Problem A-6 The Economists’ Approach to Pricing; Absorption Costing Approach to Cost-Plus Pricing
Software Solutions, Inc., was started by two young software engineers to market SpamBlocker, a software application they had written that screens incoming e-mail messages and eliminates unsolicited mass mailings. Sales of the software have been good at 50,000 units a month, but the company has been losing money as shown below:
Sales (50,000 units _ $25 per unit) . . . . . . . . . $1,250,000
Variable cost (50,000 units _ $6 per unit) . . . . 300,000
Contribution margin . . . . . . . . . . . . . . . . . . . . . 950,000
Fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . 960,000
Net operating income (loss) . . . . . . . . . . . . . . . $ (10,000)
The company’s only variable cost is the $6 fee it pays to another company to reproduce the software on floppy diskettes, print manuals, and package the result in an attractive box for sale to consumers. Monthly fixed selling and administrative expenses are $960,000. The company’s marketing manager has been arguing for some time that the software is priced too high. She estimates that every 5% decrease in price will yield an 8% increase in unit sales. The marketing manager would like your help in preparing a presentation to the company’s owners concerning the pricing issue.
Required:
1. To help the marketing manager prepare for her presentation, she has asked you to fill in the blanks in the following table. The selling prices in the table were computed by successively decreasing the selling price by 5%. The estimated unit sales were computed by successively increasing the unit sales by 8%. For example, $23.75 is 5% less than $25.00 and 54,000 units is 8% more than 50,000 units
Selling Price, Estimated Unit Sales, Sales, Variable Cost, Fixed Expenses, Net Operating Income
$25.00 50,000 $1,250,000 $300,000 $960,000 $(10,000)
$23.75 54,000 $1,282,500 $324,000 $960,000 $ (1,500)
$22.56 58,320 ? ? ? ?
$21.43 62,986 ? ? ? ?
$20.36 68,025 ? ? ? ?
$19.34 73,467 ? ? ? ?
$18.37 79,344 ? ? ? ?
$17.45 85,692 ? ? ? ?
$16.58 92,547 ? ? ? ?
$15.75 99,951 ? ? ? ?
2. Using the data from the table, construct a chart that shows the net operating income as a function of the selling price. Put the selling price on the X-axis and the net operating income on the Y-axis. Using the chart, determine the approximate selling price at which net operating income is maximized.
3. Compute the price elasticity of demand for the SpamBlocker software. Based on this calculation, what is the profit-maximizing price?
4. The owners have invested $2,000,000 in the company and feel that they should be earning at least 2% per month on these funds. If the absorption costing approach to pricing were used, what would be the target selling price based on the current sales of 50,000 units? What do you think would happen to the net operating income of the company if this price were charged?
5. If the owners of the company are dissatisfied with the net operating income and return on investment at the selling price you computed in (3) above, should they increase the selling price? Explain.
Click here for the solution: Software Solutions, Inc., was started by two young software engineers to market SpamBlocker
Showing posts with label started. Show all posts
Showing posts with label started. Show all posts
Monday, April 18, 2016
Monday, October 26, 2015
Copa Company, a manufacturer of stereo systems, started its production in October 2008 (ACC 560 Week 2)
ACC 560 Week 2 Assignment
P1-2A Copa Company, a manufacturer of stereo systems, started its production in October 2008. For the preceding 3 years Copa had been a retailer of stereo systems. After a thorough survey of stereo system markets, Copa decided to turn its retail store into a stereo equipment factory.
Raw materials cost for a stereo system will total $74 per unit. Workers on the production lines are on average paid $12 per hour. A stereo system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble stereo systems amounts to $4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000.
Janitorial costs are $1,300 monthly. Advertising costs for the stereo system will be $8,500 per month. The factory building depreciation expense is $7,200 per year. Property taxes on the factory building will be $9,000 per year.
Required:
(a) Prepare an answer sheet. Assuming that Copa manufactures, on average, 1,300 stereo systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one stereo system.
Click here for the solution: Copa Company, a manufacturer of stereo systems, started its production in October 2008 (ACC 560 Week 2)
P1-2A Copa Company, a manufacturer of stereo systems, started its production in October 2008. For the preceding 3 years Copa had been a retailer of stereo systems. After a thorough survey of stereo system markets, Copa decided to turn its retail store into a stereo equipment factory.
Raw materials cost for a stereo system will total $74 per unit. Workers on the production lines are on average paid $12 per hour. A stereo system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble stereo systems amounts to $4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000.
Janitorial costs are $1,300 monthly. Advertising costs for the stereo system will be $8,500 per month. The factory building depreciation expense is $7,200 per year. Property taxes on the factory building will be $9,000 per year.
Required:
(a) Prepare an answer sheet. Assuming that Copa manufactures, on average, 1,300 stereo systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one stereo system.
Click here for the solution: Copa Company, a manufacturer of stereo systems, started its production in October 2008 (ACC 560 Week 2)
Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008
ACC 557 Week 1 Assignment
P1-4A Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008. The following transactions occurred during the month of June.
June 1 Stockholders invested $10,000 cash in the business.
2 Purchased a used van for deliveries for $12,000. Mark paid $2,000 cash and signed a note payable for the remaining balance.
