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

On January 2, 2011, the Jackson Company purchased equipment to be used in its manufacturing process

E11-10 Double-declining-balance method; switch to straight line

On January 2, 2011, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $30,625. The expenditures made to acquire the asset were as follows:

Purchase price $154,000
Freight charges 2,000
Installation charges 4,000

Jackson's policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment's life and then switch to straight line halfway through the equipment's life.

Required:
1. Calculate depreciation for each year of the asset's eight-year life.
2. Discuss the accounting treatment of the depreciation on the equipment.

Click here for the solution: On January 2, 2011, the Jackson Company purchased equipment to be used in its manufacturing process

Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used

ACC 560 Week 2 Assignment

E2-5 Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $305,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.

1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.

Click here for the solution: Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used

The Medical Center has a single operating room that is used by local physicians to perform surgical procedures

The Medical Center has a single operating room that is used by local physicians to perform surgical procedures. The cost of using the operating room is accumulated by each patient procedure and includes the direct materials costs (drugs and medical devices), physician surgical time, and operating room overhead. On November 1 of the current year, the annual operating room overhead is estimated to be:

Disposable supplies $150,000
Depreciation expense 27,000
Utilities 5,500
Nurse salaries 225,500
Technician wages 74,000
Total operating room overhead $492,000

The overhead costs will be assigned to procedures based on the number of surgical room hours. The Medical Center expects to use the operating room an average of eight hours per day, six days per week. In addition, the operating room will be shut down two weeks per year for general repairs.

a. Determine the predetermined operating room overhead rate for the year.
b. Gretchen Kelton had a 6 hour procedure on November 10. How much operating room overhead would be charged to her procedure, using the rate determined in part (a)?
c. During November, the operating room was used 192 hours. The actual overhead costs incurred for November were $38,500. Determine the overhead under-or over- applied for the period.

Click here for the solution: The Medical Center has a single operating room that is used by local physicians to perform surgical procedures

What is the role of the Sarbanes-Oxley Act of 2002 in relation to the types of internal controls used by corporations

ACC 290 Week 5 Assignment

Answer the following summary question: What is the role of the Sarbanes-Oxley Act of 2002 in relation to the types of internal controls used by corporations such as those illustrated in Exercises 7-4, 7-5, and 7-6?

Click here for the solution: What is the role of the Sarbanes-Oxley Act of 2002 in relation to the types of internal controls used by corporations

Flint Tooling Company is considering replacing a machine that has been used in its factory for two years

PR 9-2A Flint Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:

OLD MACHINE
Cost of machine, eight year life $48,000
Annual depreciation (straight-line) 6,000
Annual manufacturing costs, excluding depreciation 14,500
Annual nonmanufacturing operating expenses 2,900
Annual revenue 29,600
Current estimated selling price of the machine 18,000

NEW MACHINE
Cost of the machine, six year life $58,500
Annual depreciation (straight-line) 9,750
Estimated annual manufacturing costs, exclusive of depreciation 5,200
Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.

Instructions
1.Prepare a differential analysis report as of May 22, 2010, comparing operations utilizing the new machine with operations using the present equipment. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired.
2.List other factors that should be considered before a final decision is reached.

Click here for the solution: Flint Tooling Company is considering replacing a machine that has been used in its factory for two years

The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones

Product costing in an ABC system (9th Edition)

The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones. Consider the following data regarding component T24:

The activities required to build the component follow:

Requirements
1. Complete the missing items for the two tables.
2. Why might managers favor this ABC system instead of August's older system, which allocated all conversion costs on the basis of direct labor?


Click here for the solution: The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones

The following gives the number of pints of type A blood used at Woodlawn Hospital in the past 6 weeks

Problem 4.1 The following gives the number of pints of type A blood used at Woodlawn Hospital in the past 6 weeks:

Week Of Pints Used
August 31 360
September 7 389
September 14 410
September 21 381
September 28 368
October 5 374

a) Forecast the demand for the week of October 12 using a 3-week moving average.
b) Use a 3-week weighted moving average, with weights of .1, .3, and .6, using .6 for the most recent week. Forecast demand for the week of October 12.
c) Compute the forecast for the week of October 12 using exponential smoothing with a forecast for August 31 of 360 and a= .2.


