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Each of the cost “types” below should be matched to one of the descriptions that follow. Variable Fixed (committed) Fixed (discretionary) Mixed

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Each of the cost “types” below should be matched to one of the descriptions that follow.
Variable
Fixed (committed)
Fixed (discretionary)
Mixed
(a)Property taxes on land and building
(b)Billboard advertising campaign
(c)Raw material used in a manufacturing process
(d)Employee picnic with band, food, and door prizes
 
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The Washington Company has 100,000 shares of $10 par common stock outstanding. Management declares (not pays) a 10% stock dividend. The market value of a share of common stock was $30 immediately prior to the stock dividend declaration. The journal entry is:

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Question 1 options:

The Washington Company has 100,000 shares of $10 par common stock outstanding. Management declares (not pays) a 10% stock dividend. The market value of a share of common stock was $30 immediately prior to the stock dividend declaration. The journal entry is:

debit retained earnings, $300,000; credit stock dividend distributable, $100,000; credit paid in capital in excess of par, $200,000
.debit stock dividends distributable, $100,000; credit common stock, $100,000.
debit stock dividends distributable, $300,000; credit common stock, $300,000.
debit retained earnings, $300,000; credit stock dividend distributable, $10,000; credit paid in capital in excess of par, $290,000.

Question 2 options:

Spiffy Dress Company previously purchased 10,000 shares of treasury stock on the open market for $10 per share. Later, the company resells 6,000 shares for $12 per share. What is the journal entry for the sale?

debit cash, $72,000; credit treasury stock, $12,000; credit additional paid-in capital, $60,000
debit cash, $72,000; credit treasury stock, $72,000
debit cash, $72,000; credit treasury stock, $60,000; credit retained earnings, $12,000
debit cash, $72,000; credit treasury stock, $60,000; credit additional paid-in capital—treasury stock, $12,000

Question 3 options:

Green Ventures Inc. purchased 10% of the outstanding stock of Jones Company. Green paid $15 per share to acquire 8,000 shares and will treat this purchase as available-for-sale securities. Par value of the stock is 50 cents. Green uses a calendar year, and on December 31, the market value of Jones stock is $17 per share. What is the entry Green needs to make on December 31?

debit unrealized gain on available-for-sale securities, $16,000; credit available-for-sale securities, $16,000.
debit available-for-sale securities, $16,000; credit unrealized gain on available-for-sale securities, $16,000.
debit available-for-sale securities, $8,000; credit unrealized gain on available-for-sale securities, $8,000.
no entry is required because the stock has not been sold.

Question 4 options:

On January 10, Bowie Ventures Inc. purchased 40% of the outstanding stock of Mighty Manufacturing Corp. The purchase was 30,000 shares at $10 per share. Bowie received dividends from Mighty in the amount of $20,000 on June 15 and again on December 15. Mighty reported net income for the year ended December 31 in the amount of $300,000. What is the journal entry, if any, that Bowie needs to make dated December 31?

No entry on December 31 because the dividends were paid on different dates.
Debit investment in Mighty Corp., $100,000; credit income from Mighty Corp., $100,000.
Debit investment in Mighty Corp., $120,000; credit income from Mighty Corp., $120,000.
Debit investment in Mighty Corp., $120,000; credit income from Mighty Corp., $100,000; credit dividends income, $20,000.

Question 5 options:

On January 1, 2017, Montgomery Inc. issued $250,000, 20-year, 5% bonds at 101. Interest is payable semiannually on January 1 and July 1. The journal entry to record this transaction on January 1, 2017, is:

debit cash, $250,000; credit bonds payable, $200,000.
debit cash, $250,000; debit premium on bonds payable, $5,000; credit bonds payable, $255,000.
debit cash, $250,000; credit bonds payable, $200,000; credit premium on bonds payable, $5,000.
debit cash, $255,000; credit bonds payable, $255,000.

