Assignment #1
Question 1: Chapter 10 Managerial Accounting
Prepare a cost of goods manufactured schedule, a partial income statement, and a partial balance sheet.
The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2017.
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Raw Material
|
|
Factory Insurance
|
$4,600
|
|
Inventory 7/1/16
|
$48,000
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Factory Machinery
|
|
|
Raw Material
|
|
Depreciation
|
16,000
|
|
Inventory 6/30/17
|
39,600
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Factory Utilities
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27,600
|
|
Finished Goods
|
|
Office Utilities Expense
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8,650
|
|
Inventory 7/1/16
|
96,000
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Sales Revenue
|
534,000
|
|
Finished Goods
|
|
Sales Discounts
|
4,200
|
|
Inventory 6/30/17
|
75,900
|
Plant Manager's Salary
|
58,000
|
|
Work in Process
|
|
Factory Property Taxes
|
9,600
|
|
Inventory 7/1/16
|
19,800
|
Factory Repairs
|
1,400
|
|
Work in Process
|
|
Raw Material Purchases
|
96,400
|
|
Inventory 6/30/17
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18,600
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Cash
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32,000
|
|
Direct Labor
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139,250
|
|
|
|
Indirect Labor
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24,460
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|
|
|
Accounts Receivable
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27,000
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|
|
Instructions:
Part (a) Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.)
Part (b) Prepare an income statement through gross profit.
Part (c) Prepare the current assets section of the balance sheet at June 30, 2017.
Question 2: Chapter 11: Cost-Volume-Profit
Compute break-even point and margin of safety ratio, and prepare a CVP income statement before and after changes in business environment.
Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in fixed costs to the $270,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of shoes. Management is impressed with Mary's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.
Instructions:
Part (a) Compute the current break-even point in units, and compare it to the break-even point in units if Mary's ideas are used.
Part (b) Compute the margin of safety ratio for current operations and after Mary's changes are introduced. (Round to nearest full percent.)
Part (c) Prepare a CVP income statement for current operations and after Mary's changes are introduced. (Show column for total amounts only.) Would you make the changes suggested?
Question 3: Incremental Analysis
Prepare incremental analysis concerning elimination of divisions.
Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $213,000 and the following divisional results.
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Division
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I
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II
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III
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IV
|
| |
|
|
|
|
|
Sales
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$250,000
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$200,000
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$500,000
|
$450,000
|
|
Cost of goods sold
|
200,000
|
192,000
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300,000
|
250,000
|
|
Selling and administrative expenses
|
$.175,000
|
60,000
|
60,000
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50,000
|
|
Income (loss) from operations
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($25,000)
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($52,000)
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$140,000
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$150,000
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Analysis reveals the following percentages of variable costs in each division.
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I
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II
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III
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IV
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Cost of goods sold
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70%
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90%
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80%
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75%
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Selling and administrative expenses
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$40
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$60
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$50
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$60
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Discontinuance of any division would save 50% of the fixed costs and expenses for that division.
Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.
Instructions:
Part (a) Compute the contribution margin for Divisions I and II.
Part (b) Prepare an incremental analysis concerning the possible discontinuance of (1) Division I and (2) Division II. What course of action do you recommend for each division?
Part (c) Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. (Use the CVP format.) Division II's unavoidable fixed costs are allocated equally to the continuing divisions.
Part (d) Reconcile the total income from operations ($213,000) with the total income from operations without Division II.
Assignment #2
Question 1: CH 13 - Budgetary Planning (15 mins)
Prepare cash budget for a month.
The controller of Trenshaw Company wants to improve the company's control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2017.
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June 30, 2017, cash balance
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$45,000
|
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Dividends to be declared on July 15*
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12,000
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Cash expenditures to be paid in July for operating expenses
|
40,800
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Amortization expense in July
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4,500
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Cash collections to be received in July
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90,000
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Merchandise purchases to be paid in cash in July
|
56,200
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Equipment to be purchased for cash in July
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20,000
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* Dividends are payable 30 days after declaration to shareholders of record on the declaration date. Trenshaw Company wants to keep minimum cash balance of $25,000.
