Use the information in Exercise 22-24 and the following additional information to prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31. a. Cost of goods sold is 55% of sales. b. Inventory at the end of June is $80,000 and at the end of July is $60,000. c. Salaries payable on June 30 are $50,000 and are expected to be $60,000 on July 31. d. The equipment account balance is $1,600,000 on July 31. On June 30, the accumulated depreciation on equipment is $280,000. e. The $6,600 cash payment of interest represents the 1% monthly expense on a bank loan of $660,000. f. Income taxes payable on July 31 are $30,720, and the income tax rate applicable to the company is 30%. g. The only other balance sheet accounts are: Common Stock, with a balance of $600,000 on June 30; and Retained Earnings, with a balance of $964,000 on June 30. Information from Exercise 22-24: Following information is for Acco Co. a. Beginning cash balance on July 1: $50,000. b. Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,720,000; June (actual), $1,200,000; and July (budgeted), $1,400,000. c. Payments on merchandise purchases: 60% in the month of purchase and 40% in the month following purchase. Purchases amounts are: June (actual), $700,000; and July (budgeted), $750,000. d. Budgeted cash disbursements for salaries in July: $275,000. e. Budgeted depreciation expense for July: $36,000. f. Other cash expenses budgeted for July: $200,000. g. Accrued income taxes due in July: $80,000. h. Bank loan interest paid in July: $6,600.
> You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $1,000,000 investment and is expected to
> Jansen Company reports the following for its ski department for the year 2015. All of its costs are direct, except as noted. Prepare a (1) departmental income statement for 2015 and (2) departmental contribution to overhead report for 2015. (3) Based o
> Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow. De
> Jessica Porter works in both the jewelry department and the hosiery department of a retail store. Porter assists customers in both departments and arranges and stocks merchandise in both departments. The store allocates Porter’s $30,000
> L’Oréal reports the following for a recent year for the major divisions in its cosmetics branch. 1. Compute profit margin for each division. State your answers as percents, rounded to two decimal places. Which Lâ
> Pirate Seafood Company purchases lobsters and processes them into tails and flakes. It sells the lobster tails for $21 per pound and the flakes for $14 per pound. On average, 100 pounds of lobster are processed into 52 pounds of tails and 22 pounds of fl
> Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing). During 2015, the departments had the following direct expenses and occupied the following amount of floor space. The
> Heart & Home Properties is developing a subdivision that includes 600 home lots. The 450 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 150 lots in the Hilltop section offer unobstructed views
> The trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturing costs. The trailer division has capacity
> Best Ink produces ink-jet printers for personal computers. It received an order for 500 printers from a customer. The following information is available for this order. 1. Compute the company’s manufacturing cycle time. 2. Compute the
> Oakwood Company produces maple bookcases to customer order. It received an order from a customer to produce 5,000 bookcases. The following information is available for the production of the bookcases. 1. Compute the company’s manufact
> ZNet Co. is a web-based retail company. The company reports the following for 2015. The company’s CEO believes that sales for 2016 will increase by 20%, and both profit margin (%) and the level of average invested assets will be the s
> Kraft Foods Group reports the following for two of its divisions for a recent year. All numbers are in millions of dollars. For each division, compute (1) return on investment, (2) profit margin, and (3) investment turnover for the year. Round answers t
> Refer to information in Exercise 24-9. Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most efficient at generating sales from average invested ass
> Marvin Dinardo manages an auto dealership’s service department. Costs and expenses for a recent quarter for his department follows. List the controllable costs that would appear on a responsibility accounting report for the service depa
> Refer to the information in Exercise 23-8 and compute the (1) direct materials price and (2) direct materials quantity variances. Indicate whether each variance is favorable or unfavorable. Information from Exercise 23-8: A manufactured product has the
> A manufactured product has the following information for June. Compute the (1) standard cost per unit and (2) total cost variance for June. Indicate whether the cost variance is favorable or unfavorable. Standard Actual Direct materials.. (6 Ibs. @
> Resset Co. provides the following results of April’s operations: F indicates favorable and U indicates unfavorable. Applying the management by exception approach, which of the variances are of greatest concern? Why? Direct material
> Bay City Company’s fixed budget performance report for July follows. The $647,500 budgeted total expenses include $487,500 variable expenses and $160,000 fixed expenses. Actual expenses include $158,000 fixed expenses. Prepare a flexibl
> Comp Wiz sells computers. During May 2015, it sold 350 computers at a $1,200 average price each. The May 2015 fixed budget included sales of 365 computers at an average price of $1,100 each. 1. Compute the sales price variance and the sales volume varian
> Blaze Corp. applies overhead on the basis of direct labor hours. For the month of March, the company planned production of 8,000 units (80% of its production capacity of 10,000 units) and prepared the following budget: During March, the company operate
> James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 8,000 units (80% of its production capacity of 10,000 units) and prepared the following overhead budget: During May, the company op
> Refer to the information from Exercise 23-19. Compute the (1) overhead volume variance and (2) overhead controllable variance. Information from Exercise 23-19: World Company expects to operate at 80% of its productive capacity of 50,000 units per month.
