sources.
Answer:
The Hotel Co. should record the net amount it receives from Expedia.com
Explanation:
According to codification ( 606 ) The Hotel Co. should record the net amount it receives from Expedia.com
Applying codification ( 606 ) the entity( Expedia.com ) will give the agreed upon transaction price to Hotel.co as soon as a requirement is met. and that price can be based on standalone selling prices of the service or good which is defined within the contract. but if the selling price is not clear there will be an estimate of the price, note that: Transaction prices are always not the same as the standalone selling price.
You are comparing two companies in the same industry. You have determined that Gore Corp. depreciates its plant assets over a 40-year life, whereas Ross Corp. depreciates its plant assets over a 20-year life. Discuss the implications this has for comparing the results of the two companies.
Answer:
Gore Corp. is depreciating over a longer term than Ross Corp. This means that on a yearly basis, they will have less depreciation expenses. This would give them a higher net income than Ross Corp but as a result they will then have to pay a higher tax.
Ross Corp on the other hand will be depreciating over a shorter term so this would mean that they are recognizing a higher depreciation expense per year. This would mean that their net income will be lower and by extension their taxes will be lower as well.
Stockholders of Hudson Enterprises recently received an annual dividend of $2.50 per share. Three analysts are trying to determine the value of this stock based on expected future dividends. Each analyst uses a required return of 14%. Use appropriate dividend valuation models to find the value of Hudson stock under each of the following sets of assumptions:
a. Analyst A assumes dividends will remain constant at $2.50 for the indefinite future. Show D0, D1, r, g and Analyst A's price.
b. Analyst B assumes dividends will grow at a constant rate of 7% per year for the indefinite future. Show D0, D1, r, g and Analyst B's price.
c. Analyst C assumes dividends will grow at 14% for the next 2 years and will thereafter grow at a constant rate of 7% for the indefinite future. Show D0, D1, D2, D3, r, g and Analyst C's price.
d. Analyst D uses the market multiple approach to value a company's stock. Hudson has had an average P/E of 15 and an average P/S of 2 over the last few years. Earnings per share of $3 and sales per share of $20 are forecast for next year. What is Analyst D's price based on earnings? Based on Sales?
Solutions Inc. signs a 10-year lease for a building owned by Property Inc. that is appropriately classified as an operating lease by both the lessee and lessor. Lease payments are $150,000 per year. The building has an estimated useful life of 30 years with no salvage value. Assume that the building has a fair and carrying value of $2,000,000 at the commencement of the lease, what amount would Property Inc. recognize in its income statement (ignoring taxes) for the year ended December 31, 2020
Answer: $83,333
Explanation:
Amount Property will recognize in income statement:
= Lease revenue - Depreciation
Depreciation:
= (Fair value - salvage) / useful life
= (2,000,000 - 0) / 30
= $66,667
Amount recognized in income statement:
= 150,000 - 66,667
= $83,333
Schweitzer realized that in many cases individuals could only accomplish direct human service in collaboration with official organization. What he wanted was: to help fund such organizations. to be a leader in such organizations. an absolutely personal and independent activity. to increase the number of official organizations dedicated to direct human service.
Answer: an absolutely personal and independent activity
Explanation:
Since Schweitzer realized that direct human service can only be accomplished when one collaborates with an official organization, this shows that he wanted to be an absolutely personal and independent activity.
In such case, he wants an activity that will be free from the outside control. Other options are wrong as he wasn't really interested in funding of organizations, or increasing the number of official organizations that are dedicated to direct human service.
