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Two-Variance Analysis: Service Company Example International Finance Incorporated issues letters of credit to importers for overseas purchases. The company charges a nonrefundable application fee of $3,000 and, on approval, an additional service fee of 2% of the amount of credit requested. The firm's budget for the year just completed included fixed expenses for office salaries and wages of $500,000, leasing office space and equipment of $50,000, and utilities and other operating expenses of $10,000. In addition, the budget also included variable expenses for supplies and other variable overhead costs of $1,000,000. The company estimated these variable over-head costs to be $2,000 for each letter of credit approved and issued. The company approves, on average, 80% of the applications it receives. During the year, the company received 600 requests and approved 75% of them. The total variable overhead was 10% higher than the standard amount applied; the total fixed expenses were 5% lower than the amount budgeted. In addition to these expenses, the company paid a $270,000 insurance premium for the letters of credit issued. The insurance premium is 1% of the amount of credits issued in U.S. dollars. The actual amount of credit issued often differs from the amount requested due to fluctuations in exchange rates and variations in the amount shipped from the amount ordered by importers. The strength of the dollar during the year decreased the insurance premium by 10%. **Required 1. Calculate the (a) variable, and (b) fixed overhead rates for the year. 2. Prepare an analysis of the overhead variances for the year just completed. (a) What is the total controllable (i.e., flexible-budget) variance for the period? (b) What is the overhead volume variance for the period? ( Hint: These two should sum to $88,000U.)
What is the current status of having the same accounting standards throughout the world? Is any work being done on developing International Accounting Standards? Would you vote for or against such standards, and why?
Boehm Inc is expected to pay a $1.50 per share dividend at the end of the year. The dividends is expected to grow to a constant grow at a constant rate of 7 year. The required rate of return on the stock rs, is 15%. What is the value per share of ..
Hammond Inc. had a credit balance of $1,800 in the unearned rent account on January 1, 2011. At the end of 2011, the credit balance in that account was $1,400. Hammond's income statement reported rent revenue in the amount of $32,500 for the..
The yield to maturity on the company's outstanding bonds is 9 percent, and the company's tax rate is 40 percent. Percy's CFO has calculated the company's WACC as 9.96 percent. What is the company's cost of common equity?
Its average product sells for $28 a unit. the variable cost per unit is $18. the store experiences a 45 percent tax rate. What are the store's fixed costs expected to be next year? Calculate the store's break-even point in both units and dollars.
Molly, age 29, is unmarried and is an active participant in a qualified deductible (traditional) IRA plan. Her modified AGI is $61,000 in 2010. a. Calculate the amount that Molly can contribute to the IRA and the amount she can deduct.
the cecil-booker vending company changed its method of valuing inventory from the average cost method to the fifo cost
we are auditing the sales and collection cycle of a non-profit hospital. Just because it is a non-profit organization, that does not eliminate the need for the auditors to assess risk.
Valence Enterprises received a $5,100 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $1,500 and a credit to Service Revenue $1,500.
the following transactions transpire during the liquidation of the marks norris smith and savannah partnershipbull
Define the process you will use and address the following assessed classroom discussion questions: What procedures will be used to collect accounting evidence? What sampling tools and techniques will be used for the examination?
On January 2, 2011, Jansing Corporation acquired a new machine with an estimated useful life of five years. The cost of the equipment was $40,000 with a residual value of $5,000.
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