TufStuff, Inc. sells a wide range of drums, bins, boxes, and other containers that are used in the chemical industry

CASE 13–30 Make or Buy; Utilization of a Constrained Resource [LO1, LO3, LO5]

TufStuff, Inc. sells a wide range of drums, bins, boxes, and other containers that are used in the chemical industry. One of the company’s products is a heavy-duty corrosion-resistant metal drum, called the WVD drum, used to store toxic wastes. Production is constrained by the capacity of an automated welding machine that is used to make precision welds. A total of 2,000 hours of welding time is available annually on the machine. Because each drum requires 0.4 hours of welding time, annual production is limited to 5,000 drums. At present, the welding machine is used exclusively to make the WVD drums. The accounting department has provided the following financial data concerning the WVD drums:

WVD Drums
Selling price per drum . . . . . . . . . . . . . . $149.00
Cost per drum:
Direct materials . . . . . . . . . . . . . . . . . $52.10
Direct labor ($18 per hour) . . . . . . . . 3.60
Manufacturing overhead . . . . . . . . . . 4.50
Selling and administrative expense. . 29.80 90.00
Margin per drum . . . . . . . . . . . . . . . . . . $ 59.00

AND SO ON

ALL 5 REQUIREMENTS ANSWERED.

Click here for the solution: TufStuff, Inc. sells a wide range of drums, bins, boxes, and other containers that are used in the chemical industry

The budget director of Regal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month

The budget director of Regal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for August 2010 is summarized as follows:
a. Estimated sales of King and Prince chairs for August by sales territory:
Northern Domestic:
King.........................5,500 units at $750 per unit
Prince......................6,900 units at $520 per unit

Southern Domestic:
King.........................3,200 units at $690 per unit
Prince......................4,000 units at $580 per unit

International:
King........................1,450 units at $780 per unit
Prince......................900 units at $600 per unit

b. Estimated inventories at August 1:
Direct materials:
Finished Products
Fabric................4,500 sq. yds
King.....................950units
Wood.................6,000 lineal ft.
Prince..................280units
Filler...................2,800 cu, ft
Springs..............6,700 units

c. Desired inventories at August 31:
Direct Materials:
Finished Products:
Fabric..................4300 sq yds
King.............800units
Wood..................6,200 lineal ft.
Prince...........400units
Filler....................3,100 cu. ft
Springs................7,500 units

d. Direct materials used in production:
In manufacture of King:
Fabric..................5.0 sq. yds per unit of product
Wood ..................35 lineal ft. per unit of product
 Filler.................... 3.8 cu ft. per units of product
Springs.................14 units per units of product

In manufacture of Prince:
Fabric...............$12.00 per sq. yd.
Filler..............$3.50 per cu. ft.
Wood................ 8.00 per lineal ft.
Springs........... 4.50 per unit

f. Direct labor requirements:
King:
Framing Department............ 2.5hrs. at $12 per hr.
Cutting Department.............. 1.5 hrs. at $11 per hr.
Upholstery Department.......... 2.4hrs. at $14 per hr.
Prince: Framing Department............ 1.8 hrs. at $12 per hr.
Cutting Department............. 0.5 hrs. at $11 per hr.
Upholstery Department......... 2.0hrs. at $14 per hr.

3.) Prepare a direct materials purchases budget for August.

4.)Prepare a direct labor cost budget for August

Click here for the solution: The budget director of Regal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month

Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007

Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007. All balances are as of the end of the year except Retained Earnings.

Accounts Payable.............................................$22,000
Accounts Receivable........................................$34,000
Cash................................................................ $12,000
Common Stock................................................ $50,000
Cost of Goods Sold.......................................... $120,000
Equipment, net of Accumulated Depreciation..... $60,000
Dividends......................................................... $14,000
Income Tax Expense......................................... $10,000
Interest Expense............................................... $7,000
Inventory.......................................................... $23,000
Operating Expenses.......................................... $45,000
Retained Earnings, Jan. 1, 2007........................ $19,000
Sales Revenue.................................................. $220,000
Unearned Revenue............................................ $14,000

Number of shares of stock outstanding at the end of 2007 is 10,000 shares.

Required:
Prepare an accrual basis income statement and a classified balance sheet in proper form.

