Computer Boutique sells computer equipment and home office furniture

Computer Boutique sells computer equipment and home office furniture. Currently, the furniture product line takes up approximately 50% of the company's retail floor space. The president of Computer Boutique is trying to decide whether the company should continue offering furniture or just concentrate on computer equipment. If furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of computer equipment can increase by 13%. Allocated fixed costs are assigned based on relative sales.

Computer Home
Office Equipment Furniture Total
Sales $1,200,000 $800,000 $2,000,000
Less cost of goods sold 700,000 500,000 1,200,000
Contribution margin 500,000 300,000 800,000
Less direct fixed costs:
Salaries 175,000 175,000 350,000
Other 60,000 60,000 120,000
Less allocated fixed costs:
Rent 14,118 9,882 24,000
Insurance 3,529 2,471 6,000
Cleaning 4,117 2,883 7,000
President's salary 76,470 53,350 130,000
Other 7,058 4,942 12,000
Total costs 340,292 380,708 649,000
Net Income $159,708 ($ 8,708) $151,000

Prepare an incremental analysis to determine the incremental effect on profit of discontinuing the furniture line.

Click here for the solution: Computer Boutique sells computer equipment and home office furniture

Cooper Training Services (CTS) provides instruction on the use of computer software for the employees of its corporate clients

Problem 11-25 Effects of operating leverage on profitability

Cooper Training Services (CTS) provides instruction on the use of computer software for the employees of its corporate clients. It offers courses in the clients’ offices on the clients’ equipment. The only major expense CTS incurs is instructor salaries; it pays instructors $3,600 per course taught. CTS recently agreed to offer a course of instruction to the employees of Akers Incorporated at a price of $340 per student. Akers estimated that 20 students would attend the course.

Base your answer on the preceding information.

Part 1:
Required
a. Relative to the number of students in a single course, is the cost of instruction a fixed or a variable cost?
b. Determine the profit, assuming that 20 students attend the course.
c. Determine the profit, assuming a 20 percent increase in enrollment (i.e., enrollment increases to 24 students). What is the percentage change in profitability?
d. Determine the profit, assuming a 20 percent decrease in enrollment (i.e., enrollment decreases to 16 students). What is the percentage change in profitability?
e. Explain why a 20 percent shift in enrollment produces more than a 20 percent shift in profitability. Use the term that identifies this phenomenon.

Click here for the solution: Cooper Training Services (CTS) provides instruction on the use of computer software for the employees of its corporate clients

Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007 (the end of its fiscal year)

P2-3A Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007 (the end of its fiscal year).

BYTE REPAIR SERVICE, INC.
Trial Balance
December 31, 2007
Cash $8,000
Accounts Receivable 15,000
Parts Inventory 13,000
Prepaid Rent 3,000
Shop Equipment 21,000
Accounts Payable $19,000
Common Stock 30,000
Retained Earnings 11,000
$60,000 $60,000

Summarized transactions for January 2008 were as follows:
1. Advertising costs, paid in cash, $1,000.
2. Additional repair parts inventory acquired on account $4,000.
3. Miscellaneous expenses, paid in cash, $2,000.
4. Cash collected from customers in payment of accounts receivable $14,000.
5. Cash paid to creditors for accounts payable due $15,000.
6. Repair parts used during January $4,000. (Hint: Debit this to Repair Parts Expense.)
7. Repair services performed during January: for cash $6,000; on account $9,000.
8. Wages for January, paid in cash, $3,000.
9. Dividends paid in January were $3,000.

Instructions
(a) Prepare journal entries to record each of the January transactions.
(b) Open T accounts for each of the accounts listed in the trial balance, and enter the opening balances for 2008. Post the journal entries to the accounts in the ledger.
(c) Prepare a trial balance as of January 31, 2008.

Click here for the solution: Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007

Twyla Enterprises uses a word processing computer to handle its sales invoices

ACC 560 Week 5 Assignment

E7-11 Twyla Enterprises uses a word processing computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.

Current Machine New Machine
Original purchase cost $15,000 $25,000
Accumulated depreciation 6,000 ---
Estimated operating costs 24,000 18,000
Useful life 5 years 5 years

If sold now, the current machine would have a salvage value of $5,000. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.

