Stellar Stairs Co. of Poway designs and builds factory-made premium wooden stairs for homes

ACC 560 Week 3 Assignment

P4-3A Stellar Stairs Co. of Poway designs and builds factory-made premium wooden stairs for homes. The manufactured stair components (spindles, risers, hangers, hand rails) permit installation of stairs of varying lengths and widths. All are of white oak wood. Its budgeted manufacturing overhead costs for the year 2009 are as follows.

Overhead Cost Pools Amount
Purchasing $ 57,000
Handling materials 82,000
Production (cutting, milling, finishing) 210,000
Setting up machines 85,000
Inspecting 90,000
Inventory control (raw materials and finished goods) 126,000
Utilities 180,000
Total budget overhead costs $830,000

For the last 4 years, Stellar Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2009, 100,000 machine hours are budgeted.

Heather Fujar, owner-manager of Stellar Stairs Co., recently directed her accountant, Lindsay Baker, to implement the activity-based costing system that she has repeatedly proposed. At Heather Fujar's request, Lindsay and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools.

Activity Cost Pools Cost Drivers Expected
Use of Cost Drivers
Purchasing Number of orders 600
Handling materials Number of moves 8,000
Production (cutting, milling, finishing) Direct labor hours 100,000
Setting up machines Number of setups 1,250
Inspecting Number of inspections 6,000
Inventory control (raw materials and finished goods) Number of components 168,000
Utilities Square feet occupied 90,000

Jason Dion, sales manager, has received an order for 280 stairs from Community Builders, Inc., a large housing development contractor. At Jason's request, Lindsay prepares cost estimates for producing components for 280 stairs so Jason can submit a contract price per stair to Community Builders. She accumulates the following data for the production of 280 stairways.

Direct materials $103,600
Direct labor $112,000
Machine hours 14,500
Direct labor hours 5,000
Number of purchase orders 60
Number of material moves 800
Number of machine setups 100
Number of inspections 450
Number of components 16,000
Number of square feet occupied 8,000

Instructions
a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis.
b) What is the manufacturing cost per stairway under traditional costing?
c) What is the manufacturing cost per stairway under the proposed activity-based costing? (Prepare all of the necessary schedules.)
d) Which of the two costing systems is preferable in pricing decisions and why?

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Cool Spring Company produces premium bottled water

E17A-10 Computing equivalent units, computing cost per equivalent unit; assigning costs; journalizing; second department, weighted-average method

Cool Spring Company produces premium bottled water. In the second department, the Bottling Department, conversion costs are incurred evenly throughout the bottling process, but packaging materials are not added until the end of the process. Costs in beginning Work in process inventory include transferred in costs of $1,700, direct labor of $700, and manufacturing overhead of $330. February data for the Bottling Department follow:

Requirements
1. Compute the Bottling Department equivalent units for the month of February. Use the weighted-average method.
2. Compute the cost per equivalent unit for February.
3. Assign the costs to units completed and transferred out and to ending Work in process inventory.
4. Prepare the journal entry to record the cost of units completed and transferred out.
5. Post all transactions to the Work in process inventory—Bottling Department T-account. What is the ending balance?

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Moon Company includes 1 coupon in each box of soap powder that it packs, 20 coupons being redeemable for a premium consisting of a kitchen utensil

Moon Company includes 1 coupon in each box of soap powder that it packs, 20 coupons being redeemable for a premium consisting of a kitchen utensil. In 2010, Moon Company purchased 12,000 premiums at $1.00 each and sold 360,000 boxes of soap powder @ $4.00 per box. Based on past experience, it is estimated that 60% of the coupons will be redeemed. During 2010, 96,000 coupons were presented for redemption.

During 2011, 19,000 premiums were purchased at $1.10. The company sold 800,000 boxes of soap at $4.00 and 330,000 coupons were presented for redemption.

Instructions
Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in both 2010 and 2011. Assume a FIFO inventory flow.


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E14-5 Assume the same information as in E14-4, except that Foreman Company uses the effective-interest method of amortization for bond premium or discount

E14-5 (Entries for Bond Transactions—Effective-Interest) Assume the same information as in E14-4, except that Foreman Company uses the effective-interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%.

Instructions
Prepare the journal entries to record the following. (Round to the nearest dollar.)
(a) The issuance of the bonds.
(b) The payment of interest and related amortization on July 1, 2011.
(c) The accrual of interest and the related amortization on December 31, 2011.

Click here for the solution: Assume the same information as in E14-4, except that Foreman Company uses the effective-interest method of amortization for bond premium or discount

(Cash Budget; Income Statement; Balance Sheet) Minden Company is a wholesale distributor of premium European chocolates

PROBLEM 9-19 Cash Budget; Income Statement; Balance Sheet

Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Units to be produced . . . . . . 5,000 8,000 7,000 6,000

Minden Company
Balance Sheet
April 30
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Buildings and equipment, net of depreciation . . . . . . . . . . . . . . . . . . 207,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000
Liabilities and Stockholders’ Equity
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,000
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,500
Capital stock, no par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,500
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . $300,000

The company is in the process of preparing budget data for May. A number of budget items have already been prepared, as stated below:
a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May.
b. Purchases of inventory are expected to total $120,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May.
c. The May 31 inventory balance is budgeted at $40,000.
d. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.
e. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.)
f. New refrigerating equipment costing $6,500 will be purchased for cash during May.
g. During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

Required:
1. Prepare a cash budget for May. Support your budget with a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases.
2. Prepare a budgeted income statement for May. Use the absorption costing income statement format as shown in Schedule 9.
3. Prepare a budgeted balance sheet as of May 31.

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