Wigs Plus Company supplies wigs and hair care products to beauty salons throughout California and the Pacific Northwest

PR 9-2A Wigs Plus Company supplies wigs and hair care products to beauty salons throughout California and the Pacific Northwest. The accounts receivable clerk for Wigs Plus prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 2009:

Customer Balance Not Past Due 1-30 31-60 61-90 91-120 Over 120
Alpha Beauty 20,000 20,000
Blonde Wigs 11,000 11,000
Zahn’s Beauty 2,900 2,900
Subtotals 900,000 498,600 217,250 98,750 33,300 29,950 22,150

The following accounts were unintentionally omitted from the aging schedule:
Customer Due Date Balance
Sun Coast Beauty May 30, 2009 $ 2850
Paradise Beauty Store Sept 15, 2009 6050
Helix Hair Products Oct 17, 2009 800
Hairy’s Hair Care Oct 20, 2009 2000
Surf Images Nov 18, 2009 700
Oh The Hair Nov 29, 2009 3500
Mountain Coatings Dec 1, 2009 2250
Lasting Images Jan 9, 2010 7400

Wigs Plus has a past history of uncollectible accounts by age category, as follows:

Age Class Percent Uncollectible
Not Past Due 2%
1-30 Days past due 4
31-60 days past due 10
61-90 days past due 15
91-120 days past due 35
Over 120 days 80

Instructions:
1. Determine the number of days past due for each of the preceding accounts.
2. Complete the aging of receivables schedule
3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
4. Assume that the allowance for doubtful accounts for Wigs Plus has a credit balance of $1,710 before adjustment on December 31, 2009. Journalize the adjustment for uncollectible account.

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Peter Catalano's Verde Vineyards in Oakville, California produces three varieties of wine

Peter Catalano's Verde Vineyards in Oakville, California produces three varieties of wine: Merlot, Viognier, and Pinot Noir. His winemaster, Kyle Ward, has identified the following activities as cost pools for accumulating overhead and assigning it to products:

Choices:
Number of bottles
Number of boxes
Gallons of wine or months of aging
Number of cartfuls
Labor hours
Number of shipments
Gallons of juice
Number of gallons processed
Gallons of chemicals
Number or cartruls or labor hours

1. Culling and replanting. Dead or overcrowded vines are culled, and new vines are planted or relocated. (Separate vineyards by variety.)
2. Tying. The posts and wires are reset, and vines are tied to the wires for the dormant season.
3. Trimming. At the end of the harvest the vines are cut and trimmed back in preparation for the next season.
4. Spraying. The vines are sprayed with chemicals for protection against insects and fungi.
5. Harvesting. The grapes are hand-picked, placed in carts, and transported to the crushers.
6. Stemming and crushing. Cartfuls of bunches of grapes of each variety are separately loaded into machines which remove stems and gently crush the grapes.
7. Pressing and filtering. The crushed grapes are transferred to presses which mechanically remove the juices and filter out bulk and impurities.
8. Fermentation. The grape juice, by variety, is fermented in either stainless-steel tanks or oak barrels.
9. Aging. The wines are aged in either stainless-steel tanks or oak barrels for one to three years depending on variety
10. Bottling and corking. Bottles are machine-filled and corked.
11. Labeling and boxing. Each bottle is labeled, as is each nine-bottle case, with the name of the vintner, vintage, and variety.
12. Storing. Packaged and boxed bottles are stored awaiting shipment.
13. Shipping. The wine is shipped to distributors and private retailers.
14. Heating and air-conditioning of plant and offices
15. Maintenance of buildings and equipment. Printing, repairs, replacements, and general maintenance are performed in the off-season.

Instructions

For each of Verde's fifteen activity cost pools, identify a probable cost driver that might be used to assign overhead costs to its three wine varieties.

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Mendocino Corporation produces two grades of wine from grapes that it buys from California growers

Problem 4-4A (P4-4A) Assign overhead costs using traditional costing and ABC; compare results.

Mendocino Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs Mendocino also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called LiteMist. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as profitable as LiteMist. Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the LiteMist product. The LiteMist product already demands considerably more attention than the CoolDay line.
Tyler Silva, president and founder of Mendocino, is skeptical about this idea. He points out that for many decades the company produced only the CoolDay line, and that it was always quite profitable. It wasn't until the company started producing the more complicated LiteMist wine that the profitability of CoolDay declined. Prior to the introduction of LiteMist, the company had simple equipment, simple growing and production procedures, and virtually no need for quality control. Because LiteMist is bottled in 1-liter bottles, it requires considerably more time and effort, both to bottle and to label and box than does CoolDay. The company must bottle and handle 5 times as many bottles of LiteMist to sell the same quantity as CoolDay. CoolDay requires 1 month of aging; LiteMist requires 1 year. CoolDay requires cleaning and inspection of equipment every 10,000 liters; LiteMist requires such maintenance every 600 liters.
Tyler has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected.
CoolDay LiteMist
Direct materials per liter $0.40 $1.20
Direct labor cost per liter $0.25 $0.50
Direct labor hours per liter 0.05 0.09
Total direct labor hours 120,000 25,000

Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Expected Use of Cost Drivers per Product
CoolDay LiteMist
Grape processing Cart of grapes $ 145,860 6,600 6,000 600
Aging Total months 396,000 6,600,000 3,000,000 3,600,000
Bottling and corking Number of bottles 270,000 900,000 600,000 300,000
Labeling and boxing Number of bottles 189,000 900,000 600,000 300,000
Maintain and inspect equipment Number of inspections 240,800 800 350 450
$1,241,660

Instructions
Answer each of the following questions. (Round all calculations to three decimal places.)
A. Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products.
B. Under ABC, prepare a schedule showing the computation of the activity-based overhead rates (per cost driver).
C. Prepare a schedule assigning each activity's overhead cost pool to each product, based on the use of cost drivers. Include a computation of overhead cost per liter.
D. Compute the total manufacturing cost per liter for both products under ABC.
E. Write a memo to Tyler Silva discussing the implications of your analysis for the company's plans. In this memo provide a brief description of ABC, as well as an explanation of how the traditional approach can result in distortions.