Question 6:

Using the selected data below, calculate the net cash provided by operating activities:

Net income $250,000
Increase in accounts receivable $13,000
Increase in accounts payable   $10,000
Loss on the sale of equipment $8,000
Depreciation expense $21,000
Purchase of new delivery truck $40,000

Question 6 options:

$276,000
$282,000
$260,000
$263,000

Question 7 options:

A Corporation has 250,000 shares of $10 par common stock issued and outstanding. AA Corporation also has 50,000 shares of $100, 6% par cumulative preferred stock. In 2017, AA had net income of $3,500,000. The number of shares of both common and preferred stock has not changed during the year, and the preferred stock dividends were paid at the end of 2017. What are the common earnings per share (EPS) for 2017? Round to the nearest cent.

$14.20
$14.00
$12.80
$13.73

Question 8 options:

A manufacturing company allocates overhead at a fixed rate of $40 per hour based on direct labor hours. During the month, total overhead incurred was $280,000, and the total direct labor hours work was 4,000. Job number 5-23 had 500 hours of direct labor. What is the amount of overhead allocated to job 5-23?

$20,000
$35,000
$27,500
$25,000

Question 9 options:

The welding department had beginning work in process of 20,000 units, ending work in process of 26,000 units, and units transferred out of 60,000 units. What was the number of units started or transferred in?

58,000
66,000
62,000
70,000

Question 10 options:

Ziggy Corp. is a job lot manufacturer. The budget for the month of May calls for 8,000 direct labor hours to be worked. Budgeted overhead is $88,000 with a predetermined rate of $11 per hour. Overhead is applied based on actual direct hours worked. Actual direct hours were 8,300 and actual overhead spending was $88,500. What was the under applied or over applied overhead for the month of May? Over applied is shown as a negative number.

$3,500
$2,800
($2,800)
($3,500)

Question 11 options:

This problem is worth 12.5 points.  On July 1, 2017 Alpha Company issues $2,000,000 face value of 5% five year bonds which call for semiannual interest payments.  The bonds are dated April 1, 2017 so these bonds are issued between interest dates.  The market rate at the date of issue is also 5%.  For simplicity, use a 360-day year and 30 day months for all calculations.

  1. Record the journal entries for the issuance of the bonds
  2. Record the journal entries for the first interest payment due on October 1, 2017. Assume that interest has not been accrued at each month end.

Question 12 options:

On April 1, 2017 Alphaa Company sells $2,000,000 face value of 5% five year bonds at 101 which call for semiannual interest payments.  The bonds are dated April 1, 2017 so these bonds are issued on an interest date.  Use the straight line method of amortization of any bond premium or discount.  For simplicity, use a 360-day year and 30 day months for all calculations.

  1. Record the journal entries for the issuance of the bonds
  2. Record the journal entries for the first interest payment due on October 1, 2017. Assume that interest has not been accrued at each month end.

Question 13 options:

Problem 1 (12.5 POINTS) Mars Manufacturing produces a basic cellphone as a contract manufacturer. Overhead is applied at a rate of $42 per direct labor hour. The direct labor rate is $18 per hour. In March, there was no beginning or ending work in process, and the assembly department produced 20,000 finished phones. The materials cost was $120,000, and there were 2,500 direct labor hours worked during the month. Actual overhead spending was $103,400 during the month. Calculate the total cost of production in the month of March and the cost per unit for each phone produced. Determine if overhead was over applied or under applied and by what amount.
Problem 2 (12.5 POINTS) Bewlay Brothers  Manufacturing produces wooden chairs. The cutting department produces all of the component parts and transfers the parts to the assembly department. The assembly department had no work in process at the beginning of the month and had two jobs started during the month. Since materials are transferred in, all materials are charged to each job at the beginning of the job. The materials cost is $17.50 per chair. Assembly time is 20 minutes per chair and the direct labor rate is $15 per hour. Overhead is charged to a job only when a job is completed and ready to transfer to finished goods. The overhead is applied on a per-chair basis at a rate of $6 per chair. Job No. 1 was for 1,000 chairs, and it was started and completed during the month. Job No. 2 was for 1,500 chairs, and it was 60% complete at month end. Calculate the costs to complete Job No. 1 and the unit cost per chair. Calculate the costs charged as of month’s end and the equivalent units of production for Job No. 2.
 
