Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000

ACC 560 Week 6 Assignment

P9-3A Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2009.

Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 5% from its 2008 level. Plan B would decrease the selling price per unit by $0.50.The marketing department expects that the sales volume would increase by 150,000 units.

At the end of 2008, Colt has 40,000 units of inventory on hand. If Plan A is accepted, the 2009 ending inventory should be equal to 5% of the 2009 sales. If Plan B is accepted, the ending inventory should be equal to 50,000 units. Each unit produced will cost $1.80 in direct labor, $1.25 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2009 should be $1,895,000.

Instructions
a) Prepare a sales budget for 2009 under each plan
b)Prepare a production budget for 2009 under each plan
c) Compute the production cost per unit under each plan. Why is the cost per unit different for each of the two plans? (Round to two decimals)
d) Which plan should be accepted (Hint: Compute the gross profit under each plan)

Click here for the solution: Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000

Margaret started her own business in the current year and will report a profit for her first year

Margaret started her own business in the current year and will report a profit for her first year. Her results of operations are as follows:

Gross income $50,000
Travel 1,000
Transportation 6,173 miles, using standard mileage method
Entertainment in" total 4,000
Seven gifts at $50 each 350
Rent and utilities for apartment in total 10,000
(20% is used for a home office)

What is the net income Margaret should show on her Schedule C? Show the calculation of her taxable business income.


Click here for the solution: Margaret started her own business in the current year and will report a profit for her first year

Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes

E9-12 (Gross Profit Method) Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

Inventory, May 1 $ 160,000
Purchases (gross) 640,000
Freight-in 30,000
Sales 1,000,000
Sales returns 70,000
Purchase discounts 12,000

Instructions
(a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales.
(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.

Click here for the solution: Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes

ACC 421 Week 3 During 2007 Pierson Company started a construction job with a contract price of $1,500,000

ACC 421 Week Three (Week 3)

Exercise 18-4 (E18-4) (Recognition of Profit on Long-Term Contracts) During 2007 Pierson Company started a construction job with a contract price of $1,500,000. The job was completed in 2009. The following information is available.

2007 2008 2009
Costs incurred to date $400,000 $935,000 $1,070,000
Estimated costs to complete 600,000 165,000 –0–
Billings to date 300,000 900,000 1,500,000
Collections to date 270,000 810,000 1,425,000

Instructions
(a) Compute the amount of gross profit to be recognized each year assuming the percentage-of-completion method is used.
(b) Prepare all necessary journal entries for 2008.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.

Click here for the solution: (Recognition of Profit on Long-Term Contracts) During 2007 Pierson Company started a construction job with a contract price of $1,500,000

Kenny Corp., a capital goods manufacturing business that started on January 4, 2007, and operates on a calendar-year basis, uses the installment-sales method of profit recognition in accounting for all its sales

Exercise 18-15 (E18-15) (Installment-Sales Method and Cost Recovery) Kenny Corp., a capital goods manufacturing business that started on January 4, 2007, and operates on a calendar-year basis, uses the installment-sales method of profit recognition in accounting for all its sales. The following data were taken from the 2007 and 2008 records.

2007 2008
Installment sales $480,000 $620,000
Gross profit as a percent of costs 25% 28%
Cash collections on sales of 2007 $140,000 $240,000
Cash collections on sales of 2008 –0– $180,000
The amounts given for cash collections exclude amounts collected for interest charges.
Instructions
(a) Compute the amount of realized gross profit to be recognized on the 2008 income statement, prepared using the installment-sales method.
(b) State where the balance of Deferred Gross Profit would be reported on the financial statements for 2008.
(c) Compute the amount of realized gross profit to be recognized on the income statement, prepared using the cost-recovery method.

Click here for the solution: Kenny Corp., a capital goods manufacturing business that started on January 4, 2007, and operates on a calendar-year basis, uses the installment-sales method of profit recognition in accounting for all its sales