Prorated to inventories and cost of goods sold

Assignment Help Financial Accounting

Reference no: EM131262343

Sail New England prduces small sailboats for beginning sailors and for small boat regattas. Sales in the most recent year were $5,000,000 with profits before taxes of $600,000. Annual S,G,& A expenses are approximaely $1000,000, direct materials and direct labor for products sold were $1,900,000 and $600,000, respctively. Sail New England has a loan outstanding of $700,000 with its current bank, and has come to your bank to see if you will offer better terms to replace the existing loan. The CFO has forwarded you their annual report in preparation for a meeting to discuss the loan. While reviewing their annual report, you find the following footnote: Note 1: Under-absorbed overhead of $600,000 was prorated to inventories (75%) and cost of goods sold (25%). A. How does tthis footnote affect your evaluation of Sail New England and its credit-worthiness? B. What questions do you want to ask the president and CFO regarding the footnot

Reference no: EM131262343

Questions Cloud

Using straight-line method and units-of-production method : Weir Service Company purchased a copier on January 1, 2014, for $17,600 and paid an additional $340 for delivery charges. The copier was estimated to have a life of four years or 1,000,000 copies. Compute the amount of depreciation expense for the co..

Compute the predetermined overhead rate : Morton Company’s variable manufacturing overhead should be $4.50 per standard direct labor-hour and fixed manufacturing should be $270,000 per year. Assume that the company chooses 30,000 direct labor-hours as the denominator level of activity. Compu..

What merchandise inventory costing methods : What merchandise inventory costing methods can be used, what type of company is best suited for each, and which is better during an inflationary period?

How does a merchandiser differ from a service provider : How does a merchandiser differ from a service provider? What are the two different merchandise inventory systems? Explain them and a benefit of each. How does a sales of merchandise get recorded under the perpetual system?

Prorated to inventories and cost of goods sold : Sail New England prduces small sailboats for beginning sailors and for small boat regattas. Sales in the most recent year were $5,000,000 with profits before taxes of $600,000. Annual S,G,& A expenses are approximaely $1000,000, direct materials and ..

Predetermined overhead rate-using activity based costing : Plum Tired manufactures tires for dune buggies and has two different products: Using TRADITIONAL costing, and assuming overhead is applied based on direct labor hours, compute the predetermined overhead rate. Using Activity Based Costing, how much o..

What is the companys contribution margin : Use the following data to answer questions 9 and 10 Sales $700,000 Fixed Administrative Expenses $110,000 Fixed Cost of Goods Sold $100,000 Fixed Selling Expenses $50,000 Variable administrative expenses $30,000 Variable cost of goods sold $220,000 v..

Using perpetual inventory system : Powell Warehouse distributes hardback books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. During the month of June, the following merchandising transactions occurred. The cost of the merchandise sold was $950. 30 Gr..

Assume that the exchange has commercial substance : Metlock Company purchased equipment on January 2, 2013, for $113,300. The equipment had an estimated useful life of 5 years with an estimated salvage value of $13,000. Metlock uses straight-line depreciation on all assets. Prepare the journal entry t..

User Account

All Pages