3 Paid $500 for office rent for the month.
5 Performed $4,400 of services on account.
9 Paid $200 in cash dividends.
12 Purchased supplies for $150 on account.
15 Received a cash payment of $1,250 for services provided on June 5.
17 Purchased gasoline for $100 on account.
20 Received a cash payment of $1,500 for services provided.
23 Made a cash payment of $500 on the note payable.
26 Paid $250 for utilities.
29 Paid for the gasoline purchased on account on June 17.
30 Paid $1,000 for employee salaries.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format.
Stockholders’
Assets Liabilities Equity
Accounts Delivery Notes Accounts Common Retained
Date Cash _ Receivable _ Supplies _ Van _ Payable _ Payable _ Stock _ Earnings
Include explanations for any changes in the Retained Earnings account in your analysis.
(b) Prepare an income statement for the month of June.
(c) Prepare a balance sheet at June 30, 2008.
Click here for the solution: Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008
P1-4A Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008. The following transactions occurred during the month of June.
June 1 Stockholders invested $10,000 cash in the business.
2 Purchased a used van for deliveries for $12,000. Mark paid $2,000 cash and signed a note payable for the remaining balance.
3 Paid $500 for office rent for the month.
5 Performed $4,400 of services on account.
9 Paid $200 in cash dividends.
12 Purchased supplies for $150 on account.
15 Received a cash payment of $1,250 for services provided on June 5.
17 Purchased gasoline for $100 on account.
20 Received a cash payment of $1,500 for services provided.
23 Made a cash payment of $500 on the note payable.
26 Paid $250 for utilities.
29 Paid for the gasoline purchased on account on June 17.
30 Paid $1,000 for employee salaries.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format.
Stockholders’
Assets Liabilities Equity
Accounts Delivery Notes Accounts Common Retained
Date Cash _ Receivable _ Supplies _ Van _ Payable _ Payable _ Stock _ Earnings
Include explanations for any changes in the Retained Earnings account in your analysis.
(b) Prepare an income statement for the month of June.
(c) Prepare a balance sheet at June 30, 2008.
Click here for the solution: Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008
Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008 (ACC 557 Week 1)
ACC 557 Week 1 Assignment
P1-4A Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008.The following transactions occurred during the month of June.
June 1 Stockholders invested $10,000 cash in the business.
2 Purchased a used van for deliveries for $12,000. Mark paid $2,000 cash and signed a note payable for the remaining balance.
3 Paid $500 for office rent for the month.
5 Performed $4,400 of services on account.
9 Paid $200 in cash dividends.
12 Purchased supplies for $150 on account.
15 Received a cash payment of $1,250 for services provided on June 5.
17 Purchased gasoline for $100 on account.
20 Received a cash payment of $1,500 for services provided.
23 Made a cash payment of $500 on the note payable.
26 Paid $250 for utilities.
29 Paid for the gasoline purchased on account on June 17.
30 Paid $1,000 for employee salaries.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format.
Stockholders’
Assets Liabilities Equity
Accounts Delivery Notes Accounts Common Retained
Date Cash _ Receivable _ Supplies _ Van _ Payable _ Payable _ Stock _ Earnings
Include explanations for any changes in the Retained Earnings account in your analysis.
(b) Prepare an income statement for the month of June.
(c) Prepare a balance sheet at June 30, 2008.
Click here for the solution: Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008 (ACC 557 Week 1)
P1-4A Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008.The following transactions occurred during the month of June.
June 1 Stockholders invested $10,000 cash in the business.
2 Purchased a used van for deliveries for $12,000. Mark paid $2,000 cash and signed a note payable for the remaining balance.
3 Paid $500 for office rent for the month.
5 Performed $4,400 of services on account.
9 Paid $200 in cash dividends.
12 Purchased supplies for $150 on account.
15 Received a cash payment of $1,250 for services provided on June 5.
17 Purchased gasoline for $100 on account.
20 Received a cash payment of $1,500 for services provided.
23 Made a cash payment of $500 on the note payable.
26 Paid $250 for utilities.
29 Paid for the gasoline purchased on account on June 17.
30 Paid $1,000 for employee salaries.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format.
Stockholders’
Assets Liabilities Equity
Accounts Delivery Notes Accounts Common Retained
Date Cash _ Receivable _ Supplies _ Van _ Payable _ Payable _ Stock _ Earnings
Include explanations for any changes in the Retained Earnings account in your analysis.
(b) Prepare an income statement for the month of June.
(c) Prepare a balance sheet at June 30, 2008.
Click here for the solution: Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008 (ACC 557 Week 1)
Friday, October 9, 2015
Gil Vogel started his own consulting firm, Vogel Consulting, on June 1, 2012
P4-2A Gil Vogel started his own consulting firm, Vogel Consulting, on June 1, 2012. The trial balance at June 30 is as follows.
VOGEL CONSULTING
Trial Balance
June 30, 2012
Debit Credit
Cash $ 6,850
Accounts Receivable 7,000
Prepaid Insurance 2,880
Supplies 2,000
Equipment 15,000
Accounts Payable $ 4,230
Unearned Service Revenue 5,200
Common Stock 22,000
Service Revenue 8,300
Salaries and Wages Expense 4,000
Rent Expense 2,000
$39,730 $39,730
In addition to those accounts listed on the trial balance, the chart of accounts for Vogel also contains the following accounts: Accumulated Depreciation—Equipment, Utilities Payable, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense.
Other data:
1. Supplies on hand at June 30 total $720.
2. A utility bill for $180 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. $4,100 of unearned service revenue has been earned at the end of the month.
5. Salaries of $1,250 are accrued at June 30.
6. The equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months.
7. Invoices representing $3,900 of services performed during the month have not been recorded as of June 30.
Instructions
(a) Prepare the adjusting entries for the month of June.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. Use T accounts.