Click here for the solution: The following gives the number of pints of type A blood used at Woodlawn Hospital in the past 6 weeks

Louder Company manufactures part MNO used in several of its truck models

Louder Company manufactures part MNO used in several of its truck models. A total of 10,000 units are produced each year with production costs as follows:

Direct materials $ 45,000
Direct manufacturing labor 15,000
Variable support costs 35,000
Fixed support costs 25,000
Total costs $120,000

Louder Company has the option of purchasing part MNO from an outside supplier at $11.20 per unit. If MNO is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.

Question 1: What amount of the MNO production costs is avoidable?

Question 2: Should the company outsource MNO? Why or why not?

Question 3: What other items should the company consider before outsourcing any of the parts it manufactures?


Click here for the solution: Louder Company manufactures part MNO used in several of its truck models

Explain why each of the following phrases or clauses is used rather than the alternative provided

Auditing P 3-26 A careful reading of an unqualified report indicates several important phrases.

Explain why each of the following phrases or clauses is used rather than the alternative provided:

a. "The financial statements referred to above present fairly in all material respects the financial position" rather than "The financial statements mentioned above are correctly stated."
b. "In conformity with accounting principles generally accepted in the United States of America" rather than "are properly stated to represent the true economic conditions."
c. "In our opinion, the financial statements present fairly" rather than "The financial statements present fairly."
d. "Brown & Phillips, CPAs (firm name)," rather than "James E. Brown, CPA (individual partner's name)."
e. "We conducted our audit in accordance with auditing standards generally accepted in the United States of America" rather than "Our audit was performed to detect material misstatements in the financial statements."


Click here for the solution: Explain why each of the following phrases or clauses is used rather than the alternative provided

Why are ratios and trends used in financial analysis

1. Why are ratios and trends used in financial analysis?


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An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting

ACC 225 Week 8

Quick Study Exercise 8-1

An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.
1. What is the main objective of internal control procedures, and how is it achieved?
2. Why should recordkeeping for assets be separated from custody over the assets?
3. Why should the responsibility for a transaction be divided between two or more individuals or departments?


Click here for the solution: An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting

The following are the classes of transactions and the titles of the journals used for Phillips Equipment Rental Co

Auditing P 6-23 The following are the classes of transactions and the titles of the journals used for Phillips Equipment Rental Co.

Classes of Transactions:
Purchases Returns
Rental revenue
Charge-off of uncollectible accounts
Acquisition of goods and services (except payroll)
Rental allowances
Adjusting entries (for payroll)
Payroll service and payments
Cash disbursements (except payroll)
Cash receipts

Title of Journals:
Cash receipts journal
Cash disbursements journal
Acquisitions journal
Revenue journal
Payroll journal
Adjustments journal

Required:
a. Identify one financial statement balance that is likely to be affected by each of the nine classes of transactions.
b. For each class of transactions, identify the journal that is likely to be used to record the transactions.
c. Identify the transaction cycle that is likely to be affected by each of the nine classes of transactions.
d. Explain how total rental revenue, as cited on the financial statements of Phillips Equipment Rental Co., is accumulated in journals and is summarized on the financial statements. Assume that there are several adjusting entries for rental revenue at the balance sheet date.


Click here for the solution: The following are the classes of transactions and the titles of the journals used for Phillips Equipment Rental Co

The Pyramid Construction Company has used the completed-contract method of accounting for construction contracts

P 20-2 Change in principle; change in method of accounting for long-term construction

The Pyramid Construction Company has used the completed-contract method of accounting for construction contracts during its first two years of operation, 2009 and 2010. At the beginning of 2011, Pyramid decided to change to the percentage-of-completion method for both tax and financial reporting purposes. The following table presents information concerning the change for 2009–2011. The income tax rate for all years is 40%.