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Discuss the meaning of goodwill impairment and how it is computed under current accounting standards

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Discuss the meaning of goodwill impairment and how it is computed under current accounting standards

 
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Your team has been hired to provide financial analysis for a start-up company, Bobble in Style, which produces customized bobble heads. The bobble heads are made out of less rigid materials and are more true to life than those of competitors. The company inventors, Mr. and Mrs. Lee, are going to pitch their idea to Shark Tank in a few months, but first they need to have a better understanding of the business financials. The Lee’s are already creating and selling their product from their home-based office and work area. They know what costs are involved with making the bobble heads on a small scale, but they don’t have an understanding of financial figures beyond basic costs. They need you to make sense of various financial figures for them

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MGMT 640

GROUP PROJECT

Scenario:  Your team has been hired to provide financial analysis for a start-up company, Bobble in Style, which produces customized bobble heads. The bobble heads are made out of less rigid materials and are more true to life than those of competitors. The company inventors, Mr. and Mrs. Lee, are going to pitch their idea to Shark Tank in a few months, but first they need to have a better understanding of the business financials. The Lee’s are already creating and selling their product from their home-based office and work area. They know what costs are involved with making the bobble heads on a small scale, but they don’t have an understanding of financial figures beyond basic costs. They need you to make sense of various financial figures for them.

The Project:  There are several financial analysis tasks involved with this project, which are outlined below (#1-8). Once you have worked through each task, you will need to produce a PowerPoint presentation to introduce and highlight your findings. Your PowerPoint presentation should include a title slide, an executive summary slide(s), subsequent slides that illustrate your findings, any additional recommendations that you would like to make, and a conclusion slide. The PowerPoint presentation should be approximately 15-25 slides in length. Include notes in the presentation as needed.  You will also need to create a written executive summary (one page in length). Your final submission will include the PowerPoint presentation, the executive summary, and an Excel file with relevant calculations. The specific financial analysis tasks and related information are listed below (#1-8).

Working in a Group:  Your instructor will assign you into a group during Week 4. This allows time for students to drop/add during the first 3 weeks of the course. Starting early will allow for adequate time to develop timelines and assign responsibilities as a team. Group Projects provide the opportunity to work with your classmates and are a necessary part of the Financial Management workforce. Please use this occasion to demonstrate your strengths and allow group members to do the same. Critically thinking and creativity are vital to your success in the work place and this project is a great chance to build those talents.

It is a group project so you will need to coordinate with various members of your group on how to progress with the project. Often students are reluctant to work in groups, but as you have experienced in the workplace, working in a group will not be an option. You will learn together and find out more about flexibility and sharing of responsibilities with the project. All team members should contribute to the financial analysis tasks. A timeline for completion of these tasks should be determined by the team. The completed PowerPoint presentation should be cohesive and professional in appearance. You may decide to split the Executive Summary and PowerPoint presentations between all members, or you may decide to have 2 students focus on the Executive Summary Word document and content for the associated PowerPoint slide while the rest of the team members focus on the PowerPoint presentation. The decision should be based on what works best for your team. Also determine a timeline for this portion of the assignment. Consider how editing will be done within your team. Use the grading rubric to help guide your work! 