(c) Prepare an adjusted trial balance at June 30, 2012.
Click here for the solution: Gil Vogel started his own consulting firm, Vogel Consulting, on June 1, 2012
VOGEL CONSULTING
Trial Balance
June 30, 2012
Debit Credit
Cash $ 6,850
Accounts Receivable 7,000
Prepaid Insurance 2,880
Supplies 2,000
Equipment 15,000
Accounts Payable $ 4,230
Unearned Service Revenue 5,200
Common Stock 22,000
Service Revenue 8,300
Salaries and Wages Expense 4,000
Rent Expense 2,000
$39,730 $39,730
In addition to those accounts listed on the trial balance, the chart of accounts for Vogel also contains the following accounts: Accumulated Depreciation—Equipment, Utilities Payable, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense.
Other data:
1. Supplies on hand at June 30 total $720.
2. A utility bill for $180 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. $4,100 of unearned service revenue has been earned at the end of the month.
5. Salaries of $1,250 are accrued at June 30.
6. The equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months.
7. Invoices representing $3,900 of services performed during the month have not been recorded as of June 30.
Instructions
(a) Prepare the adjusting entries for the month of June.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. Use T accounts.
(c) Prepare an adjusted trial balance at June 30, 2012.
Click here for the solution: Gil Vogel started his own consulting firm, Vogel Consulting, on June 1, 2012
Monday, October 5, 2015
SY Telc has recently started the manufacture of RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks
ACC 560 Week 5 Assignment
E7-6 SY Telc has recently started the manufacture of RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a mobile phone. The cost structure to manufacture 20,000 RecRobo’s is as follows.
Cost
Direct materials ($40 per robot) $800,000
Direct labor ($30 per robot) 600,000
Variable overhead ($6 per robot) 120,000
Direct labor ($30 per robot) 600,000
Variable overhead($6 per robot) 120,000
Allocated fixed overhead($25 per robot) 500,000
Total $2,020,000
SY Telc is approached by Chen Inc. which offers to make RecRobo for $90 per unit or $1,800,000.
Instructions
(a) Using incremental analysis, determine whether SY Telc should accept this offer under each of the following independent assumptions.
(1) Assume that $300,000 of the fixed overhead cost can be reduced (avoided).
(2) Assume that none of the fixed overhead can be reduced (avoided). However, if the robots are purchased from Chen Inc., SY Telc can use the released productive resources to generate additional income of $300,000.
(b) Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier.
Click here for the solution: SY Telc has recently started the manufacture of RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks
E7-6 SY Telc has recently started the manufacture of RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a mobile phone. The cost structure to manufacture 20,000 RecRobo’s is as follows.
Cost
Direct materials ($40 per robot) $800,000
Direct labor ($30 per robot) 600,000
Variable overhead ($6 per robot) 120,000
Direct labor ($30 per robot) 600,000
Variable overhead($6 per robot) 120,000
Allocated fixed overhead($25 per robot) 500,000
Total $2,020,000
SY Telc is approached by Chen Inc. which offers to make RecRobo for $90 per unit or $1,800,000.
Instructions
(a) Using incremental analysis, determine whether SY Telc should accept this offer under each of the following independent assumptions.
(1) Assume that $300,000 of the fixed overhead cost can be reduced (avoided).
(2) Assume that none of the fixed overhead can be reduced (avoided). However, if the robots are purchased from Chen Inc., SY Telc can use the released productive resources to generate additional income of $300,000.
(b) Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier.
Click here for the solution: SY Telc has recently started the manufacture of RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks
Sunday, September 27, 2015
Williams-Santana, Inc. is a manufacturer of high-tech industrial parts that was started in 1997 by two talented engineers with little business training
Integrating Case 16–5 Tax effects of accounting changes and error correction; six situations
Williams-Santana, Inc. is a manufacturer of high-tech industrial parts that was started in 1997 by two talented engineers with little business training. In 2011, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2011 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.
a. A five-year casualty insurance policy was purchased at the beginning of 2009 for $35,000. The full amount was debited to insurance expense at the time.
b. On December 31, 2010, merchandise inventory was overstated by $25,000 due to a mistake in the physical inventory count using the periodic inventory system.
c. The company changed inventory cost methods to FIFO from LIFO at the end of 2011 for both financial statement and income tax purposes. The change will cause a $960,000 increase in the beginning inventory at January 1, 2010.
d. At the end of 2010, the company failed to accrue $15,500 of sales commissions earned by employees during 2010. The expense was recorded when the commissions were paid in early 2011.
e. At the beginning of 2009, the company purchased a machine at a cost of $720,000. Its useful life was estimated to be 10 years with no salvage value. The machine has been depreciated by the double declining-balance method. Its carrying amount on December 31, 2010, was $460,800. On January 1, 2011, the company changed to the straight-line method.
f. Additional industrial robots were acquired at the beginning of 2008 and added to the company's assembly process. The $1,000,000 cost of the equipment was inadvertently recorded as repair expense. Robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for both financial reporting and income tax reporting.
Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2011 related to the situation described. Any tax effects should be adjusted for through the deferred tax liability account.