Click here for the solution: Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007

The budget director of Outdoor Gourmet Grill Company requests estimates of sales, production, and other operating data

The budget director of Outdoor Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July 2010 is summarized as follows:

a. Estimated sales for July by sales territory:
Maine:
Backyard Chef...........................5000 units at $750 per unit
Master Chef..............................1800 units at $1,500 per unit
Vermont:
Backyard Chef..........................4200 units at $800 per unit
Master Chef.............................1600 units at $1,600 per unit
New Hampshire:
Backyard Chef..........................4600 units at $850 per unit
Master Chef.............................1900 units at $1,700 per unit

b. Estimated inventories at July 1:
Direct materials: Finished products:
Grates.....................1000 units Backyard chef........1400 units
Stainless steel...........1800 lbs Master Chef........... 600 units
Burner subassemblies....500 units
Shelves.................... 300 units

c. Desired inventories at July 31:
Direct materials: Finished products:
Grates..................... 800 units Backyard chef........1600 units
Stainless steel........... 2100 lbs Master Chef........... 500 units
Burner subassemblies....550 units
Shelves.................... 350 units

d. Direct materials used in production:
In manufacture of Backyard Chef:
Grates.......................... 3 units per unit of product
Stainless steel................ 20 lbs per unit of product
Burner subassemblies....... 2 units per unit of product
Shelves......................... 5 units per unit of product
In manufacture of Master Chef:
Grates.......................... 6 units per unit of product
Stainless steel................ 45 lbs per unit of product
Burner subassemblies....... 4 units per unit of product
Shelves......................... 6 units per unit of product

e. Anticipated purchase price for direct materials:
Grates.............. $20 per unit Burner subassemblies...... $105 per unit
Stainless steel...... $6 per lb Shelves.........................$7 per unit

f. Direct labor requirements:
Backyard Chef:
Stamping Dept. 0.60 hr at $18 per hr
Forming Dept. 0.80 hr at $14 per hr
Assembly Dept. 1.50 hr at $12 per hr
Master Chef:
Stamping Dept. 0.80 hr at $18 per hr
Forming Dept. 1.50 hr at $14 per hr
Assembly Dept. 2.50 hr at $12 per hr

1. Prepare a sales budget for July.
2. Prepare a production budget for July.
3. Prepare a direct materials purchases budget for July.
4. Prepare a direct labor cost budget for July.

Click here for the solution: The budget director of Outdoor Gourmet Grill Company requests estimates of sales, production, and other operating data

Howit Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products

P5-6B Howit Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products. The company 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 through 2008, inclusive.

2005 2006 2007 2008
Income Statement Data
Sales $96,850 $ (e) $82,220
Cost of goods sold (a) 25,140 25,990
Gross profit 69,640 61,540 (i)
Operating expenses 63,500 (f) 52,060
Net income $ (b) $4,570 $ (j)

Balance Sheet Data
Merchandise inventory $13,000 $ (c) $14,700 $ (k)
Account payable 5,800 6,500 4,600 (l)

Additional Information
Purchases of merchandise
Inventory on account $25,890 $ (g) $24,050
Cash payments to supplies (d) (h) 24,650

Instructions
(a) Calculate the missing accounts.
(b) Sales declined over the 3-year fiscal period, 2006-2008. Does that mean that profitability necessarily also declined? Explain, computing the gross profit rate and the profit margin ratio for each fiscal year to help support your answer. (Round to one decimal place.)

Click here for the solution: Howit Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products

Manning Co. manufactures and sells trophies for winners of athletic and other events

Manning Co. manufactures and sells trophies for winners of athletic and other events. Its manufacturing plant has the capacity to produce 18,000 trophies each month; current monthly production is 15,300 trophies. The company normally charges $141 per trophy. Cost data for the current level of production are shown below:

Direct materials 948,600
Direct Labor 290,700
Selling and administrative 41,310
Fixed Cost manufacturing 579,870
Selling administrative 134,640

The company has just received a special one-time order for 900 trophies at $73 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Required: Should the company accept this special order? Why?


Click here for the solution: Manning Co. manufactures and sells trophies for winners of athletic and other events

Corporations invest in other companies for all of the following reasons except to

1) Corporations invest in other companies for all of the following reasons except to

2) A typical investment to house excess cash until needed is

3) Pension funds and mutual funds regularly invest in debt and stock securities to

4) On January 1, 2008, Turner Company purchased at face value, a $1,000, 7% bond that pays interest on January 1 and July 1. Turner Company has a calendar year end.
The entry for the receipt of interest on July 1, 2008, is

5) If a short-term debt investment is sold, the Investment account is

6) Steven Co. purchased 30, 6% Johnston Company bonds for $30,000 cash plus brokerage fees of $300. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a

7) If an investor owns less than 20% of the common stock of another corporation as a long-term investment,

8) If the equity method is being used, cash dividends received

9) If one company owns more than 50% of the common stock of another company,

10) The contra-account, Market Adjustment, is also called a(n)

11) The balance in the Unrealized Loss—Equity account will

12) If the cost of an available-for-sale security exceeds its fair value by $40,000, the entry to recognize the loss

13) Which of the following is a major difference when accounting for long-term debt investments versus short-term debt investments?

14) A company that acquires less than 20% ownership interest in another company should account for the stock investment in that company using

15) Securities bought and held primarily for sale in the near term to generate income on short-term price differences are

Click here for the solution: Corporations invest in other companies for all of the following reasons except to

The chapter talks about Delphi Company reducing its other postretirement benefits by approximately $500 million because of a change in the law

14-43 The chapter talks about Delphi Company reducing its other postretirement benefits by approximately $500 million because of a change in the law. The federal government will reimburse companies for prescription drug benefits that they provide to their employees who are of Medicare age. The reimbursement is 28% of all prescription drug benefits in excess of $250 per person per year, up to a maximum of $1,300 per person.