  1. Financial Statements:  Develop an Income Statement for 20XX, Cash Flow Statement for 20XX, and Balance Sheet as of the end of 20XX based on the data provided below for year 20XX. All sales are collected when the sale is made and all expenses are paid when the expense is incurred. Explain the purpose of each financial statement.
    1. Income Statement Data for 20XX:
      1. Units produced and sold = 420
      1.  Sales ($80 per unit selling price) = $33600
      1. Cost of goods sold ($30 per unit, all variable costs) = $12600
      1. Labor = $0 (Mr. and Mr. Lee were the only ones working and did not pay themselves)
      1. Advertising fees =$2000
      1. Bank fees = $150
      1. Phone/internet = $1200
      1. Shipping ($3 per unit) = $1260
      1. Utilities = $900
      1. Office supplies = $800
      1. Interest expense on note payable = $350
      1. Depreciation expense (straight line) = $800
      1. Income tax rate = 26 %
    1. Other Financial Data for 20XX:
      1. Proceeds from sale of equipment = $3000.  The equipment originally cost $1000 and had accumulated depreciation of $200.
      1. Purchase of equipment = $1600 (The machine is purchased on the last day of 20XX so no depreciation expense is recorded.)
      1. Repayment of note payable = $5000
      1. Consider any data relevant from the income statement.
    1. Balance Sheet Data for Beginning of 20XX:
      1. Cash and cash equivalents = $10000
      1. Accounts receivable = $0 (Cash is received at time of sale)
      1. Raw materials inventory = $10500
      1. Equipment = $5000 (This includes the $1000 cost of the equipment sold in 20XX).
      1. Accumulated depreciation = $1,000 (This includes the accumulated depreciation of 200 for the equipment sold in 20XX.
      1. Accounts payable = $0 (Cash is paid at the time of purchase.)
      1. Note payable = $5000 (This is the note payable which is repaid in 20XX)
      1. Common stock = $15000
      1. Retained earnings = $4500
  • Financial Ratios:  Calculate the following financial ratios and explain the meaning of the results.
    • Net Profit Margin
    • Quick Ratio
    • Debt-to-Equity Ratio
  • Cost Classification:  The Lee’s have provided you with the following costs and relevant information that are assumed for year 20XY.

A. Classify each of the costs (a. through j.) below under C. as a variable cost or a fixed cost.

B. Explain the importance of distinguishing between variable and fixed costs. 

C. Prepare a budgeted income statement, assuming 600 units to be produced and sold, a per unit selling price of $85, an income tax rate of 28% and the following information.

  1. Cost of goods sold of $35 per unit
    1. Labor = $400/month
      1. One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month.
    1. Advertising fees = $3,000
    1. Bank fees = $200
    1. Phone/internet =  $150 per month
    1. Shipping = $3 per unit
    1. Utilities = $100 per month
    1. Office Supplies = $900
    1. Conference Exhibitor Fee = $3000
    1. Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1200
  2. Net Present Value:  The Lees are considering adding a new piece of equipment that will speed up the process of building the bobble heads. The cost of the piece of equipment is $42000. It is expected that the new piece of equipment will lead to cash flows of $17000, $29000, and $40000 over the next 3 years. If the appropriate discount rate is 12%, what is the NPV of this investment? Explain the findings.
  3. Budget Preparation:  The Lees believe that production and sales could double after being on Shark Tank which is scheduled in December of 20XY. They want to be prepared for this. Based on the budgeted income statement calculated above for 20XY, create a new budgeted income for 20XZ assuming that the production and sales is double the level of 20XY.
  4. Incremental Analysis:  If production does increase dramatically after their presentation on Shark Tank, the Lees will need more space for production. They have two options. Option 1 is to rent out a spacious warehouse nearby. If they pursue this option, there rent will be $1200 per month and utilities are estimated to cost an additional $350 per month. Their second option, Option 2, is to rent a smaller storefront space that is also nearby. The storefront rent is $1350 per month. However, utilities will likely only cost an additional $150 per month. They want to compare their options over one year’s time (since each rental contract is a 1 year commitment). What is the incremental analysis if the Lees choose Option 1 over Option 2?
  5. Break-Even Analysis:  You have been asked to calculate how many units need to be sold to break even, based on the costs provided in task #3. Assume that only one conference will be attended and the estimated expenses associated with this conference are on target. Use the information in task #3 except do not consider taxes.)
  6. Contribution Margin:  Based on the Break-Even Analysis just performed, what is the contribution margin per unit and the total contribution margin?
 
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