3. Briefly describe any other steps that should be taken to appropriately report the situation.
Click here for the solution: Williams-Santana, Inc. is a manufacturer of high-tech industrial parts that was started in 1997 by two talented engineers with little business training
Williams-Santana, Inc. is a manufacturer of high-tech industrial parts that was started in 1997 by two talented engineers with little business training. In 2011, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2011 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.
a. A five-year casualty insurance policy was purchased at the beginning of 2009 for $35,000. The full amount was debited to insurance expense at the time.
b. On December 31, 2010, merchandise inventory was overstated by $25,000 due to a mistake in the physical inventory count using the periodic inventory system.
c. The company changed inventory cost methods to FIFO from LIFO at the end of 2011 for both financial statement and income tax purposes. The change will cause a $960,000 increase in the beginning inventory at January 1, 2010.
d. At the end of 2010, the company failed to accrue $15,500 of sales commissions earned by employees during 2010. The expense was recorded when the commissions were paid in early 2011.
e. At the beginning of 2009, the company purchased a machine at a cost of $720,000. Its useful life was estimated to be 10 years with no salvage value. The machine has been depreciated by the double declining-balance method. Its carrying amount on December 31, 2010, was $460,800. On January 1, 2011, the company changed to the straight-line method.
f. Additional industrial robots were acquired at the beginning of 2008 and added to the company's assembly process. The $1,000,000 cost of the equipment was inadvertently recorded as repair expense. Robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for both financial reporting and income tax reporting.
Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2011 related to the situation described. Any tax effects should be adjusted for through the deferred tax liability account.
3. Briefly describe any other steps that should be taken to appropriately report the situation.
Click here for the solution: Williams-Santana, Inc. is a manufacturer of high-tech industrial parts that was started in 1997 by two talented engineers with little business training
The partnerships of Up & Down and Back & Forth started in business on July 1, 2005; each partnership owns one retail appliance store
The partnerships of Up & Down and Back & Forth started in business on July 1, 2005; each partnership owns one retail appliance store. It was agreed as of June 30, 2008, to combine the partnerships to form a new partnership to be known as Discount Partnership. Trial balances of the two original partnerships as of June 30, 2008 follow.
Up & Down Back & Forth
Trial Balance Trial Balance
June 30, 2008 June 30, 2008
Cash $ 25,000 $ 20,000
Accounts Receivable 90,000 140,000
Allowance for Doubtful Accounts $ 2,000 $ 6,000
Merchandise Inventory 180,000 115,000
Land 25,000 35,000
Buildings and Equipment 80,000 125,000
Allowance for Depreciation 24,000 61,000
Prepaid Expenses 6,000 8,000
Accounts Payable 42,000 54,000
Notes Payable 65,000 74,000
Accrued Expenses 34,000 44,000
Up, Capital 95,000
Down, Capital 144,000
Back, Capital 65,000
Forth, Capital 139,000
Totals $406,000 $406,000 $443,000 $443,000
The following additional information is available.
1. The profit- and loss-sharing ratios for the former partnerships were 40% to Up and 60% to Down; 30% to Back and 70% to Forth. The profit- and loss-sharing ratio for the new partnership will be Up, 20%; Down, 30%; Back, 15%; and Forth, 35%.
2. The opening capital ratios for the new partnership are to be the same as the profit- and loss-sharing ratios for the new partnership. The capital assigned to Up & Down will total $225,000. Any cash settlements among the partners arising from capital account adjustments will be a private matter and will not be recorded on the partnership books.
3. The partners agreed that the allowance for bad debts for the new partnership is to be 4% of the accounts receivable balances.
4. The opening inventory of the new partnership is to be valued by the FIFO method. The inventory of Up & Down was valued by the FIFO method and the Back & Forth inventory was valued by the LIFO method. The LIFO inventory represents 80% of its FIFO value.
5. Depreciation is to be computed by the double-declining balance method with a 10-year life for the depreciable assets. Depreciation for three years is to be accumulated in the opening balance of the Allowance for Depreciation account. Up & Down computed depreciation by the straight-line method, and Back & Forth used the double-declining balance method. All assets were obtained on July 1, 2005.
6. After the books were closed, an unrecorded merchandise purchase of $4,000 by Back & Forth was discovered. The merchandise had been sold by June 30, 2008.
7. The accounts of Up & Down include a vacation pay accrual. It was agreed that Back & Forth should make a similar accrual for their 10 employees, who will receive a two-week vacation of $200 per employee per week.
Required:
A. Prepare a worksheet to determine the opening balances of a new partnership after giving effect to the information above. Formal journal entries are not required. Supporting computations, including the computation of goodwill, should be in good form.
B. Prepare a schedule computing the cash to be exchanged between Up & Down and between Back & Forth, in settlement of the affairs of each original partnership.
Click here for the solution: The partnerships of Up & Down and Back & Forth started in business on July 1, 2005; each partnership owns one retail appliance store
Up & Down Back & Forth
Trial Balance Trial Balance
June 30, 2008 June 30, 2008
Cash $ 25,000 $ 20,000
Accounts Receivable 90,000 140,000
Allowance for Doubtful Accounts $ 2,000 $ 6,000
Merchandise Inventory 180,000 115,000
Land 25,000 35,000
Buildings and Equipment 80,000 125,000
Allowance for Depreciation 24,000 61,000
Prepaid Expenses 6,000 8,000
Accounts Payable 42,000 54,000
Notes Payable 65,000 74,000
Accrued Expenses 34,000 44,000
Up, Capital 95,000
Down, Capital 144,000
Back, Capital 65,000
Forth, Capital 139,000
Totals $406,000 $406,000 $443,000 $443,000
The following additional information is available.
1. The profit- and loss-sharing ratios for the former partnerships were 40% to Up and 60% to Down; 30% to Back and 70% to Forth. The profit- and loss-sharing ratio for the new partnership will be Up, 20%; Down, 30%; Back, 15%; and Forth, 35%.