Pyramid issued 50,000 $1 par, common shares for $230,000 when the business began, and there have been no changes in paid-in capital since then. Dividends were not paid the first year, but $10,000 cash dividends were paid in both 2010 and 2011.

Required:
1. Prepare the journal entry to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account.)
2. Prepare the 2011–2010 comparative income statements beginning with income before income taxes.
3. Prepare the 2011–2010 comparative statements of shareholders' equity. (Hint: The 2009 statements reported retained earnings of $36,000. This is $60,000 − [$60,000 × 40%].


Click here for the solution: The Pyramid Construction Company has used the completed-contract method of accounting for construction contracts

The following control procedures are used in Falk Company for over-the-counter cash receipts

E4-3 The following control procedures are used in Falk Company for over-the-counter cash receipts.

1. Cashiers are experienced; thus, they are not bonded.
2. All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer.
3. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attache case in the stock room until it is deposited in the bank.
4. At the end of each day the total receipts are counted by the cashier on duty and reconciled to the cash register total.
5. The company accountant makes the bank deposit and then records the day's receipts.

a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.
b) For each weakness, suggest a change in the procedure that will result in good internal control


Click here for the solution: The following control procedures are used in Falk Company for over-the-counter cash receipts

At the beginning of 2009, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods

Ethics Case 11-10; Asset impairment

At the beginning of 2009, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10-year service life and no residual value. The straight-line depreciation method was used to measure depreciation for 2009 and 2010.

Late in 2011, it became apparent that sales of the new frozen food line were significantly below expectations. The company decided to continue production for two more years (2012 and 2013) and then discontinue the line. At that time, the equipment will be sold for minimal scrap values.

The controller, Heather Meyer, was asked by Harvey Dent, the company's chief executive officer (CEO), to determine the appropriate treatment of the change in service life of the equipment. Heather determined that there has been impairment of valued requiring an immediate write-down of the equipment of $12,900,000. The remaining book value would then be depreciate over the equipment's revised service life.

The CEO does not like Heather's conclusion because of the effect it would have on 2011 income. "Looks like a simple revision in service life from 10 years to 5 years." Dent concluded. "let's go with it that way, Heather."

Required:
1. What is the difference in before-tax income between the CEO's and Heather's treatment of the situation?
2. Discuss Heather Meyer's ethical dilemma.

Click here for the solution: At the beginning of 2009, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods

Top Switch Inc. designs and manufactures switches used in telecommunications

Top Switch Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout the state of Tennessee affected Top Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed.

Before the unfortunate incident, recovery specialists cleaned the buildings. The company controller is very nervous and anxious to recover whatever records he can to support the insurance claim for the destroyed inventory. After consulting with the cost accountant, they decide to retrieve the previous year’s annual report for the beginning inventory numbers. In addition, they also agreed that they need first quarter cost data.

The cost accountant was working on the first quarter results before the storm hit, and to his surprise, the report was still in his desk drawer. After reviewing the data , the information shows the following information: Material purchases were $ 325,000; Direct Labor was $ 220,000. Further discussions between the controller and the cost accountant revealed that sales were $ 1,350,000 and the gross margin was 30% of sales. The cost accountant also discovered, while sifting through the information, that cost of goods available for sale was $ 1,020,000 at cost. While assessing the damage, the controller determined that the prime costs were $ 545,000 up to the time of the damage and that manufacturing overhead is 65% of conversion cost. The cost accountant is not sure about all of this, but he decides to see what he can do with the information.

The beginning inventory numbers are as follows:

Raw Materials, $ 41,000
Work in Process, $ 56,000
Finished Goods, $ 35,000
Required:

Determine the amount of cost in the Raw Materials, Work in Process, and Finished Goods Inventory as of the date of the storm. ( Hint: You may wish to reconstruct the various schedules and statements that would have been affected by the company’s accounts during the period.)