Instructions:
(a) Prepare a cash budget for the month ended July 31, 2017, and indicate how much money, if any, Trenshaw Company will need to borrow to meet its minimum cash requirement.
(b) Explain how cash budgeting can reduce the cost of short-term borrowing.
Question 2: Budgetary Control and Responsibility Accounting
Prepare a responsibility report for an investment center.
The Dinkle and Frizell Dental Clinic provides both preventive and orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two separate investment centers: Preventive Services and Orthodontic Services. Each of them is in charge of one of the centers: Reese for Preventive Services and Anita for Orthodontic Services. Each month, they prepare an income statement for the two centers to evaluate performance and make decisions about how to improve the operational efficiency and profitability of the clinic.
Recently, they have been concerned about the profitability of the Preventive Services operations. For several months, it has been reporting a loss. The responsibility report for the month of May 2017 is shown below.
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Difference from Budget
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|
|
|
|
|
|
|
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Actual
|
|
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Service revenue
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$40,000
|
$1,000 F
|
|
Variable costs
|
|
|
|
Filling materials
|
5,000
|
100 U
|
|
Novocain
|
3,900
|
100 U
|
|
Supplies
|
1,900
|
350 F
|
|
Dental assistant wages
|
2,500
|
-0-
|
|
Utilities
|
500
|
110 U
|
|
Total variable costs
|
13,800
|
40 F
|
|
Fixed costs
|
|
|
|
Allocated portion of receptionist's salary
|
3,000
|
200 U
|
|
Dentist salary
|
9,800
|
400 U
|
|
Equipment depreciation
|
6,000
|
-0-
|
|
Allocated portion of building depreciation
|
15,000
|
1,000 U
|
|
Total fixed costs
|
33,800
|
1,600 U
|
|
Operating income (loss)
|
($7,600)
|
mce_markernbsp; 560 U
|
In addition, the owners know that the investment in operating assets at the beginning of the month was $82,400, and it was $77,600 at the end of the month. They have asked for your assistance in evaluating their current performance reporting system.
Instructions:
(a) Prepare a responsibility report for an investment center as illustrated in the chapter.
(b) Write a memo to the owners discussing the deficiencies of their current reporting system.
Question 3: Standard Costs and Balanced Scorecard
Compute variances, and prepare income statement.
Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017.
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Costs and Production Data
|
Actual
|
Standard
|
|
Raw materials unit cost
|
$2.25
|
$2.10
|
|
Raw materials units used
|
10,600
|
10,000
|
|
Direct labor payroll
|
$120,960
|
$120,000
|
|
Direct labor hours worked
|
14,400
|
15,000
|
|
Manufacturing overhead incurred
|
$189,500
|
|
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Manufacturing overhead applied
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$193,500
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Machine hours expected to be used at normal capacity
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42,500
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Budgeted fixed overhead for June
|
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$55,250
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Variable overhead rate per machine hour
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$3.00
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Fixed overhead rate per machine hour
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$1.30
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Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used.
Instructions:
Part (a) Compute all of the variances for (1) direct materials and (2) direct labor.
Part (b) Compute the total overhead variance.
Part (c) Prepare an income statement for management. (Ignore income taxes.)
Question 4: Planning for Capital Investments
Calculate payback, annual rate of return, and net present value.
Drake Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value.
There would be no salvage value at the end of the investment's life.
Investment Proposal
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Year
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Initial cost and book value
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Annual Cash Flows
|
Anuual Net income
|
| |
|
|
|
|
0
|
$105,000
|
|
|
|
1
|
70,000
|
45,000
|
10,000
|
|
2
|
42,000
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40,000
|
12,000
|
|
3
|
$21,000
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$35,000
|
$14,000
|
|
4
|
7,000
|
30,000
|
16,000
|
|
5
|
0
|
25,000
|
18,000
|
Drake Corporation uses an 11% required rate of return for new investment proposals.
Instructions:
Part (a) What is the cash payback period for this proposal?
Part (b) What is the annual rate of return for the investment?
Part (c) What is the net present value of the investment?
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Attachment:- Budgetary Planning.rar