2. The opening capital ratios for the new partnership are to be the same as the profit- and loss-sharing ratios for the new partnership. The capital assigned to Up & Down will total $225,000. Any cash settlements among the partners arising from capital account adjustments will be a private matter and will not be recorded on the partnership books.
3. The partners agreed that the allowance for bad debts for the new partnership is to be 4% of the accounts receivable balances.
4. The opening inventory of the new partnership is to be valued by the FIFO method. The inventory of Up & Down was valued by the FIFO method and the Back & Forth inventory was valued by the LIFO method. The LIFO inventory represents 80% of its FIFO value.
5. Depreciation is to be computed by the double-declining balance method with a 10-year life for the depreciable assets. Depreciation for three years is to be accumulated in the opening balance of the Allowance for Depreciation account. Up & Down computed depreciation by the straight-line method, and Back & Forth used the double-declining balance method. All assets were obtained on July 1, 2005.
6. After the books were closed, an unrecorded merchandise purchase of $4,000 by Back & Forth was discovered. The merchandise had been sold by June 30, 2008.
7. The accounts of Up & Down include a vacation pay accrual. It was agreed that Back & Forth should make a similar accrual for their 10 employees, who will receive a two-week vacation of $200 per employee per week.
Required:
A. Prepare a worksheet to determine the opening balances of a new partnership after giving effect to the information above. Formal journal entries are not required. Supporting computations, including the computation of goodwill, should be in good form.
B. Prepare a schedule computing the cash to be exchanged between Up & Down and between Back & Forth, in settlement of the affairs of each original partnership.
Click here for the solution: The partnerships of Up & Down and Back & Forth started in business on July 1, 2005; each partnership owns one retail appliance store
Friday, September 25, 2015
Big A's Auto Service was started on January 1, 2012
Exercise 5-3 Effect of recognizing uncollectible accounts expense on financial statements percent of revenue allowance method
Big A's Auto Service was started on January 1, 2012. The company experienced the following events during its first two years of operation.
Events affecting 2012:
1. Provided $30,000 of repair services on account
2. Collected $25,000 cash from accounts receivable
3. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the service revenue on account.
Events affecting 2013:
1. Wrote of a $280 account receivable that was determined to be uncollectible
2. Provided $35,000 of repair services on account
3. Collected $31,000 cash from accounts receivable
4. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the service revenue on account
Required:
a. Organize the transaction data in accounts under an accounting equation.
b. Determine the following amounts:
1. Net income for 2012
2. Net cash flow from operating activities for 2012
3. Balance of accounts receivable at the end of 2012
4. Net realizable value of accounts receivable at the end of 2012
c. Repeat requirement b for the 2013 accounting period.
Click here for the solution: Big A's Auto Service was started on January 1, 2012
Big A's Auto Service was started on January 1, 2012. The company experienced the following events during its first two years of operation.
Events affecting 2012:
1. Provided $30,000 of repair services on account
2. Collected $25,000 cash from accounts receivable
3. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the service revenue on account.
Events affecting 2013:
1. Wrote of a $280 account receivable that was determined to be uncollectible
2. Provided $35,000 of repair services on account
3. Collected $31,000 cash from accounts receivable
4. Adjusted the accounting records to reflect the estimate that uncollectible accounts expense would be 1 percent of the service revenue on account
Required:
a. Organize the transaction data in accounts under an accounting equation.
b. Determine the following amounts:
1. Net income for 2012
2. Net cash flow from operating activities for 2012
3. Balance of accounts receivable at the end of 2012
4. Net realizable value of accounts receivable at the end of 2012
c. Repeat requirement b for the 2013 accounting period.
Click here for the solution: Big A's Auto Service was started on January 1, 2012
Sunday, September 20, 2015
Linda Ace started her own consulting firm, Modine Consulting, Inc. on May 1, 2008
P3-1B Linda Ace started her own consulting firm, Modine Consulting, Inc.
on May 1, 2008. The trial balance at May 31 is as follows.
MODINE CONSULTING, INC.
Trial Balance
May 31, 2008
Account
Number Debit Credit
101 Cash $ 7,700
112 Accounts Receivable 4,000
126 Supplies 1,500
130 Prepaid Insurance 4,800
149 Office Furniture 9,600
201 Accounts Payable $ 3,500
209 Unearned Service Revenue 3,000
311 Common Stock 19,100
400 Service Revenue 6,000
726 Salaries Expense 3,000
729 Rent Expense 1,000
$31,600 $31,600
In addition to those accounts listed on the trial balance, the chart of accounts for Modine Consulting also contains the following accounts and account numbers: No. 150 Accumulated Depreciation—Office Furniture, No. 212 Salaries Payable, No. 229 Travel Payable, No. 631 Supplies Expense,No. 717 Depreciation Expense,No. 722 Insurance Expense, and No. 736 Travel Expense.
Other data:
1. $500 of supplies have been used during the month.
2. Travel expense incurred but not paid on May 31, 2008, $200.
3. The insurance policy is for 2 years.
4. $1,000 of the balance in the unearned service revenue account remains unearned at the end of the month.
5. May 31 is a Wednesday, and employees are paid on Fridays. Modine Consulting has two employees, who are paid $700 each for a 5-day work week.
6. The office furniture has a 5-year life with no salvage value. It is being depreciated at $160 per month for 60 months.