> Tempo Company’s fixed budget (based on sales of 7,000 units) for the first quarter of calendar year 2015 reveals the following. Prepare flexible budgets following the format of Exhibit 23.3 that show variable costs per unit, fixed costs
> World Company expects to operate at 80% of its productive capacity of 50,000 units per month. At this planned level, the company expects to use 25,000 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate
> Refer to the information from Exercise 23-17. Compute and interpret the following. 1. Variable overhead spending and efficiency variances. 2. Fixed overhead spending and volume variances. 3. Controllable variance. Information from Exercise 23-17: Sedona
> Sedona Company set the following standard costs for one unit of its product for 2015. The $5.60 ($4.00 1 $1.60) total overhead rate per direct labor hour is based on an expected operating level equal to 75% of the factory’s capacity o
> Refer to Exercise 23-13. Hart Company records standard costs in its accounts and its materials variances in separate accounts when it assigns materials costs to the Work in Process Inventory account. 1. Show the journal entry that both charges the direct
> Hart Company made 3,000 bookshelves using 22,000 board feet of wood costing $266,200. The company’s direct materials standards for one bookshelf are 8 board feet of wood at $12 per board foot. 1. Compute the direct materials price and quantity variances
> Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. During June the company incurred the following actual costs to produce 9,000 units. Compute the (1) direct materials price and
> Hutto Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. During May the company incurred the following actual costs to produce 9,000 units. Compute the (1) direct materials price and
> Refer to the information in Exercise 23-8 and compute the (1) direct labor rate and (2) direct labor efficiency variances. Indicate whether each variance is favorable or unfavorable. Information from Exercise 23-8: A manufactured product has the followi
> JPAK Company manufactures and sells mountain bikes. It normally operates eight hours a day, five days a week. Using this information, classify each of the following costs as fixed or variable. If additional information would affect your decision, describ
> Refer to Exercise 22-8. For April, May, and June, prepare (1) a direct labor budget and (2) a factory overhead budget. Data from Exercise 22-8: Rad Co. provides the following sales forecast and production budget for the next four months: The company p
> The production budget for Manner Company shows units to be produced as follows: July, 620; August, 680; September, 540. Each unit produced requires two hours of direct labor. The direct labor rate is currently $20 per hour but is predicted to be $21 per
> Refer to the information in Exercise 22-3. In addition, each finished unit requires five pounds of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs. Beginni
> Hospitable Co. provides the following sales forecast for the next four months: The company wants to end each month with ending finished goods inventory equal to 25% of next month’s sales. Finished goods inventory on April 1 is 190 uni
> Karim Corp. requires a minimum $8,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $8,400 and th
> Jasper Company has sales on account and for cash. Specifically, 70% of its sales are on account and 30% are for cash. Credit sales are collected in full in the month following the sale. The company forecasts sales of $525,000 for April, $535,000 for May,
> Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash disbursements (excluding cash disbursements for loan principal and interest payments) for the first three months of next year. According to a credit a
> Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 75,000 units. The following unit sales of the transmissions are expected during t
> Fortune, Inc., is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are forecasted at 45,000 for January, 55,000 for February, and 50,000 for March. Cost of goods sold is $1
> Tyler Co. predicts the following unit sales for the next four months: April, 3,000 units; May, 4,000 units; June, 6,000 units; and July, 2,000 units. The company’s policy is to maintain finished goods inventory equal to 30% of the next month’s sales. At
> Kelsey is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for merchandise for the next three months follow: Sales are 20% cash and 80% on credit. All credit sales are collected in the month following the
> Castor, Inc., is preparing its master budget for the quarter ended June 30. Budgeted sales and cash payments for merchandise for the next three months follow: Sales are 50% cash and 50% on credit. All credit sales are collected in the month following t
> Hector Company reports the following sales and purchases data. Payments for purchases are made in the month after purchase. Selling expenses are 10% of sales, administrative expenses are 8% of sales, and both are paid in the month of sale. Rent expense o
> Big Sound, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy calls for ending inventory in each month to equal 20% of the next month’s budgeted cost of goods
> Quick Dollar Company purchases all merchandise on credit. It recently budgeted the following month-end accounts payable balances and merchandise inventory balances. Cash payments on accounts payable during each month are expected to be: May, $1,600,000;
> Hardy Company’s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 20% of the next month’s budgeted cost of goods sold. All merchandise is purchased on credit, and 50% of the p
> Use the following information to prepare the July cash budget for Acco Co. It should show expected cash receipts and cash disbursements for the month and the cash balance expected on July 31. a. Beginning cash balance on July 1: $50,000. b. Cash receipts
