Hardy Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat

E7-4 Hardy Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular as an undergarment for sports activities. Operating at capacity, the company can produce 1,000,000 undergarments of Y-Go a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows.

Per Undergarment Total
Direct materials $2.00 $2,000,000
Direct labor 0.50 500,000
Variable manufacturing overhead 1.00 1,000,000
Fixed manufacturing overhead 1.50 1,500,000
Variable selling expenses 0.25 250,000
Net income $5.25 $5,250,000

The U.S. Army has approached Hardy Fiber and expressed an interest in purchasing 200,000 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1 per undergarment to cover all other costs and provide a profit. Presently, Hardy Fiber is operating at 70 percent capacity and does not have any other potential buyers for Y-Go. If Hardy Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order.

Using incremental analysis, determine whether Hardy Fiber should accept the Army's offer.

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Kristen Montana operates a retail clothing operation

Kristen Montana operates a retail clothing operation. She purchases all merchandise inventory on credit and uses a periodic inventory system. The accounts payable account is used for recording inventory purchases only; all other current liabilities are accrued in separate accounts. You are provided with the following selected information for the fiscal years 2005, 2006, 2007, and 2008.

2005 2006 2007 2008
Inventory (ending) $13,000 $11,300 $14,700 $12,200
Accounts payable (ending) 20,000
Sales 225,700 227,600 219,500
Purchase of merchandise
inventory on account 146,000 145,000 129,000
Cash payments to suppliers 135,000 161,000 127,000

Instructions:
a. Calculate cost of goods sold for each of the 2009, 2010, and 2011 fiscal years.
b. Calculate the gross profit for each of the 2009, 2010, and 2011 fiscal years.
c. Calculate the ending balance of accounts payable for each of the 2009, 2010, and 2011 fiscal years.
d. Calculate the gross profit rate for each fiscal year.
e. Sales declined in fiscal 2011. Does that mean that profitability, as measured by the gross profit rate, necessarily also declined? Explain, calculating the gross profit rate for each fiscal year to help support year answer.

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Porto Bay Corporation manufactures and distributes leisure clothing

Porto Bay Corporation manufactures and distributes leisure clothing. Selected transactions completed by Porto Bay during the current fiscal year are as follows:

Jan. 10. Split the common stock 4 for 1 and reduced the par from $100 to $25 per share. After the split, there were 500,000 common shares outstanding.
Mar. 1. Declared semiannual dividends of $1.20 on 80,000 shares of preferred stock and $0.24 on the 500,000 shares of $25 par common stock to stockholders of record on March 31, payable on April 30.
Apr. 30. Paid the cash dividends.
July 9. Purchased 75,000 shares of the corporations own common stock at $26, recording the stock at cost.
Aug. 29. Sold 40,000 shares of treasury stock at $32, receiving cash.
Sept. 1. Declared semiannual dividends of $1.20 on the preferred stock and $0.15 on the common stock (before the stock dividend). In addition, a 1% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimated at $30.
Oct. 31. Paid the cash dividends and issued the certificates for the common stock dividend.

Instructions
Journalize the transactions.


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On May 31, the inventory balances of Princess Designs, a manufacturer of high-quality children’s clothing, were as follows

P 3. On May 31, the inventory balances of Princess Designs, a manufacturer of high-quality children’s clothing, were as follows: Materials Inventory, $21,360; Work in Process Inventory, $15,112; and Finished Goods Inventory, $17,120. Job order cost cards for jobs in process as of June 30 had these totals:

The predetermined overhead rate is 130 percent of direct labor costs. Materials
purchased and received in June were as follows:
June 4 $33,120
June 16 28,600
June 22 31,920
Direct labor costs for June were as follows:
June 15 payroll $23,680
June 29 payroll 25,960
Direct materials requested by production during June were as follows:
June 6 $37,240
June 23 38,960

On June 30, Princess Designs sold on account finished goods with a 75 percent markup over cost for $320,000.

Required
1. Using T accounts for Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Overhead, Accounts Receivable, Payroll Payable, Sales, and Cost of Goods Sold, reconstruct the transactions in June.
2. Compute the cost of units completed during the month.
3. What was the total cost of goods sold during June?
4. Determine the ending inventory balances.
5. Jobs 24-A and 24-C were completed during the first week of July. No additional materials costs were incurred, but Job 24-A required $960 more of direct labor, and Job 24-C needed an additional $1,610 of direct labor. Job 24-A was composed of 1,200 pairs of trousers; Job 24-C, of 950 shirts. Compute the product unit cost for each job. (Round your answers to two
decimal places.)


Click here for the solution: On May 31, the inventory balances of Princess Designs, a manufacturer of high-quality children’s clothing, were as follows

Hal-Marts, Inc., has two sales departments: equipment and clothing

Hal-Marts, Inc., has two sales departments: equipment and clothing. During February, these two departments reported the following operating results:

Equipment Clothing
Sales $490,000 $250,000
Contribution Margin 35% 50%
Traceable Fixed Costs $29,200 $26,800

In addition, fixed costs common to both departments amounted to $54,400.

Complete the following responsibility income statement for Hal-Marts, Inc. Follow the contribution margin approach, and show percentages as well as dollar amounts. Conclude your income statement with the company’s income from operations.

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Gianni Sport was a New York manufacturer and distributor of women’s clothing

Gianni Sport was a New York manufacturer and distributor of women’s clothing. Gantos was a clothing retailer headquartered in Grand Rapids, Michigan. In 1980, Gantos’s sales total was 20 times greater than Gianni Sport’s, and in this industry, buyers were “in the driver’s seat.” In June 1980, Gantos submitted to Gianni Sport a purchase order for women’s holiday clothing to be delivered on October 10, 1980. The purchase order contained the following clause:

Buyer reserves the right to terminate by notice to Seller all or any part of this Purchase Order with respect to Goods that have not actually been shipped by Seller or as to Goods which are not timely delivered for any reason whatsoever.

Gianni Sport made the goods in question especially for Gantos. This holiday order comprised 20 to 22 percent of Gianni Sport’s business. In late September 1980, before the goods were shipped, Gantos canceled the order. Was the cancellation clause unconscionable?

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