Toyco, a retail toy chain, honors two bank credit cards and makes daily deposits of credit card sales in two credit card bank accounts

12-42 Toyco, a retail toy chain, honors two bank credit cards and makes daily deposits of credit card sales in two credit card bank accounts. (Bank A and Bank B). Each day, Toyco batches its credit card sales slips, bank deposit slips and authorized sales return documents and sends them to data processing for data entry. Each week detailed computer printouts of the general ledger credit card cash accounts are prepared. Credit card banks have been instructed to make an automatic weekly transfer of cash to Toyco's general bank account. The credit card banks charge back deposits that include sales to holders of stolen or expired cards.

The auditor examining Toyco financial statements has obtained copies of the detailed general ledger cash account printouts, a summary of the bank statements and the manually prepared bank reconciliations, all for the week of December 31, as shown here. (see attachment)

Required:
Review the December 31 bank reconciliation and the related information contained in the following schedules and describe what actions the auditor should take to obtain satisfaction for each item on the bank reconciliation. Assume that all amounts are material and that all computations are accurate. Organize your answer sheet as follows, using the code contained on the bank reconciliation:

Code Number Actions to Be Taken by the Auditor to Gain Satisfaction


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Trimble Company sells an electronic toy for $40

Trimble Company sells an electronic toy for $40. The variable cost is $24 per unit and the fixed cost is $32,000 per year. Management is considering the following changes:

Alternative #1
Lease a new packaging machine for $4,000 per year, which will reduce variable cost by $1 per unit.

Alternative #2
Increase selling price 10 percent to counteract an expected 25 percent increase in fixed cost.

Alternative #3
Reduce fixed cost by 25 percent by moving to a lower rent location. This would have the effect of increasing variable costs by 10 percent.

Required:
Consider and answer each of the following questions independently:
Round calculations to the nearest unit
(a) Determine the current break-even point in units and dollars.
(b) Determine the expected profit assuming alternative #1 and sales of 3,200 units.
(c) Determine the break-even point in units and dollars assuming alternative #2.
(d) Determine the break-even point required in units and dollars assuming alternative #3.
(e) Determine the volume of sales required to earn $23,600 assuming alternative #3.

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