The Macrohard Corporation projects an increase in sales from $18 million to $25 million

The Macrohard Corporation projects an increase in sales from $18 million to $25 million, but it needs an additional $500,000 of current assets to support this expansion. Macrohard purchases under terms of 2/10, net 45 and currently pays on the 10th day, taking discounts. The CFO is considering using trade credit to finance the additional working capital required. Alternatively, Macrohard can finance its expansion with a one-year loan from its bank. The bank has quoted the following alternative loan terms:

a) 10 percent rate on a simple interest loan, with monthly interest payments.
b) 9 percent annual rate on a discount interest basis with no compensating balance.
c) 8 percent annual rate on a discount interest basis, with a 10 percent compensating balance.
d) 7 percent add-on interest, with monthly payments.

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The Pension Trust Fund maintained by the City of Linden had the following transactions

The Pension Trust Fund maintained by the City of Linden had the following transactions during 2012. Record each transaction in the Pension Trust Fund. Ignore any other funds that may be involved in a transaction.

1. Contributions of $600,000 were received from General Fund employees, and the General Fund contributed its share of $100,000.

2. The fund paid $500 for investment management fees.

3. Investments held by the fund increased in value by $3,500.

4. Depreciation on fund capital assets totaled $800.

5. Retirement benefits of $7,700 were paid to retirees.

6. Interest of $2,500 and dividends of $1,400 were received from investments.

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Finsdale Farms, Inc. produces and sells corn dogs

Finsdale Farms, Inc. produces and sells corn dogs. The corn dogs are dipped by hand. Austin Beagle, production manager, is considering purchasing a machine that will make the corn dogs. Austin has shopped for machines and found that the machine he wants will cost $215,000. In addition, Austin estimates that the new machine will increase the company’s annual net cash inflows by $33,000. The machine will have a 12-year useful life and no salvage value.

Instructions

(a)   Calculate the cash payback period.

(b)   Calculate the machine’s internal rate of return.

(c)   Calculate the machine’s net present value using a discount rate of 10%.

(d)   Assuming Finsdale Farms, Inc.’s cost of capital is 10%, is the investment acceptable? Why or why not?

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Cherokee, Inc. manufactures one product called tybos

Cherokee, Inc. manufactures one product called tybos. The company uses a standard cost system and sells each tybo for $8. At the start of monthly production, Cherokee estimated 9,500 tybos would be produced in March. Cherokee has established the following material and labor standards to produce one tybo:

Standard Quantity         Standard Price

Direct materials              2.5 pounds                 $3 per pound

Direct labor                      0.6 hours                  $10 per hour

During March 2013, the following activity was recorded by the company relating to the production of tybos:

1.   The company produced 9,000 units during the month.

2.   A total of 24,000 pounds of materials were purchased at a cost of $66,000.

3.   A total of 24,000 pounds of materials were used in production.

4.   5,000 hours of labor were incurred during the month at a total wage cost of $55,000.

Instructions

Calculate the following variances for March for Cherokee, Inc.

(a)   Materials price variance

(b)   Materials quantity variance

(c)   Labor price variance

(d)   Labor quantity variance

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At January 1, 2002, Betty DeRose, Inc. had an allowance for doubtful accounts

At January 1, 2002, Betty DeRose, Inc. had an allowance for doubtful accounts with a $2,700 credit balance. During 2002, Betty did not write-off any accounts receivable as uncollectible. Additionally, during 2002, Betty recorded $1,400 of recoveries of accounts receivable written off in prior years. At December 31, 2002, Betty prepared the following aging schedule:

Accounts Receivable % Uncollectible

not past due $150,000 2%

1-30 days past due 35,000 5%

31-60 days past due ? 8%

61-90 days past due 8,000 15%

over 90 days past due 2,000 50%

Based on the above information, Betty DeRose, Inc. estimated its bad debt expense to be $6,210 for 2002. Calculate the amount of accounts receivable that were 31-60 days past due. Do not use decimals in your answer.

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Draper Consulting began operations and completed the following transactions during the first

Draper Consulting began operations and completed the following transactions during the first half of December:

Dec 2 Received $18,000 cash and gave capital to Draper.

2 Paid monthly office rent, $550.

3 Paid cash for a Dell computer, $1,800. This equipment is expected to remain in service for five years.

4 Purchased office furniture on account, $4,200. The furniture should last for five years.
5 Purchased supplies on account, $900.

9 Performed consulting service for a client on account, $1,500.

12 Paid utility expenses, $250.

18 Performed service for a client and received cash of $1,100.

Requirements

1. Analyze the effects of Draper Consulting’s transactions on the accounting equation. Use the format of Exhibit 1-6, and include these headings: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; and Draper, capital.