Reuse of large amounts of copyrighted film in a documentary would not constitute a copyright infringement.
a) True
b)False
Answer:
B. False
Explanation:
I majored in Business
Jake's Sound Systems has 210,000 shares of common stock outstanding at a market price of $36 a share. Last month, Jake's paid an annual dividend in the amount of $1.593 per share. The dividend growth rate is 4%. Jake's also has 6,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 7% coupon, pay interest annually, and mature in 4.89 years. The bonds are selling at 99% of face value. The company's tax rate is 34%. What is Jake's weighted average cost of capital
Answer:
WACC = 6.92%
Explanation:
total equity = 210,000 x $36 = $7,560,000,weight of equity = 56%
cost of equity:
36 = 1.65672 / (Re - 4%)
Re = 8.602%
total bonds = $5,940,000, weight of bonds = 44%
bond YTM = 7.24%
after tax cost = 7.24% x 66% = 4.78%
WACC = (.56 x 8.602$) + (.44 x 4.78%) = 4.817 + 2.103 = 6.92%
YTM = (70 + 10/4.89) / (1990/2) = 72.04 / 995 = 7.24%
715
Russell Retail Group begins the year with inventory of $65,000 and ends the year with inventory of $55,000. During the year, the company has four purchases for the following amounts. Purchase on February 17 $ 220,000 Purchase on May 6 140,000 Purchase on September 8 170,000 Purchase on December 4 420,000 Required: Calculate cost of goods sold for the year.
Answer:
COGS= $960,000
Explanation:
Giving the following information:
Beginning inventroy= $65,000
Ending inventory= $55,000
Total Purchase= 220,000 + 140,000 + 170,000+ 420,000= $950,000
To calculate the cost of goods sold, we need to use the following formula:
COGS= beginning inventory + cost of goods purchased - ending inventory
COGS= 65,000 + 950,000 - 55,000
COGS= $960,000
Given the following information, calculate the going-in capitalization rate for the following apartment complex. In your calculations, assume no miscellaneous income and above-the-line treatment of capital expenditures.
Number of apartment units: 15
Monthly rent per unit: $3,000
Vacancy and collection loss: 10% of potential gross income
Operating expenses: 5% of effective gross income
Capital expenditures: 10% of effective gross income
Acquisition price: $3,420,000
a. 0.81%
b. 1.01%
c. 13.50%
d. 15.79%
e. 12.08%
Answer:
The correct option is b. 1.01%.
Explanation:
This can be calculated as follows:
Potential gross income = Number of apartment units * Monthly rent per unit = 15 * $3,000 = $45,000
Therefore, we have:
Details Amount ($)
Potential gross income (PGI) 45,000
Vacancy and collection loss (10% of PGI) (4,500)
Effective gross income (EGI) 40,500
Operating expenses: 5% of effective gross income (2,025)
Capital expenditures (10% of effective gross income) (4,050)
Net operating income 34,425
Acquisition price = 3,420,000
Going-in capitalization rate = Net operating income / Acquisition price = $34,425 / $3,420,000 = 0.0101, or 1.01%
Therefore, the correct option is b. 1.01%.
Grey Corp owns 100% of Blue Company. On January 1, 2017 Grey sold Blue a machine for $66,000. Immediately prior to the sale, the machine was recorded on Grey's books at a net book value of $25,000. Prior to the sale, Grey was depreciating the machine on a straight-line basis with 9 years of remaining life and no salvage value. Blue plans to adopt the same depreciation assumptions as Grey. What elimination adjustments with respect to this sale must be made to consolidated net income in 2018 (ignoring income tax effects)
Answer:
Journal 1 - Eliminate gain on sale :
Debit : Other Income ($66,000 - $25,000) $41,000
Credit : Machinery $41,000
Journal 2 - Eliminate the unrealized profit from the sale :
Debit : Accumulated depreciation $4,556
Credit : Depreciation $4,556
Explanation:
Grey Corp and Blue Company are in a group of Companies. Grey Corp is the Parent and should prepare Consolidated Financial Statements . Blue Company is a subsidiary (Grey owns more that 50 % of voting rights in Blue Company).
When preparing Consolidated Financial Statements, intragroup transaction must be eliminated. As they happen, a Company trades within its-self that is the reason they should be eliminated.