Click here for the solution: Top Switch Inc. designs and manufactures switches used in telecommunications

Presented below are the assumptions, principles, and constraints used in this chapter

E2-4 (Assumptions, Principles, and Constraints) Presented below are the assumptions, principles, and constraints used in this chapter.

1. Economic entity assumption
2. Going concern assumption
3. Monetary unit assumption
4. Periodicity assumption
5. Historical cost principle
6. Fair value principle
7. Expense recognition principle
8. Full disclosure principle
9. Cost-benefit relationship
10. Materiality
11. Industry practices
12. Conservatism

Instructions
Identify by number the accounting assumption, principle, or constraint that describes each situation on the next page. Do not use a number more than once.
(a) Allocates expenses to revenues in the proper period.
(b) Indicates that fair value changes subsequent to purchase are not recorded in the accounts. (Do not use revenue recognition principle.)
(c) Ensures that all relevant financial information is reported.
(d) Rationale why plant assets are not reported at liquidation value. (Do not use historical cost principle.)
(e) Anticipates all losses, but reports no gains.
(f) Indicates that personal and business record keeping should be separately maintained.
(g) Separates financial information into time periods for reporting purposes.
(h) Permits the use of fair value valuation in certain industries. (Do not use fair value principle.)
(i) Requires that information significant enough to affect the decision of reasonably informed users should be disclosed. (Do not use full disclosure principle.)
(j) Assumes that the dollar is the "measuring stick" used to report on financial performance.

Click here for the solution: Presented below are the assumptions, principles, and constraints used in this chapter

Dyer purchased a used Ford from Walt Bennett Ford for $5,895

Dyer purchased a used Ford from Walt Bennett Ford for $5,895. She signed a written contract, which showed that no taxes were included in the sales price. Dyer contended, however, that the salesperson who negotiated the purchase with her told her both before and after her signing of the contract that the sales tax on the automobile had been paid. The contract Dyer signed contained the following language:

The above comprises the entire agreement pertaining to this purchase and no other agreement of any kind, verbal understanding, representation, or promise whatsoever will be recognized.

It also stated:

This contract constitutes the entire agreement between the parties and no modification hereof shall be valid in any event and Buyer expressly waives the right to rely thereon, unless made in writing, signed by Seller.

Later, when Dyer attempted to license the automobile, she discovered that the Arkansas sales tax had not been paid on it. She paid the sales tax and sued Bennett for breach of contract. What result?

Click here for the solution: Dyer purchased a used Ford from Walt Bennett Ford for $5,895

Norwel company manufactures miniature circuit boards used in wireless phones and personal organizers

Norwel company manufactures miniature circuit boards used in wireless phones and personal organizers. On January 2, 2014, Norwel purchased a circuit board stamping machine at a retail price of $12,000. Norwel paid 5% sales tax on this purchase. Norwel paid a contractor $1,400 for a specially wired platform for the machine, to ensure non-interrupted power to the machine.

Norwel estimates the machine will have a 4-year useful life, with a residual value of $2,000 at the end of 4 years. Norwel uses straight-line depreciation and employs the half-year convention in accounting for partial-year depreciation (that is, it takes a half year of depreciation in the first year of an asset’s useful life). Norwel’s fiscal year ends on December 31.

1) At what amount should Norwel record the acquisition cost of the machine?

2) What journal entry should Norwel record in 2014?

3) At what amount will the machine be reported in Norwel’s balance sheet at December 31, 2014?

4) On July 1, 2015, Norwel decides to outsource its circuit board operations to Boards-R-Us Inc. As part of his plan, Norwel sells the machine (and the platform) to Boards-R-Us for $7,000. What is the impact of this disposal on Norwel’s 2015 income before taxes?

Click here for the solution: Norwel company manufactures miniature circuit boards used in wireless phones and personal organizers