Reference no: EM132476381

Assignment #1

Question 1: Chapter 10 Managerial Accounting

Prepare a cost of goods manufactured schedule, a partial income statement, and a partial balance sheet.

The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2017.

Raw Material		Factory Insurance	$ 4,600
Inventory 7/1/16	$ 48,000	Factory Machinery
Raw Material		Depreciation	16,000
Inventory 6/30/17	39,600	Factory Utilities	27,600
Finished Goods		Office Utilities Expense	8,650
Inventory 7/1/16	96,000	Sales Revenue	534,000
Finished Goods		Sales Discounts	4,200
Inventory 6/30/17	75,900	Plant Manager's Salary	58,000
Work in Process		Factory Property Taxes	9,600
Inventory 7/1/16	19,800	Factory Repairs	1,400
Work in Process		Raw Material Purchases	96,400
Inventory 6/30/17	18,600	Cash	32,000
Direct Labor	139,250
Indirect Labor	24,460
Accounts Receivable	27,000

Instructions

Part (a) Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.)

Part (b) Prepare an income statement through gross profit.

Part (c) Prepare the current assets section of the balance sheet at June 30, 2017.

Question 2: Chapter 11 Cost-Volume-Profit

Compute break-even point and margin of safety ratio, and prepare a CVP income statement before and after changes in business environment.

Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in fixed costs to the $270,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of shoes. Management is impressed with Mary's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

Instructions

Part (a) Compute the current break-even point in units, and compare it to the break-even point in units if Mary's ideas are used.

Part (b) Compute the margin of safety ratio for current operations and after Mary's changes are introduced. (Round to nearest full percent.)

Part (c) Prepare a CVP income statement for current operations and after Mary's changes are introduced. (Show column for total amounts only.) Would you make the changes suggested?

Question 3: Incremental Analysis

Prepare incremental analysis concerning elimination of divisions.

Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $213,000 and the following divisional results.

Division
	I	II	III	IV
Sales	$250,000)	$200,000	$500,000	$450,000
Cost of goods sold	200,000)	192,000)	300,000	250,000
Selling and administrative expenses	$.175,000)	60,000)	60,000	50,000
Income (loss) from operations	$ (25,000)	$ (52,000)	$140,000	$150,000

Analysis reveals the following percentages of variable costs in each division.

	I	II	III	IV
Cost of goods sold	70%	90%	80%	75%
Selling and administrative expenses	40	60	50	60

Discontinuance of any division would save 50% of the fixed costs and expenses for that division.

Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.

Instructions

Part (a) Compute the contribution margin for Divisions I and II.

Part (b) Prepare an incremental analysis concerning the possible discontinuance of (1) Division I and (2) Division II. What course of action do you recommend for each division?

Part (c) Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. (Use the CVP format.) Division II's unavoidable fixed costs are allocated equally to the continuing divisions.

Part (d) Reconcile the total income from operations ($213,000) with the total income from operations without Division II.

Assignment #2

Question 1 CH 13 - Budgetary Planning (15 mins)

Prepare cash budget for a month.

The controller of Trenshaw Company wants to improve the company's control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2017.

June 30, 2017, cash balance	$45,000
Dividends to be declared on July 15*	12,000
Cash expenditures to be paid in July for operating expenses	40,800
Amortization expense in July	4,500
Cash collections to be received in July	90,000
Merchandise purchases to be paid in cash in July	56,200
Equipment to be purchased for cash in July	20,000

* Dividends are payable 30 days after declaration to shareholders of record on the declaration date. Trenshaw Company wants to keep a minimum cash balance of $25,000.

Instructions

(a) Prepare a cash budget for the month ended July 31, 2017, and indicate how much money, if any, Trenshaw Company will need to borrow to meet its minimum cash requirement.

(b) Explain how cash budgeting can reduce the cost of short-term borrowing.

Question 2 Budgetary Control and Responsibility Accounting

Prepare a responsibility report for an investment center.

The Dinkle and Frizell Dental Clinic provides both preventive and orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two separate investment centers: Preventive Services and Orthodontic Services. Each of them is in charge of one of the centers: Reese for Preventive Services and Anita for Orthodontic Services. Each month, they prepare an income statement for the two centers to evaluate performance and make decisions about how to improve the operational efficiency and profitability of the clinic.

Recently, they have been concerned about the profitability of the Preventive Services operations. For several months, it has been reporting a loss. The responsibility report for the month of May 2017 is shown below.

	Actual	Difference from Budget
Service revenue	$ 40,000	$1,000 F
Variable costs
Filling materials	5,000	100 U
Novocain	3,900	100 U
Supplies	1,900	350 F
Dental assistant wages	2,500	-0-
Utilities	500	110 U
Total variable costs	13,800	40 F
Fixed costs
Allocated portion of receptionist's salary	3,000	200 U
Dentist salary	9,800	400 U
Equipment depreciation	6,000	-0-
Allocated portion of building depreciation	15,000	1,000 U
Total fixed costs	33,800	1,600 U
Operating income (loss)	$ (7,600)	$    560 U

In addition, the owners know that the investment in operating assets at the beginning of the month was $82,400, and it was $77,600 at the end of the month. They have asked for your assistance in evaluating their current performance reporting system.

Instructions
(a) Prepare a responsibility report for an investment center as illustrated in the chapter.
(b) Write a memo to the owners discussing the deficiencies of their current reporting system.

Question 3 Standard Costs and Balanced Scorecard

Compute variances, and prepare income statement.

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017.

Costs and Production Data	Actual	Standard
Raw materials unit cost	$2.25	$2.10
Raw materials units used	10,600	10,000
Direct labor payroll	$120,960	$120,000
Direct labor hours worked	14,400	15,000
Manufacturing overhead incurred	$189,500
Manufacturing overhead applied		$193,500
Machine hours expected to be used at normal capacity		42,500
Budgeted fixed overhead for June		$55,250
Variable overhead rate per machine hour		$3.00
Fixed overhead rate per machine hour		$1.30

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.

Instructions

Part (a) Compute all of the variances for (1) direct materials and (2) direct labor.
Part  (b) Compute the total overhead variance.
Part  (c) Prepare an income statement for management. (Ignore income taxes.)

Question 4 Planning for Capital Investments

Calculate payback, annual rate of return, and net present value.

Drake Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value.

There would be no salvage value at the end of the investment's life.

Investment Proposal
Year	Initial Cost and Book Value	Annual Cash Flows	Annual Net Income
0	$105,000
1	70,000	$45,000	$10,000
2	42,000	40,000	12,000
3	21,000	35,000	14,000
4	7,000	30,000	16,000
5	0	25,000	18,000

Drake Corporation uses an 11% required rate of return for new investment proposals.

Instructions

Part (a) What is the cash payback period for this proposal?

Part (b) What is the annual rate of return for the investment?

Part (c) What is the net present value of the investment?

Attachment:- Budgetary Planning.rar