Concerning the sale of machine by Grey (Parent) to Blue (Subsidiary), we must first eliminate the Income (gain on sale) in Parent as well as the asset that sits in the Subsidiary.
Debit : Other Income ($66,000 - $25,000) $41,000
Credit : Machinery $41,000
Also, we have to eliminate the unrealized profit on the gain of the asset sold.
Debit : Accumulated depreciation $4,556
Credit : Depreciation $4,556
Deprecation calculation :
Deprecation = $41,000 ÷ 9 = $4,556
What is a factor that does NOT go into an economic analysis?
1. marginal analysis
2. societal concerns
3 ethical concerns
4 sunk costs
You are given the following information on Parrothead Enterprises:
Debt: 9,300 6.5 percent coupon bonds outstanding, with 22 years to maturity and a quoted price of 104.75. These bonds pay interest semiannually and have a par value of $1,000.
Common stock: 240,000 shares of common stock selling for $64.80 per share. The stock has a beta of.93 and will pay a dividend of $3.00 next year. The dividend is expected to grow by 5.3 percent per year indefinitely.
Preferred stock: 8,300 shares of 4.65 percent preferred stock selling at $94.30 per share. The par value is $100 per share.
Market: 11.7 percent expected return, risk-free rate of 3.75 percent, and a 23 percent tax rate.
Calculate the company's WACC. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC %
Answer:
8.19%
Explanation:
Calculation to determine the company's WACC
First step is to calculate the CAPM rate of equity
Using this formula
CAPM rate of equity = Risk free rate + market risk premium * beta
Let plug in the formula
CAPM rate of equity=3.75%+(11.7%-3.75%)*0.93
CAPM rate of equity=11.14%
Second step is to calculate the DDM rate of equity
Using this formula
DDM rate of equity= Expected dividend next year/Price today + Growth rate
Let plug in the formula
DDM rate of equity=3/64.8+5.3%
DDM rate of equity=9.93%
Third step is to calculate the Cost of equity using this formula
Cost of equity = Average of CAPM and DDM
Let plug in the formula
Cost of equity=(11.14%+9.93%)/2
Cost of equity= 10.54%
Fourth Step is to calculate the Cost of debt (after tax)
Cost of debt (after tax) using financial calculator to compute YTM
PV -1047.5
FV 1000
PMT 1000*6.5%/2 32.5
N 22*2 44
Compute I 3.05%
YTM =3.05%*2 6.10%
Tax rate = 23%
Hence,
Rate of debt (after tax) = 6.1%*(1-23%)
Rate of debt (after tax) = 4.70%
Fifth step is to calculate the Rate of preferred stock using this formula
Rate of preferred stock = Annual dividend/Current price
Let plug in the formula
Rate of preferred stock=4.65/94.3
Rate of preferred stock=4.93
Sixth step is to calculate the Weight
Market value
Source
equity 240000*64.8= 15552000
debt 1047.5*9300= 9741750
preferred stock 8300*94.3=782690
Total 26076440
equity 15552000/26076440= 59.64%
debt 9741750/26076440=37.36%
preferred stock 782690/ 26076440=3.00%
Now let calculate compute WACC
WACC= weight * cost
equity 59.64%*10.54%=6.28%
debt 37.36%* 4.70% =1.76%
preferred stock3.00%*4.93%=0.15%
WACC = 8.19%
(6.28%+1.76%+0.15%)
Therefore the company's WACC is 8.19%
A company's old machine that cost $40,000 and had accumulated depreciation of $22,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $45,000. The company also paid $33,000 cash, along with its old machine to acquire the new machine. If this transaction has commercial substance, the new machine should be recorded at:
Answer:
$45,000
Explanation:
Based on the information given we are told that the new machine had an estimated 20-year life as well as an invoice price of the amount of $45,000 which means that in a situation were the transaction has commercial substance the new machine should be recorded at invoice price of the amount of $45,000.
Therefore the new machine should be recorded at:$45,000
Pina Company has the following two temporary differences between its income tax expense and income taxes payable.