> Walker Company prepares monthly budgets. The current budget plans for a September ending inventory of 30,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Bud
> Mike’s Motors Corp. manufactures motors for dirt bikes. The company requires a minimum $30,000 cash balance at each month-end. If necessary, the company takes a loan to meet this requirement, at a cost of 2% interest per month (paid at
> Use the following information to prepare the September cash budget for PTO Manufacturing Co. The following information relates to expected cash receipts and cash disbursements for the month ended September 30. a. Beginning cash balance, September 1, $40,
> Foyert Corp. requires a minimum $30,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at month end. The cash balance on October 1 is $30,000
> For each of the following situations, identify (1) the case as either (a) a present or a future value and (b) a single amount or an annuity, (2) the table you would use in your computations (but do not solve the problem), and (3) the interest rate and
> a. How much would you have to deposit today if you wanted to have $60,000 in four years? Annual interest rate is 9%. b. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 8% on your investments, how
> Starr Company decides to establish a fund that it will use 10 years from now to replace an aging production facility. The company will make a $100,000 initial contribution to the fund and plans to make quarterly contributions of $50,000 beginning in thre
> Ornamental Sculptures Mfg. manufactures garden sculptures. Each sculpture requires 8 pounds of direct materials at a cost of $3 per pound and 0.5 direct labor hours at a rate of $18 per hour. Variable manufacturing overhead is charged at a rate of $3 per
> MCO Leather Goods manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $4 per pound and 0.8 direct labor hours at a rate of $16 per hour. Variable manufacturing overhead is charged at a rate of $2 per direct labor ho
> Blue Wave Co. predicts the following unit sales for the coming four months: September, 4,000 units; October, 5,000 units; November, 7,000 units; and December, 7,600 units. The company’s policy is to maintain finished goods inventory equal to 60% of the n
> Electro Company budgets production of 450,000 transmissions in the second quarter and 520,000 transmissions in the third quarter. Each transmission requires 0.80 pounds of a key raw material. Electro Company aims to end each quarter with an ending invent
> Spiller Corp. plans to issue 10%, 15-year, $500,000 par value bonds payable that pay interest semiannually on June 30 and December 31. The bonds are dated December 31, 2015, and are issued on that date. If the market rate of interest for the bonds is 8%
> Otto Co. borrows money on April 30, 2015, by promising to make four payments of $13,000 each on November 1, 2015; May 1, 2016; November 1, 2016; and May 1, 2017. 1. How much money is Otto able to borrow if the interest rate is 8%, compounded semiannually
> C&H Ski Club recently borrowed money and agrees to pay it back with a series of six annual payments of $5,000 each. C&H subsequently borrows more money and agrees to pay it back with a series of four annual payments of $7,500 each. The annual int
> Dave Krug finances a new automobile by paying $6,500 cash and agreeing to make 40 monthly payments of $500 each, the first payment to be made one month after the purchase. The loan bears interest at an annual rate of 12%. What is the cost of the automobi
> Rad Co. provides the following sales forecast and production budget for the next four months: The company plans for finished goods inventory of 120 units at the end of June. In addition, each finished unit requires 5 pounds of raw materials and the com
> Addison Co. budgets production of 2,400 units during the second quarter. In addition, information on its direct labor and its variable and fixed overhead is shown below. For the second quarter, prepare (1) a direct labor budget and (2) a factory overhead
> Rida, Inc., a manufacturer in a seasonal industry, is preparing its direct materials budget for the second quarter. It plans production of 240,000 units in the second quarter and 52,500 units in the third quarter. Raw material inventory is 43,200 pounds
> Health Co-op is an outpatient surgical clinic that wants to better understand its costs. It decides to prepare an activity-based cost analysis, including an estimate of the average cost of both general surgery and orthopedic surgery. The clinicâ
> Singh and Smythe is an architectural firm that provides services for residential construction projects. The following data pertain to a recent reporting period. 1. Using ABC, compute the firm’s activity overhead rates. Form activity c
> Consider the following data for two products of Vigano Manufacturing. 1. Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line. 2. If the market price for Product A is $20
> Refer to the information in Exercise C-1 to answer the following requirements. 1. Using ABC, compute the overhead cost per unit for each product line. 2. Determine the total cost per unit for each product line if the direct labor and direct materials cos
> Real Cool produces two different models of air conditioners. The company produces the mechanical systems in their components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and
> Google generates much of its revenue by providing online advertising. It is said that: “Activity-based costing is only useful for manufacturing companies.” Is this a true statement? Explain.
> Samsung must assign overhead costs to its products. Activity-based costing is generally considered more accurate than other methods of assigning overhead. If this is so, why do all manufacturers not use it?