2. Prepare the income statement of Draper Consulting for the month ended December 31, 2012.

3. Prepare the statement of owner’s equity for the month ended December 31, 2012.

4. Prepare the balance sheet at December 31, 2012.

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Baseball Products manufactures a single product with the following full unit costs

Baseball Products manufactures a single product with the following full unit costs at a volume of 2,000 units:

Direct materials $   900
Direct labor 360
Manufacturing overhead* 610
Selling expenses (50% variable) 300
Administrative expenses**      290
Total per unit $2,460

 

*Note that per unit manufacturing overhead costs include $840,000 fixed costs

**Note that per unit administrative expenses include $500,000 fixed costs.

A company recently approached Baseball’s management about buying 200 units of product. Baseball currently sells its product to dealers for $2,600 per unit. Capacity is sufficient to produce the extra 200 units. No selling expenses would be incurred on the special order.

What is the minimum price Baseball should charge just to break even on the special order?

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Overhill, Inc., produces one model of mountain bike

Overhill, Inc., produces one model of mountain bike. Partial information for the company follows.

Requirement 1:
Complete Overhill’s cost data table. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

Cost Data
Number of bikes produced and sold 400 800 1,000
Total costs
Variable costs $ 125,000.00 $ $
Fixed costs per year
Total costs $ $ $
Cost per unit
Variable cost per unit $ $ $
Fixed cost per unit
Total cost per unit $ $ 543.75

 

Calculate Hermosa’s contribution margin ratio and its total contribution margin at each sales level indicated in the table assuming the company sells each bike for $650. (Round your answers to 2 decimal places.)

Calculate Hermosa’s break-even point in units and sales revenue. (Round your “Unit” and “SalesRevenue” answers to the nearest whole number.)

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Friendley’s Miniature Golf and Driving Range Inc. was opened on March

Friendley’s Miniature Golf and Driving Range Inc. was opened on March 1 by Dean Barley. These selected events and transactions occurred during March.

Mar. 1 Stockholders invested $50,000 cash in the business in exchange for common stock of the corporation.
3 Purchased Arnie’s Golf Land for $38,000 cash. The price consists of land $23,000, building $9,000, and equipment $6,000. (Record this in a single entry.)
5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of $1,200 cash.
6 Paid cash $2,400 for a 1-year insurance policy.
10 Purchased golf clubs and other equipment for $5,500 from Golden Bear Company, payable in 30 days.
18 Received golf fees of $1,600 in cash from customers for golf services performed.
19 Sold 100 coupon books for $25 each in cash. Each book contains ten coupons that enable the holder to play one round of miniature golf or to hit one bucket of golf balls. (Hint: The revenue should not be recognized until the customers use the coupons.)
25 Paid a $500 cash dividend.
30 Paid salaries of $800.
30 Paid Golden Bear Company in full for equipment purchased on March 10.
31 Received $900 in cash from customers for golf services performed.

Journalize the March transactions. Friendley’s records golf fees as service revenue.

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Poppycrock, Inc., manufactures large crates of microwaveable

Poppycrock, Inc., manufactures large crates of microwaveable popcorn that are typically sold to distributors. Its main factory has the capacity to manufacture and sell 35,000 crates per month. The following information is available for the factory:

Sales price per crate $ 26.00 Variable cost per crate:

Direct materials 5.50

Direct labor 10.50

Variable overhead 3.90

Fixed costs per month $ 103,000.00

Boys and Girls of Canada is a not-for-profit organization that raises funds each year by selling popcorn door-to-door. It offers to pay Poppycrock $22 per crate for a special-order batch of 5,000 crates. The special-order popcorn would include a unique label with information about the Boys and Girls of Canada. The additional cost of the label is estimated at $1.00 per crate. In addition, the variable overhead for these special-order crates would decrease by $0.50 because there would be no distribution costs.

A.

What is the incremental cost of creating a normal crate of popcorn? A special-order crate of popcorn? (Round your answers to 2 decimal places.)

Incremental Unit CostNormal cratesSpecial order crates

B-1. What is the impact on Poppycrock’s monthly operating profit if it accepts the offer and it is producing and distributing 30,000 normal crates per month. What is the opportunity cost of not accepting the offer?

Impact on operation profit

B-2. What is the opportunity cost of not accepting the offer?

Oportunity Cost

C-1. What is the impact on Poppycrock’s monthly operating profit if it accepts the offer and it is producing and selling 35,000 normal crates per month. What is the opportunity cost of accepting the offer?

Impact on operating profit

C-2. What is the opportunity cost of accepting the offer?

Opotunity Cost

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