2020 2021 2022
Pretax financial income $864,000 $917,000 $909,000
Excess depreciation expense on tax return (30,400) (38,500) (9,800 )
Excess warranty expense in financial income 19,400 10,100 8,300
Taxable income $853,000 $888,600 $907,500
The income tax rate for all years is 20%.
a. Assuming there were no temporary differences prior to 2017, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, 2018, and 2019.
b. Indicate how deferred taxes will be reported on the 2019 balance sheet. Martinezâs product warranty is for 12 months.
c. Prepare the income tax expense section of the income statement for 2019, beginning with the line "Pretax financial income."
Answer:
multiply ur answer by 0.2 if you want to solve for the income tax rate
Explanation:
Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a ($17,500) loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $120,000 of salary, $10,500 of long-term capital gains, $3,500 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?
Answer: $8,000
Explanation:
A special rule allows Michelle to classify up to $25,000 as losses against her nonpassive income.
If Michelle's modified adjusted gross income (MAGI) exceeds $100,000 however, the amount that exceeds the $100,000 will be reduced by 50% and deducted from the exemption allowed.
Loss deduction = Exemption allowed - [(Nonpassive income - MAGI limit) * 50%)
= 25,000 - [ (120,000 + 10,500 + 3,500 - 100,000) * 50%]
= $8,000
Break-even sales and sales to realize operating incomeFor the current year ended March 31, Cosgrove Company expects fixed costs of $465,000, a unit variable cost of $62, and a unit selling price of $92.a. Compute the anticipated break-even sales (units).fill in the blank 1 unitsb. Compute the sales (units) required to realize operating income of $108,000.fill in the blank 2 units
Answer:
Break even point in units=15,500 units
Units to achieve target profit=19,100 units
Explanation:
Break-even point is the level of activity at which a firm must operate such that its total revenue will equal its total costs. At this point, the company makes no profit or loss because the total contribution exactly equals the total fixed costs
Break-even point (in units) is calculated using this formula:
Break even point in units = Total general fixed cost/ (selling price - Variable cost)
Break even point in units= $465,000/(92-62)=15,500 units
Units to achieve target profit = (Total general fixed cost for the period + target profit)/ contribution per unit
Units to achieve target profit of 108,000 = ($465,000+ 108,000)/ (92-62)=19,100 units
Break even point in units=15,500 units
Units to achieve target profit=19,100 units
is Company uses an ABC system. Which of the following statements is/are correct with respect to ABC? I. All cost allocation bases used in ABC systems are cost drivers. II. ABC systems are useful in manufacturing, but not in merchandising or service industries. III. ABC systems can eliminate cost distortions because ABC develops cost drivers that have a cause-and-effect relationship with the activities performed.
Answer:
I. All cost allocation bases used in ABC systems are cost drivers.
III. ABC systems can eliminate cost distortions because ABC develops cost drivers that have a cause-and-effect relationship with the activities performed.
Explanation:
I. is TRUE since the basis of ABC costing is determining, quantifying, and using cost drivers to allocate overhead costs.
III, is TRUE since the advantage of ABC costing is allocating costs based on cause and effect relationships.
II. ABC systems are useful in manufacturing, but not in merchandising or service industries. ⇒ FALSE
ABC costing can also be used for merchandising and service industries, although, it is mostly used in manufacturing businesses.The following information describes production activities of Mercer Manufacturing for the year.
Actual direct materials used 31,000 1bs. at $5.80 per lb
Actual direct labor used 10,600 hours for a total of $217,300
Actual units produced . 63,000
Budgeted standards for each unit produced are 0.50 pounds of direct material at $5.75 per pound and 10 minutes $21.50 per hour.
AQ = Actual Quantity
SQ=Standard Quantity
AP =Actual Price
SP =Standard Price
AH =Actual Hours
SH= Standard Hours
AR= Actual Rate
SR= Standard Rate
(1) Compute the direct materials price and quantity variances
(2) Compute the direct labor rate and efficiency varian rect labor rate and efficiency variances.