Check: (a) Cost/liter—C.D. $1.078; (c) Cost/liter—C.D. $.241

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Bonita Corp. is thinking about opening a soccer camp in southern California

ACC 560 Week 8 Assignment

P12-5A Bonita Corp. is thinking about opening a soccer camp in southern California. To start the camp, Bonita would need to purchase land and build four soccer fields and a sleeping and dining facility to house 150 soccer players. Each year the camp would be run for 8 sessions of 1 week each. The company would hire college soccer players as coaches. The camp attendees would be male and female soccer players ages 12-18. Property values in southern California have enjoyed a steady increase in value. It is expected that after using the facility for 20 years, Bonita can sell the property for more than it was originally purchased for. The following amounts have been estimated.

Cost of land $300,000
Cost to build dorm and dining facility $600,000
Annual cash inflows assuming 150 players and 8 weeks $950,000
Annual cash outflows $840,000
Estimated useful life 20 years
Salvage value $1,500,000
Discount rate 8%

Instructions
a) Calculate the net present value of the project. Should the project be accepted?
b) To gauge the sensitivity of the project to these estimates, assume that if only 125 campers attend each week, annual cash inflows will be $800,000 and annual cash outflows will be $770,000. What is the net present value using these alternative estimates? Should the project be accepted?
c) Assuming the original facts, what is the net present value if the project is actually riskier than first assumed, and a 11% discount rate is more appropriate? Should the project be accepted?
d) Assume that during the first 5 years the annual net cash flows each year were only $45,000. At the end of the fifth year the company is running low on cash, so management decides to sell the property for $1,300,000. What was the actual internal rate of return on the project?


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ACC 349 Week 3 Mendocino Corporation produces two grades of wine from grapes that it buys from California growers

ACC 349 Week 3 (Week Three)

Problem 4-4A (P4-4A) Assign overhead costs using traditional costing and ABC; compare results.

Mendocino Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs Mendocino also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called LiteMist. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as profitable as LiteMist. Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the LiteMist product. The LiteMist product already demands considerably more attention than the CoolDay line.

Tyler Silva, president and founder of Mendocino, is skeptical about this idea. He points out that for many decades the company produced only the CoolDay line, and that it was always quite profitable. It wasn't until the company started producing the more complicated LiteMist wine that the profitability of CoolDay declined. Prior to the introduction of LiteMist, the company had simple equipment, simple growing and production procedures, and virtually no need for quality control. Because LiteMist is bottled in 1-liter bottles, it requires considerably more time and effort, both to bottle and to label and box than does CoolDay. The company must bottle and handle 5 times as many bottles of LiteMist to sell the same quantity as CoolDay. CoolDay requires 1 month of aging; LiteMist requires 1 year. CoolDay requires cleaning and inspection of equipment every 10,000 liters; LiteMist requires such maintenance every 600 liters.

Tyler has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected.

CoolDay LiteMist
Direct materials per liter $0.40 $1.20
Direct labor cost per liter $0.25 $0.50
Direct labor hours per liter 0.05 0.09
Total direct labor hours 120,000 25,000

Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Expected Use of Cost Drivers per Product

CoolDay LiteMist
Grape processing Cart of grapes $ 145,860 6,600 6,000 600
Aging Total months 396,000 6,600,000 3,000,000 3,600,000
Bottling and corking Number of bottles 270,000 900,000 600,000 300,000
Labeling and boxing Number of bottles 189,000 900,000 600,000 300,000
Maintain and inspect equipment Number of inspections 240,800 800 350 450
$1,241,660

Instructions
Answer each of the following questions. (Round all calculations to three decimal places.)
A. Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products.
B. Under ABC, prepare a schedule showing the computation of the activity-based overhead rates (per cost driver).
C. Prepare a schedule assigning each activity's overhead cost pool to each product, based on the use of cost drivers. Include a computation of overhead cost per liter.
D. Compute the total manufacturing cost per liter for both products under ABC.
E. Write a memo to Tyler Silva discussing the implications of your analysis for the company's plans. In this memo provide a brief description of ABC, as well as an explanation of how the traditional approach can result in distortions.

Check: (a) Cost/liter—C.D. $1.078; (c) Cost/liter—C.D. $.241


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4-6A Damerly Company (a California employer) wants to give holiday bonus check of $250 to each employee

4-6A Damerly Company (a California employer) wants to give holiday bonus check of $250 to each employee. Since it wants the check amount to be $250, it will need to gross-up the amount of the bonus. Calculate the withholding taxes and the gross amount of the bonus to be made to John Rolen if his cumulative earning for the year are $46,910. Besides being subject to social security taxes and federal income tax (supplemental rate), a 6% California income tax must be withheld on supplemental payments.

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