> What is activity-based costing? What is its goal?
> Access Samsung’s 2013 Corporate Sustainability Report, from its website www.samsung.com. Identify and read the section “Social Responsibility: Making Contributions Around the Globe.” Required Samsung’s 2013 Corporate Sustainability Report notes that the
> Visit or call a local auto dealership and inquire about leasing a car. Ask about the down payment and the required monthly payments. You will likely find the salesperson does not discuss the cost to purchase this car but focuses on the affordability of t
> Read the chapter opener about Limor Fried and her company, Adafruit Industries. Suppose Limor’s business continues to grow, and she builds a massive new manufacturing facility and warehousing center to make her business more efficient and reduce costs.
> Break into teams and identify four reasons that an international airline such as Southwest or Delta would invest in a project when its direct analysis using both payback period and net present value indicate it to be a poor investment. Provide an example
> Many companies must determine whether to internally produce their component parts or to outsource them. Further, some companies now outsource key components or business processes to international providers. Access the website sourcingmag.com and review t
> Payback period, accounting rate of return, net present value, and internal rate of return are common methods to evaluate capital investment opportunities. Assume that your manager asks you to identify the type of measurement basis and unit that each meth
> A consultant commented that “too often the numbers look good but feel bad.” This comment often stems from estimation error common to capital budgeting proposals that relate to future cash flows. Three reasons for this error often exist. First, reliably p
> Apple and Google sell a variety of products, including smartphones and tablet computers. Some products are more profitable than others. Teams of employees in each company make advertising, investment, and product mix decisions. A certain portion of adver
> Assume Apple invested $2.12 billion to expand its manufacturing capacity. Assume that these assets have a 10-year life, and that Apple requires a 10% internal rate of return on these assets. Required 1. What is the amount of annual cash flows that Apple
> Selected product data from Samsung (www.samsung.com) follow. Required 1. Compute the percentage growth in net sales for each product line from fiscal year 2012 to 2013. Round percents to one decimal. 2. Which product line’s net sales
> Visit a local movie theater and check out both its concession area and its showing areas. The manager of a theater must confront questions such as: * How much return do we earn on concessions? * What types of movies generate the greatest sales? * What ty
> Brian Linton’s company, United By Blue, sells jewelry and apparel. His company plans for continued expansion into other types of products. Required 1. How can United By Blue use departmental income statements to assist in understanding and controlling o
> Apple and Samsung compete across the world in several markets. Required 1. Design a three-tier responsibility accounting organizational chart assuming that you have available internal information for both companies. Use Exhibit 24.1 as an example. The g
> This chapter described and used spreadsheets to prepare various managerial reports (see Exhibit 24-6). You can download from websites various tutorials showing how spreadsheets are used in managerial accounting and other business applications. Required
> Improvement Station is a national home improvement chain with more than 100 stores throughout the country. The manager of each store receives a salary plus a bonus equal to a percent of the store’s net income for the reporting period. T
> Super Security Co. offers a range of security services for athletes and entertainers. Each type of service is considered within a separate department. Marc Pincus, the overall manager, is compensated partly on the basis of departmental performance by sta
> Apple and Google compete in several product categories. Sales, income, and asset information is provided for fiscal year 2013 for each company below. Required 1. Compute profit margin for each company. 2. Compute investment turnover for each company. A
> Review Apple’s income statement in Appendix A and identify its revenues for the years ended September 28, 2013, September 29, 2012, and September 24, 2011. For the year ended September 28, 2013, Apple reports the following product reven
> Access the annual report of Samsung (at samsung.com) for the year ended December 31, 2013. The usefulness of its budgets, variances, and related analyses depends on the accuracy of management’s estimates of future sales activity. Required 1. Identify an
> Niner Bikes, as discussed in the chapter opener, uses a costing system with standard costs for direct materials, direct labor, and overhead costs. Two comments frequently are mentioned in relation to standard costing and variance analysis: “Variances are
> Access iSixSigma’s website (iSixSigma.com) to search for and read information about benchmarking to complete the following requirements. Required 1. Write a one-paragraph explanation (in layperson’s terms) of benchmarking. 2. How does standard costing
> The reason we use the words favorable and unfavorable when evaluating variances is made clear when we look at the closing of accounts. To see this, consider that (1) all variance accounts are closed at the end of each period (temporary accounts), (2) a f
> Setting materials, labor, and overhead standards is challenging. If standards are set too low, companies might purchase inferior products and employees might not work to their full potential. If standards are set too high, companies could be unable to of
> The usefulness of budgets, variances, and related analyses often depends on the accuracy of management’s estimates of future sales activity. Required 1. Identify and record the prior three years’ sales (in dollars) for Apple and Google using their finan