Answer:
Results are below.
Explanation:
To calculate the direct material price and quantity variance, we need to use the following formulas:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (5.75 - 5.8)*31,000
Direct material price variance= $1,550 unfavorable
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (63,000*0.5 - 31,000)*5.75
Direct material quantity variance= $2,875 favorable
To calculate the direct labor rate and efficiency variance, we need to use the following formulas:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Direct labor time (efficiency) variance= (10,500 - 10,600)*21.5
Direct labor time (efficiency) variance= $2,150 unfavorable
Standard quantity= (10/60)*63,000= 10,500 hours
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Direct labor rate variance= (21.5 - 20.5)*10,600
Direct labor rate variance= $10,600 favorable
Actual rate= 217,300 / 10,600= $20.5
Last month when Holiday Creations, Inc., sold 41,000 units, total sales were $282,000, total variable expenses were $214,320, and fixed expenses were $36,900. Required: 1. What is the company’s contribution margin (CM) ratio? 2. What is the estimated change in the company’s net operating income if it can increase total sales by $1,700? (Do not round intermediate calculations.)
Answer:
1. Company’s contribution margin (CM) ratio = 24%
2. Estimated change in the company’s net operating income = $408
Explanation:
1. What is the company’s contribution margin (CM) ratio?
Contribution margin (CM) = Total sales - Total variable expenses = $282,000 - $214,320 = $67,680
Contribution margin (CM) ratio = Contribution margin / Total sales = $67,680 / $282,000 = 0.24, or 24%
2. What is the estimated change in the company’s net operating income if it can increase total sales by $1,700? (Do not round intermediate calculations.)
Estimated change in the company’s net operating income = Increase total in sales * Contribution margin (CM) ratio = $1.700 * 24% = $408
Eco Cycle, an eco-friendly bicycle manufacturer has developed a new product known as Green Ride. Green Ride is a stationary bicycle for home use which generates power for electronics and household appliances, such as televisions, video game consoles, dishwashers, and washing machines. Given the recent shift toward sustainable living, renewable energy sources, and a focus on positively impacting climate change, Eco Cycle expects this product to do well in the market. While the company knows that all consumers follow a similar adoption process for products, not all consumers follow it at the same time. In one or more fully formed paragraphs, identify each of the five types of adopters and explain in detail the characteristics of each type of adopter for Eco Cycle and the Green Ride.
Answer:
Explanation:
The Green Ride is an ecologically friendly bicycle product from Eco-Cycle. It is to be utilized at home to produce power for gadgets and family things in this way giving an inexhaustible wellspring of energy.
The milestone book " Diffusion of Innovations" by sociologist Everett Rogers in 1962 originally sorted the adopter types premise on specific attributes as recorded beneath:
1) Innovators: These arrangement of individuals receive new innovation or product as they are recently dispatched. This arrangement of individuals are prepared to face challenges and they are the boldest. For this situation, some corporates may get intrigued to evaluate the Green Ride alternative to perceive how it tends to be utilized to save cost on the force front.
2) Early Adopters: This arrangement of individuals make trends and need to see them on the ball, subsequently they will become the early adopters. For this situation, individuals who are lethargic towards open-air exercises will get their hands on this bicycle as it is locally (home) established and be the early adopter of this product.
3) Early Majority: These arrangements of individuals settle on choices dependent on utilities and the useful benefits of the product. For this situation, everyone who is worried about the use and benefits of Green Ride will get input from Early Adopters and can continue likewise.
4) Late Majority: This arrangement of individuals imparts a few qualities to the Early Majority set of individuals yet they are generally careful prior to submission. For this situation, youngsters may not get intrigued to utilize a bicycle which is kept to Indoors as it were.
5) Laggards: These arrangements of individuals are delayed to adjust to new innovation or product. They will in general embrace just when they are constrained. For this situation, the arrangement of individuals who are customary bicycle clients won't be prepared to acknowledge this new product except if compelled to do as such because of the limited development during circumstances such as the present.