7. Invoices representing $1,000 of services performed during the month have not been recorded as of May 31.
Instructions
(a) Prepare the adjusting entries for the month of May. Use J4 as the page number for your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances and place a check mark in the posting reference column.
(c) Prepare an adjusted trial balance at May 31, 2008.
Check: (c) Adj. trial balance $33,800
Click here for the solution: Linda Ace started her own consulting firm, Modine Consulting, Inc. on May 1, 2008
MODINE CONSULTING, INC.
Trial Balance
May 31, 2008
Account
Number Debit Credit
101 Cash $ 7,700
112 Accounts Receivable 4,000
126 Supplies 1,500
130 Prepaid Insurance 4,800
149 Office Furniture 9,600
201 Accounts Payable $ 3,500
209 Unearned Service Revenue 3,000
311 Common Stock 19,100
400 Service Revenue 6,000
726 Salaries Expense 3,000
729 Rent Expense 1,000
$31,600 $31,600
In addition to those accounts listed on the trial balance, the chart of accounts for Modine Consulting also contains the following accounts and account numbers: No. 150 Accumulated Depreciation—Office Furniture, No. 212 Salaries Payable, No. 229 Travel Payable, No. 631 Supplies Expense,No. 717 Depreciation Expense,No. 722 Insurance Expense, and No. 736 Travel Expense.
Other data:
1. $500 of supplies have been used during the month.
2. Travel expense incurred but not paid on May 31, 2008, $200.
3. The insurance policy is for 2 years.
4. $1,000 of the balance in the unearned service revenue account remains unearned at the end of the month.
5. May 31 is a Wednesday, and employees are paid on Fridays. Modine Consulting has two employees, who are paid $700 each for a 5-day work week.
6. The office furniture has a 5-year life with no salvage value. It is being depreciated at $160 per month for 60 months.
7. Invoices representing $1,000 of services performed during the month have not been recorded as of May 31.
Instructions
(a) Prepare the adjusting entries for the month of May. Use J4 as the page number for your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances and place a check mark in the posting reference column.
(c) Prepare an adjusted trial balance at May 31, 2008.
Check: (c) Adj. trial balance $33,800
Click here for the solution: Linda Ace started her own consulting firm, Modine Consulting, Inc. on May 1, 2008
Tuesday, September 8, 2015
On June 1 Eckersley Service Company was started with an investment of $26,200 cash
P1-3A On June 1 Eckersley Service Company was started with an investment of $26,200 cash. Here are the assets and liabilities of the company on June 30, and the revenues and expenses for the month of June, its first month of operations.
Cash $4,600 Notes payable $12,000
Accounts receivable 4,000 Accounts payable 500
Revenue 7,000 Supplies expense 1,000
Supplies 2,400 Gas & oil expense 600
Advertising expense 400 Utilities expense 300
Equipment 29,000 Wage expense 1,400
In June, the company issued no additional common stock, but paid dividends of $2,000.
Instructions
(a) Complete an income statement and a retained earnings statement for the month of June and a balance sheet at June 30, 2010.
(b)
(c)
Click here for the solution: On June 1 Eckersley Service Company was started with an investment of $26,200 cash
Cash $4,600 Notes payable $12,000
Accounts receivable 4,000 Accounts payable 500
Revenue 7,000 Supplies expense 1,000
Supplies 2,400 Gas & oil expense 600
Advertising expense 400 Utilities expense 300
Equipment 29,000 Wage expense 1,400
In June, the company issued no additional common stock, but paid dividends of $2,000.
Instructions
(a) Complete an income statement and a retained earnings statement for the month of June and a balance sheet at June 30, 2010.
(b)
(c)
Click here for the solution: On June 1 Eckersley Service Company was started with an investment of $26,200 cash
Wednesday, September 2, 2015
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
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
Baucom Manufacturing Corporation was started with the issuance of common stock for $50,000
P12-13A Baucom Manufacturing Corporation was started with the issuance of common stock for $50,000. It purchased $7,000 of raw materials and worked on three job orders during 2012 for which data follow. (Assume that all transactions are for cash unless otherwise indicated.)
Direct raw material used Direct labor
Job 1 $1,000 $2,000
Job 2 $2,000 $4,000
Job 3 $3,000 $2,000
Total $6,000 $8,000
Factory overhead is applied using a predetermined overhead rate of $0.60 per direct labor dollar. Jobs 2 and 3 were completed during the period and Job 3 was sold for $10,000 cash. Baucom paid $400 for selling and administrative expenses. Actual factory overhead was $4,300.
Required
a. Record the preceding events in a horizontal statements model. The first event for 2012 has been recorded as an example.
b. Reconcile all subsidiary accounts with their respective control accounts.
c. Record the closing entry for over- or underapplied manufacturing overhead in the horizontal statements model, assuming that the amount is insignificant.
d. Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2012.
Click here for the solution: Baucom Manufacturing Corporation was started with the issuance of common stock for $50,000
Direct raw material used Direct labor
Job 1 $1,000 $2,000
Job 2 $2,000 $4,000
Job 3 $3,000 $2,000
Total $6,000 $8,000
Factory overhead is applied using a predetermined overhead rate of $0.60 per direct labor dollar. Jobs 2 and 3 were completed during the period and Job 3 was sold for $10,000 cash. Baucom paid $400 for selling and administrative expenses. Actual factory overhead was $4,300.