Required
a. Identify the process the company would use to identify the liability for postretirement drug benefits. Assume this was done prior to the new federal law. Identify the data the company would need to make the estimate. Identify how the auditor might audit the data.
b. Explain how the auditor would verify the $500 million reduction in liability due to the new federal law.

Click here for the solution: The chapter talks about Delphi Company reducing its other postretirement benefits by approximately $500 million because of a change in the law

Biello Co. manufactures and sells medals for winners of athletic and other events

Biello Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 15,000 medals each month; current monthly production is 14,250 medals. The company normally charges $115 per medal. Cost data for the current level of production are shown below.

Variable Costs
Direct Materials $969,000
Direct Labor $270,750
Selling and Administrative $270,075
Fixed Costs
Manufacturing $370,550
Selling and Administrative $89,775

The company has just received a special one-time order for 600 medals at $102 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.

Required:
Should the company accept this special order? Why?

Click here for the solution: Biello Co. manufactures and sells medals for winners of athletic and other events

The adjusted trial balance of Eastwood Company and other related information for the year 2010 are presented on the next page

P5-3 (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Eastwood Company and other related information for the year 2010 are presented on the next page.

EASTWOOD COMPANY
ADJUSTED TRIAL BALANCE
DECEMBER 31, 2010
Debits Credits
Cash $ 41,000
Accounts Receivable 163,500
Allowance for Doubtful Accounts $ 8,700
Prepaid Insurance 5,900
Inventory 208,500
Long-term Investments 339,000
Land 85,000
Construction Work in Progress 124,000
Patents 36,000
Equipment 400,000
Accumulated Depreciation of Equipment 240,000
Unamortized Discount on Bonds Payable 20,000
Accounts Payable 148,000
Accrued Expenses 49,200
Notes Payable 94,000
Bonds Payable 200,000
Common Stock 500,000
Paid-in Capital in Excess of Par—Common Stock 45,000
Retained Earnings 138,000
$1,422,900$1,422,900

Additional information:
1. The LIFO method of inventory value is used.
2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same.
3. The amount of the Construction Work in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $85,000, as shown in the trial balance.
4. The patents were purchased by the company at a cost of $40,000 and are being amortized on a straight-line basis.
5. Of the unamortized discount on bonds payable, $2,000 will be amortized in 2011.
6. The notes payable represent bank loans that are secured by long-term investments carried at $120,000. These bank loans are due in 2011.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2021.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding.

Instructions
Prepare a balance sheet as of December 31, 2010, so that all important information is fully disclosed.

Click here for the solution: The adjusted trial balance of Eastwood Company and other related information for the year 2010 are presented on the next page

Which of the following is an advantage of a sole proprietorship over other business forms

1. Which of the following is an advantage of a sole proprietorship over other business forms?

2. Internet versions of topical tax services include

3. Regulations are

4. Ralph and Yolanda purchased 20% of the initial offering of Major Corporation common stock for $150,000. Major Corporation is a qualifying small business corporation and the stock qualifies as Sec. 1244 stock. Ten months later, Major Corporation files for bankruptcy and the shareholders are notified that the stock is worthless. Ralph and Yolanda, who are married and file a joint return, have a

5. Which of the following is not a step in the tax research process?

6. For Sec. 351 purposes, the term "property" does not include

7. Which of the following is a true statement regarding primary authority of tax law?

8. Which of the following is secondary authority?

9. Which of the following statements about a partnership is true?

10. Identify which of the following statements is true.

Click here for the solution: Which of the following is an advantage of a sole proprietorship over other business forms

(Break-even and other CVP relationships) Cedars Hospital has average revenue of $180 per patient day

3. Break-even and other CVP relationships

Cedars Hospital has average revenue of $180 per patient day. Variable costs are $45 per patient day; fixed costs total $4,320,000 per year.

a. How many patient days does the hospital need to break even?
b. What level of revenue is needed to earn a target income of $540,000?
c. If variable costs drop to $36 per patient day, what increase in fixed costs can be tolerated without changing the break-even point as determined in part (a)?

Click here for the solution: (Break-even and other CVP relationships) Cedars Hospital has average revenue of $180 per patient day

The budget director of Outdoor Chef Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month

The budget director of Outdoor Chef Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for May 2012 is summarized as follows:

a. Estimated sales for May by sales territory:
b. Estimated inventories at May 1:
c. Desired inventories at May 31:
d. Direct materials used in production:
e. Anticipated purchase price for direct materials:
f. Direct labor requirements:

Required;
1. Prepare a sales budget for May.
2. Prepare a production budget for May.
3. Prepare a direct materials purchases budget for May.
4. Prepare a direct labor cost budget for May

Check: 3. Total Direct Materials Purchases, $939,065

Click here for the solution: The budget director of Outdoor Chef Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month