TB MC Qu. 8-199 The Puyer Corporation makes and sells ... The Puyer Corporation makes and sells only one product called a Deb. The company is in the process of preparing its Selling and Administrative Expense Budget for next year. The following budget data are available: Monthly Fixed Cost Variable Cost Per Deb Sold Sales commissions $ 0.90 Shipping $ 1.40 Advertising $ 50,000 $ 0.20 Executive salaries $ 60,000 Depreciation on office equipment $ 20,000 Other $ 40,000 All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the company has budgeted to sell 17,000 Debs in March, then the average budgeted selling and administrative expenses per unit sold for March is closest to: (Round your intermediate calculations to 2 decimal places.)
Answer: $10
Explanation:
First, we need to calculate the total budgeted selling and administrative expenses for March which will be:
Advertising = $50,000
Add: Executive salaries = $60,000
Add: Depreciation on office equipment = $20,000
Add: Other = $40,000
Total = $170,000
Since the company has budgeted to sell 17,000 Debs in March, then the average budgeted selling and administrative expenses per unit sold for March is:
= $170000 / 17000
= $10
You have decided to start a lawn service business to help pay your tuition so that you can complete your undergraduate accounting degree. You plan to provide various lawn maintenance services that will include lawn mowing services, aeration and fertilization. You and two of your friends have agreed to work for you in this new business endeavor. Which of the following would best describe organizing for your new business?
A. Preparing monthly billing statements for clients.
B. Determining the types of lawn services that you will provide for clients.
C. Providing employees with the authority to make decisions regarding a client.
D. Hiring and training new employees.
Answer:
B. Determining the types of lawn services that you will provide for clients.
Explanation:
As can be seen in the question above, you have decided to open a gardening business. However, as we know, gardening is very broad and many services can be associated with it. In order not to leave your business disorganized and to define the service you are offering, you have organized your business by determining the types of lawn services that your business offers, such as lawn mowing, aeration and fertilization.
The ___ function returns the year portion of the data/time available
Answer:
The Excel YEAR function returns the year component of a date as a 4-digit number.
Explanation:
Smith and Sons, Inc. Income Statement (in millions)
2016 2015
Net sales 10,300 9,800
Cost of goods sold (5,500) (5,200)
Gross profit 4,800 4,600
Selling and administrative expenses (2,800) (2,700)
Income from operations 2,000 1,900
Interest expense (300) (250)
Income before income taxes 1,700 1,650
Income tax expense (420) (400)
Net income 1,280 1,250
Smith and Sons, Inc. Balance Sheet
Assets
Current assets
Cash and cash equivalents 450 650
Accounts receivable 900 800
Inventory 750 900
Other current assets 400 250
Total current assets 2,500 2,600
Property, plant & equipment, net 2,350 2,250
Other assets 5,700 5,900
Total Assets 10,550 10,750
Liabilities and Stockholders' Equity
Current liabilities 3,250 3,150
Long-term liabilities 5,000 5,400
Total liabilities 8,250 8,550
Stockholders' equity-common 2,300 2,200
Total Liabilities and Stockholders' Equity 10,550 10,750
Required:
Calculate the quick ratio for Smith & Sons, Inc., for 2015 and 2016.
Answer:
2015 Quick Ratio 0.54
2016 Quick Ratio 0.54
Explanation:
Calculation to determine the quick ratio for Smith & Sons, Inc., for 2015 and 2016
Using this formula
Quick Ratio = Quick assets/Current liabilities
Let plug in the formula
2015 Quick Ratio = (2,600-900)/3150
2015 Quick Ratio= 0.54
2016 Quick Ratio = (2500-750)/3,250
2016 Quick Ratio = 0.54
Therefore the quick ratio for Smith & Sons, Inc., for 2015 is 0.54 and 2016 is 0.54