Required
a. Record the preceding events in a horizontal statements model. The first event for 2012 has been recorded as an example.
b. Reconcile all subsidiary accounts with their respective control accounts.
c. Record the closing entry for over- or underapplied manufacturing overhead in the horizontal statements model, assuming that the amount is insignificant.
d. Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2012.
Click here for the solution: Baucom Manufacturing Corporation was started with the issuance of common stock for $50,000
Tuesday, August 18, 2015
On June 1, Beardsley Service Co. was started with an initial investment in the company of $22,100 cash
P1-3A On June 1, Beardsley Service Co. was started with an initial investment in the company of $22,100 cash. Here are the assets and liabilities of the company at June 30, and the revenues and expenses for the month of June, its first month of operations:
Cash $ 4,600 Notes payable $12,000
Accounts receivable 4,000 Accounts payable 500
Service revenue 7,500 Supplies expense 1,000
Supplies 2,400 Maintenance and repairs expense 600
Advertising expense 400 Utilities expense 300
Equipment 26,000 Salaries and wages expense 1,400
In June, the company issued no additional stock, but paid dividends of $1,400.
Instructions
(a) Prepare an income statement and a retained earnings statement for the month of June and a balance sheet at June 30, 2012.
(b) Briefly discuss whether the company’s first month of operations was a success.
(c) Discuss the company’s decision to distribute a dividend.
Click here for the solution: On June 1, Beardsley Service Co. was started with an initial investment in the company of $22,100 cash
Cash $ 4,600 Notes payable $12,000
Accounts receivable 4,000 Accounts payable 500
Service revenue 7,500 Supplies expense 1,000
Supplies 2,400 Maintenance and repairs expense 600
Advertising expense 400 Utilities expense 300
Equipment 26,000 Salaries and wages expense 1,400
In June, the company issued no additional stock, but paid dividends of $1,400.
Instructions
(a) Prepare an income statement and a retained earnings statement for the month of June and a balance sheet at June 30, 2012.
(b) Briefly discuss whether the company’s first month of operations was a success.
(c) Discuss the company’s decision to distribute a dividend.
Click here for the solution: On June 1, Beardsley Service Co. was started with an initial investment in the company of $22,100 cash
Saturday, August 1, 2015
Henri and Simone started Manx Corporation in 2002 with each investing $500,000
Henri and Simone started Manx Corporation in 2002 with each investing $500,000. Manx develops and manufactures pet toys and supplies. The business has been very profitable (now valued at $5 million) due to Henri’s marketing abilities and Simone’s knack for inventing toys that pets love. Since Henri and Simone feel that Manx cannot expand further in the pet product industry, they are in the market to acquire another company. Henri hears about LaPerm Corporation from one of their customers. LaPerm is a beauty supply manufacturer. It has a great line of products but has suffered substantial losses due to a lack of strategic marketing and ineffective management. It is a small company with net assets valued at $200,000, but it has a $300,000 NOL and a $100,000 business credit carryover. All the shares of LaPerm are held by Marcel, who started LaPerm 40 years ago. Marcel is 66 and is no longer interested in running the business. Before Henri and Simone enter into negotiations with Marcel regarding the acquisition of LaPerm using a tax-deferred reorganization, what issues should be considered?
Click here for the solution: Henri and Simone started Manx Corporation in 2002 with each investing $500,000
Click here for the solution: Henri and Simone started Manx Corporation in 2002 with each investing $500,000
During 2010 Nilsen Company started a construction job with a contract price of $1,600,000
E18-4 (Recognition of Profit on Long-Term Contracts) During 2010 Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2012. The following information is available.
2010 2011 2012
Costs incurred to date $400,000 $825,000 $1,070,000
Estimated costs to complete 600,000 275,000 –0–
Billings to date 300,000 900,000 1,600,000
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 2011.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.
Click here for the solution: During 2010 Nilsen Company started a construction job with a contract price of $1,600,000
2010 2011 2012
Costs incurred to date $400,000 $825,000 $1,070,000
Estimated costs to complete 600,000 275,000 –0–
Billings to date 300,000 900,000 1,600,000
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 2011.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.
Click here for the solution: During 2010 Nilsen Company started a construction job with a contract price of $1,600,000
Swift Corp., a capital goods manufacturing business that started on January 4, 2010, and operates on a calendar-year basis
E18-15 (Installment-Sales Method and Cost-Recovery Method) Swift Corp., a capital goods manufacturing business that started on January 4, 2010, 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 2010 and 2011 records.
2010 2011
Installment sales $480,000 $620,000
Gross profit as a percent of costs 25% 28%
Cash collections on sales of 2010 $130,000 $240,000
Cash collections on sales of 2011 –0– $160,000
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 2011 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 2011.
(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: Swift Corp., a capital goods manufacturing business that started on January 4, 2010, and operates on a calendar-year basis
2010 2011
Installment sales $480,000 $620,000
Gross profit as a percent of costs 25% 28%
Cash collections on sales of 2010 $130,000 $240,000
Cash collections on sales of 2011 –0– $160,000
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 2011 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 2011.
(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: Swift Corp., a capital goods manufacturing business that started on January 4, 2010, and operates on a calendar-year basis
Thursday, July 30, 2015
Nick Waege started his own consulting firm, Waegelein Consulting, on June 1, 2010
Nick Waege started his own consulting firm, Waegelein Consulting, on June 1, 2010. The trial balance at June 30 is as follows.