Complete the analysis to determine if the current machine should be replaced.

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Gwinnett Paper Company manufactures three products (computer paper, newsprint, and specialty paper)

Gwinnett Paper Company manufactures three products (computer paper, newsprint, and specialty paper) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

Activity Activity Cost Pool
Production $495,000
Setup 225,000
Moving 29,750
Shipping 126,000
Production engineering 150,000

The activity bases identified for each activity are as follows:

Activity Activity Base
Production Machine Hours
Setup Number of setups
Moving Number of moves
Shipping Number of customer orders
Production engineering Number of test runs

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

Machine Number of Number of Number of Number of Units
hours setups moves customer test runs
orders
Computer paper 900 130 290 440 90 1000
Newsprint 1125 60 130 135 20 1250
Speciality paper 450 310 430 625 140 500
Total 2475 500 850 1200 250 2750

Each product requires 0.9 machine hour per unit.

Instructions
1. Determine the activity rate for each activity.
2. Determine the total and per-unit activity cost for all three products. Round all per unit amounts to the nearest whole cent.
3. Why aren't the activity unit costs equal across all three products since they require the same machine time per unit?


Click here for the solution: Gwinnett Paper Company manufactures three products (computer paper, newsprint, and specialty paper)

You are the controller of Software Company, a distributor of computer software, which is planning to acquire a portion of the net assets

You are the controller of Software Company, a distributor of computer software, which is planning to acquire a portion of the net assets of a product line of Midge Company, a competitor enterprises. The projected acquisition cost is expected to exceed substantially the current fair value of the identifiable net assets to be acquired, which the competitor has agreed to sell because of its substantial net losses of recent years. The board of directors of Software asks if the excess acquisition costs may appropriately be recognized as goodwill.

Prepare a memorandum to the board of directors in answer to the question


Click here for the solution: You are the controller of Software Company, a distributor of computer software, which is planning to acquire a portion of the net assets

Shabbona Corporation operates a retail computer store

Shabbona Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2010. The terms of acquisition for each truck are described below.

1. Truck #1 has a list price of $15,000 and is acquired for a cash payment of $13,900.
2. Truck #2 has a list price of $20,000 and is acquired for a down payment of $2,000 cash and a zero-interest-bearing note with a face amount of $18,000. The note is due April 1, 2011. Shabbona would normally have to pay interest at a rate of 10% for such a borrowing, and the dealership has an incremental borrowing rate of 8%.
3. Truck #3 has a list price of $16,000. It is acquired in exchange for a computer system that Shabbona carries in inventory. The computer system cost $12,000 and is normally sold by Shabbona for $15,200. Shabbona uses a perpetual inventory system.
4. Truck #4 has a list price of $14,000. It is acquired in exchange for 1,000 shares of common stock in Shabbona Corporation. The stock has a par value per share of $10 and a market value of $13 per share.

Prepare the appropriate journal entries for the foregoing transactions for Shabbona Corporation. (Round computations to the nearest dollar)


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Software Associates (SA) is a computer software consulting firm that specializes in designing and implementing integrated marketing database warehousing programs

P 12–17: Software Associates

Software Associates (SA) is a computer software consulting firm that specializes in designing and implementing integrated marketing database warehousing programs. Humphrey Catalog is a client.

In preparing its bid for Humphrey, SA estimates its total labor cost for this project to be $222,500, broken down as follows:

Required:
a. Prepare a performance report for the Humphrey Catalog project.
b. Offer a plausible explanation for SA’s performance on the Humphrey project.

Click here for the solution: Software Associates (SA) is a computer software consulting firm that specializes in designing and implementing integrated marketing database warehousing programs

The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation

The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. June is Zygon's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $895,000, while conversion costs equaled $4,225,000. Accounting records indicate that 475,000 chips were started in June, and that 425,000 chips were completed.

Ending inventory was 50% complete as to conversion costs.

Required:
a. What is the total manufacturing cost per chip for June?
b. Allocate the total costs between the completed chips and the chips in ending inventory.

Click here for the solution: The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation