For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly

For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. A new purchasing agent has been hired by the company who wants to start using the economic-order-quantity method and its supporting decision elements. She has gathered the following information:

Annual demand in units 250
Days used per year 250
Lead time, in days 10
Ordering costs $100
Annual unit carrying costs $20

Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs, and annual carrying costs (17 points)

Click here for the solution: For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly

A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each

A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each. The normal selling price of this product is $48.00 each. The normal unit product cost of product M97 is computed as follows:

Direct Materials..............$18.50
Direct Labor......................$1.20
Variable Manufacturing Overhead.......$8.40

Unit Product Cost= $32.00

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.

Required:
Determine the effect on the company's total net operating income of accepting the special order.


Click here for the solution: A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each

Determine the size of the M1 money supply using the following information

1. Determine the size of the M1 money supply using the following information.
Currency plus traveler’s checks $25 million
Negotiable CDs $10 million
Demand deposits $13 million
Other checkable deposits $12 million

Click here for the solution: Determine the size of the M1 money supply using the following information

Assume that a country estimates its M1 money supply at $20 million

8. Assume that a country estimates its M1 money supply at $20 million. A broader measure of the money supply, M2, is $50 million. The country’s gross domestic product is $100 million. Production or real output for the country is 500,000 units or products.

a. Determine the velocity of money based on the M1 money supply.
b. Determine the velocity of money based on the M2 money supply.
c. Determine the average price for the real output.

Click here for the solution: Assume that a country estimates its M1 money supply at $20 million

Tel-Com Company, a telephone service and supply company, has just completed its fourth year of operations

Problem 9-3A Compare Two Methods of Accounting for Uncollectible Receivables

Tel-Com Company, a telephone service and supply company, has just completed its fourth year of operations. The direct write-off method of recording bad debt expense has been used during the entire period. Because of substantial increases in sales volume and the amount of uncollectible accounts, the company is considering changing to the allowance method. Information is requested as to the effect that an annual provision of ¾% of sales would have had on the amount of bad debt expense reported for each of the past four years. It is also considered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts:

Year Sales Written Off 1st 2nd 3rd 4th
1st $700,000 $2,000 $2,000
2nd $900,000 $3,400 $1,800 $1,600
3rd $1,200,000 $6,450 $1,000 $3,700 $1,750
4th $2,000,000 $9,200 - $1,260 $3,700 $4,240

Instructions
1. Assemble the desired data, using the following column headings:
2. Experience during the first four years of operations indicated that the receivables were either collected within two years or had to be written off as uncollectible. Does the estimate of 3/4% of sales appear to be reasonably close to the actual experience with uncollectible accounts originating during the first two years? Explain.

Check: 1. Year 4: Balance of Allowance Account, End of Year, $14,950

Click here for the solution: Tel-Com Company, a telephone service and supply company, has just completed its fourth year of operations

GWI is a manufacturer of beauty supply products

GWI is a manufacturer of beauty supply products. Sullivan is a distributor of beauty supply products in New England and operates more than two dozen wholesale beauty supply stores in that region. In February 1998, the parties entered into a distribution agreement, pursuant to which GWI granted Sullivan the exclusive right to sell its products to professional stores in New Hampshire, Vermont, and Maine, and to sell its products to both professional stores and salons in Massachusetts. Among other things, the agreement provided that “[a]ll disputes and claims relating to or arising under or out of this Agreement shall be fully and finally settled by arbitration.” This agreement expired in 2003, but the parties continued their relationship under the same terms and conditions as had governed the relationship during the duration of the contract. In 2006, another of GWI’s regional distributors Kaleidoscope/BOA, Inc.—assigned to Sullivan all of its “right, title, and interest under the Kaleidoscope Distribution Agreement [with GWI] dated August 16, 2004, save and except the right to distribute Graham Webb Classic line products to salons in the territory.” GWI consented to this assignment. By acquiring an assignment of Kaleidoscope’s rights under its distribution agreement with GWI, Sullivan obtained the exclusive right to distribute GWI products to professional salons in Maine, New Hampshire, and Vermont (previously, it had the exclusive right to distribute GWI products only to professional stores in those states). Like the original distribution agreement between GWI and Sullivan, both the distribution agreement between Kaleidoscope and GWI (the rights under which were assigned to Sullivan) and the agreement evidencing that assignment contained arbitration provisions. Despite the fact that the Sullivan Distribution Agreement (SDA) had expired, the Assignment Agreement specifically referenced that document, describing the parties’ respective rights and obligations and noting that the SDA will have to be amended to take into account Sullivan’s newly expanded distribution rights. The parties’ reference to the SDA in the Assignment Agreement provides strong evidence that, although the SDA agreement had expired, the parties were continuing their business relationship pursuant to its terms. A little more than a year later, GWI notified Sullivan of its intention to terminate its distribution relationship with Sullivan, effective April 1, 2007. In that letter, GWI specifically invoked the termination provisions contained in both the SDA and the Kaleidoscope Distribution Agreement. When Sullivan was unable to persuade GWI to change its mind, it sued GWI for breach of contract and other claims. Sullivan asserted that the arbitration provision in the Assignment Agreement was not relevant to this dispute and that it was not bound by the arbitration provisions in the Kaleidoscope Distribution Agreement. Is this a good argument?

Click here for the solution: GWI is a manufacturer of beauty supply products

The budget committee of Clipboard Office Supply has assembled the following data

P21-21A Preparing an operating budget

The budget committee of Clipboard Office Supply has assembled the following data. As the business manager, you must prepare the budgeted income statements for May and June 2011.
a. Sales in April were $50,000. You forecast that monthly sales will increase 2.0% in May and 2.4% in June.
b. Clipboard maintains inventory of $9,000 plus 25% of sales revenue budgeted for the following month. Monthly purchases average 50% of sales revenue in that same month. Actual inventory on April 30 is $13,000, sales budgeted for July are $65,000.
c. Monthly salaries amount to $3,000. Sales commissions equal 4% of sales for that month. Combine salaries and commissions into a single figure.
d. Other monthly expenses are as follows:
Rent expense $2,600, paid as incurred
Depreciation expense $ 300
Insurance expense $ 200, expiration of prepaid amount
Income tax 20% of operating income

Requirement:
1. Prepare Clipboard Office Supply's budgeted income statements for May and June. Show cost of goods sold computations. (Round all amounts to the nearest $100. (Round amounts ending in $50 or more upward, and amounts ending in less than downward). For example, budgeted May sales are $51,000 ($50,000 x 1.02), and June sales are $52,200 ($51,000 x 1.024)

Click here for the solution: The budget committee of Clipboard Office Supply has assembled the following data

Refer to P21-21A. Clipboard Office Supply's sales are 75% cash and 25% credit

P21-22A Preparing a financial budget

Refer to P21-21A. Clipboard Office Supply's sales are 75% cash and 25% credit. (Use the rounded sales values) Credit sales are collected in the month of purchase and 75% the following month. Salaries and sales commissions are also paid half in the month earned and half the next month. Income tax is paid at the end of the year.

The April 30, 2011 balance sheet showed the following balances:
Cash $25,000
Accounts payable 53,000
Salaries and commission payable 2,500

Requirements:
1. Prepare schedules of (a) budgeted cash collections, (b) budgeted cash payments for purchases, and (c) budgeted cash payments for operating expenses. Show amounts for each month and totals for May and June. Round your computations to the nearest dollar.
2. Prepare a cash budget. If no financing activity took place, what is the budgeted cash balance on June 30, 2011?

Click here for the solution: Refer to P21-21A. Clipboard Office Supply's sales are 75% cash and 25% credit