WAEGELEIN CONSULTING
Trial Balance
June 30, 2010
Debit Credit
Cash 6,850
Accounts Receivable 7,000
Prepaid Insurance 2,640
Supplies 2,000
Office Equipment 15,000
Accounts Payable 4,540
Unearned Service Revenue 5,200
Common Stock 21,750
Service Revenue 8,000
Salaries Expense 4,000
Rent Expense 2,000
39,490 39,490
In addition to those accounts listed on the trial balance, the chart of accounts for Waegelein also contains the following accounts:
Accumulated Depreciation - Office Equipment, Utilities Payable, Salaries Payable, Depreciation Expense, Insurance Expense, Utilities Expense, Supplies Expense
Other data:
1. Supplies on hand at June 30 total $980.
2. A utility bill for $180 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. $3,900 of unearned service revenue has been earned at the end of the month.
5. Salaries of $1,250 are accrued at June 30.
6. The office equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months.
7. Invoices representing $3,500 of services performed during the month have not been recorded as of June 30.
Instructions:
a. Prepare the adjusting entries for the month of June.
b. Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. Use T accounts.
c. Prepare an adjusted trial balance at June 30, 2010.
Click here for the solution: Nick Waege started his own consulting firm, Waegelein Consulting, on June 1, 2010
WAEGELEIN CONSULTING
Trial Balance
June 30, 2010
Debit Credit
Cash 6,850
Accounts Receivable 7,000
Prepaid Insurance 2,640
Supplies 2,000
Office Equipment 15,000
Accounts Payable 4,540
Unearned Service Revenue 5,200
Common Stock 21,750
Service Revenue 8,000
Salaries Expense 4,000
Rent Expense 2,000
39,490 39,490
In addition to those accounts listed on the trial balance, the chart of accounts for Waegelein also contains the following accounts:
Accumulated Depreciation - Office Equipment, Utilities Payable, Salaries Payable, Depreciation Expense, Insurance Expense, Utilities Expense, Supplies Expense
Other data:
1. Supplies on hand at June 30 total $980.
2. A utility bill for $180 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. $3,900 of unearned service revenue has been earned at the end of the month.
5. Salaries of $1,250 are accrued at June 30.
6. The office equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months.
7. Invoices representing $3,500 of services performed during the month have not been recorded as of June 30.
Instructions:
a. Prepare the adjusting entries for the month of June.
b. Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. Use T accounts.
c. Prepare an adjusted trial balance at June 30, 2010.
Click here for the solution: Nick Waege started his own consulting firm, Waegelein Consulting, on June 1, 2010
Wednesday, July 15, 2015
Dinkel Manufacturing Corporation accumulates the following data relative to jobs started and finished during the month of June 2008
Dinkel Manufacturing Corporation accumulates the following data relative to jobs started and finished during the month of June 2008. Costs and Production Data Actual Standard Raw materials unit cost $2.25 $2.00 Raw materials units used 10,600 10,000 Direct labor payroll $122,400 $120,000 Direct labor hours worked 14,400 15,000 Manufacturing overhead-incurred $184,500 Manufacturing overhead applied $189,000 Machine hours expected to be used at normal capacity 42,500 Budgeted fixed overhead for June $51,000 Variable overhead rate per hour $3.00 Fixed overhead rate per hour $1.20 Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used. Hint: Compute variances, and prepare income statement. (a) Compute all of the variances for (1) direct materials and (2) direct labor. (3) Compute the total overhead variance. (b) Prepare an income statement for management. Ignore income taxes.
Click here for the solution: Dinkel Manufacturing Corporation accumulates the following data relative to jobs started and finished during the month of June 2008
Click here for the solution: Dinkel Manufacturing Corporation accumulates the following data relative to jobs started and finished during the month of June 2008
Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains
P 12–15: Great Southern Furniture
Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains. Hotels purchase furniture (beds, night stands, and chests of drawers) from manufacturers who ship the furniture to the hotels unassembled. Koehler sends a site supervisor and a small crew of employees to the hotel. The site supervisor first hires additional local employees to help assemble the furniture and then trains them. The locally hired employees along with the small crew of Great Southern employees assemble the furniture at the hotel. This significantly reduces the shipping charges and damage to the furniture. Before sending a crew to the site, Koehler has a crew in his office assemble several sets to make sure there are no problems and also to estimate the expected time required to assemble the particular furniture. The 500-room Hyatt opens in Tampa and Koehler sends a crew to assemble the 500 bedroom sets. He establishes that 4.5 hours are required to assemble one complete room and the estimated cost per hour is $22. Upon completing the job, the crew reports they had total wages of $49,693 for 2,170 hours worked.
Required:
Write a report evaluating the performance of the crew at the Hyatt in Tampa.
Click here for the solution: Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains
Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains. Hotels purchase furniture (beds, night stands, and chests of drawers) from manufacturers who ship the furniture to the hotels unassembled. Koehler sends a site supervisor and a small crew of employees to the hotel. The site supervisor first hires additional local employees to help assemble the furniture and then trains them. The locally hired employees along with the small crew of Great Southern employees assemble the furniture at the hotel. This significantly reduces the shipping charges and damage to the furniture. Before sending a crew to the site, Koehler has a crew in his office assemble several sets to make sure there are no problems and also to estimate the expected time required to assemble the particular furniture. The 500-room Hyatt opens in Tampa and Koehler sends a crew to assemble the 500 bedroom sets. He establishes that 4.5 hours are required to assemble one complete room and the estimated cost per hour is $22. Upon completing the job, the crew reports they had total wages of $49,693 for 2,170 hours worked.
Required:
Write a report evaluating the performance of the crew at the Hyatt in Tampa.
Click here for the solution: Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains
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