Business combination

What factors may make it attractive for a company to complete a business combination by acquiring the stock of another company and operating it as a subsidiary?

Mountain Corporation

ocky Mountain Corporation makes two types of hiking boots – Xactive and Pathbreaker, data concerning these two product lines appear below:

Xactive Pathbreaker

selling price per unit $132 $94

direct materials per unit $64.60 $53

direct labor per unit $9.60 $8.00

direct labor-hours per unit 1.2 DLHs 1.0DLHs

Estimated annual production and sales 24,000 units 70,000 units

The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct-labor hours for the upcoming year appear below:

Estimated total manufacturing overhead…………………. $2,470,000

estimated total direct labor-hours………………………. 98,800 DLHs

1. Compute the product margins for the Xactive and the Pathbreaker products under the company’s traditional costing system.

* Total margin: Xactive$________ Pathbreaker$__________ Total$______

2. The company is considering replacing its traditional costing system with an activity-based costing system that would assign its manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idle capacity costs):

Estimated Expected

Activities and Activity Measures

Overhead Cost Xactive Pathbreaker Total

Supporting direct labor (DLH) $ 642,200 28,800 70,000 98,800

Batch setups (setups) 915,000 350 260 610

Product sustaining 840,000 1 1 2

Other 72,800 NA NA NA

Total mfg overhead cost $ 2,470,000

Compute the product margins for the Xactive and the Pathbreaker products under the activity-based costing system. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount. Omit the “$” sign in your response.)

Xactive Pathbreaker Total

* Product margin $ $ $

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your percentage answers to one decimal place and other answers to the nearest dollar amount. Omit the “$” & “%” signs in your response.)

Xactive Pathbreaker Total

Amount – % of total Amount – % of total Amount

Traditional Cost System

(Select one)

Direct materials $ % $ % $

Other

Selling and administrative

Product sustaining

Supporting direct labor

Batch setups

(Select one)

Direct materials $ % $ % $

Other

Selling and administrative

Product sustaining

Supporting direct labor

Batch setups

(Select one)

Direct materials $ % $ % $

Other

Selling and administrative

Product sustaining

Supporting direct labor

Batch setups

Total cost assigned: $ $ $

Activity-Based Costing System

Direct costs:

(Select one)

Direct materials $ % $ % $

Other

Selling and administrative

Product sustaining

Supporting direct labor

Batch setups

(Select one)

Direct materials $ % $ % $

Other

Selling and administrative

Product sustaining

Supporting direct labor

Batch setups

Indirect costs:

(Select one)

Direct materials $ % $ % $

Other

Selling and administrative

Product sustaining

Supporting direct labor

Batch setups

(Select one)

Direct materials $ % $ % $

Other

Selling and administrative

Product sustaining

Supporting direct labor

Batch setups

(Select one)

Direct materials $ % $ % $

Other

Selling and administrative

Product sustaining

Supporting direct labor

Batch setups

Total cost as: $ $ $

Costs not assigned to products:

(Select one)

Direct materials $ % $ % $

Other

Selling and administrative

Product sustaining

Supporting direct labor

Batch setups

Total cost $

The balance sheet of Phototec, Inc.

The balance sheet of Phototec, Inc., a distributor of photographic supplies, as of May 31 is given below:

Phototec, Inc.

Balance Sheet

May 31

Assets

Cash $ 10,950

Accounts receivable 73,000

Inventory 36,500

Buildings and equipment, net of depreciation 609,550

Total assets $ 730,000

Liabilities and Stockholders’ Equity

Accounts payable $ 87,600

Note payable 16,060

Capital stock 538,740

Retained earnings 87,600

Total liabilities and stockholders’ equity $ 730,000

The company is in the process of preparing a budget for June and has assembled the following data:

a. Sales are budgeted at $270,000 for June. Of these sales, $75,000 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected the following month. All of the May 31 accounts receivable will be collected in June.

b. Purchases of inventory are expected to total $191,000 during June. These purchases will all be on account. Sixty percent of all inventory purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the May 31 accounts payable to suppliers will be paid during June.

c. The June 30 inventory balance is budgeted at $34,000.

d. Selling and administrative expenses for June are budgeted at $34,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,000 for the month.

e. The note payable on the May 31 balance sheet will be paid during June. The company’s interest expense for June (on all borrowing) will be $700, which will be paid in cash.

f. New warehouse equipment costing $9,000 will be purchased for cash during June.

g. During June, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

1a. Prepare schedule of expected cash collections from sales and a schedule of expected cash disbursements for inventory purchases.

1b. Prepare a cash budget for June.

2. Prepare a budgeted income statement for June.

3. Prepare a budgeted balance sheet as of June 30.

birds-of-a-feather

The participants of such recreational activities as hang gliding, soaring, hiking, rock collecting, or skydiving often create local ”birds-of-a-feather” (affinity) organizations. Two examples are the Chicago sky divers (http://www.chicagoskydivers.com) or the soaring club of western Canada (http://www.canadianrockiessoaring.com). Many of these clubs collect dues

from members to pay for the printing and mailing costs of monthly newsletters. Some of them maintain only minimal accounting information on manual pages or, at best, in spreadsheets.

a. What financial information are such clubs likely to collect and maintain?

b. Assuming that the club keeps manual accounting records; would you consider such systems accounting information systems? Why or why not?

c. Assume that the club treasurer of one such organization is in charge of all financial matters, including collecting and depositing member dues, paying vendor invoices, and preparing yearly reports. Do you think that assigning only one person to this job is a good idea? Why or why not?

d. What benefits would you guess might come from computerizing some or all of the club’s financial information, even if there are less than 100 members? For example, do you think that such computerization is likely to be cost effective?

summarizes its accounting policies

Walgreen Co’s 2010 annual report includes the following in the note that summarizes its accounting policies:

Inventories are valued on a lower of last-in, first out (LIFO) cost or market basis. At August 31, 2010 and 2009, inventories would have been greater by $1,379 million and $1,239 million, respectively, if they had been valued on a lower of first-in, first out (FIFO) cost or market basis. Inventory includes product costs, inbound freight, warehousing costs and vendor allowances.

What inventory costing method does Walgreen Co. use?

What is the amount of the LIFO reserve at the end of each of the two years?

Explain the meaning of the increase or decrease in the LIFO reserve during the 2010. What does this tell you about inventory costs for the company? Are they rising or falling? Explain.

Being that you are an inquisitive person

Being that you are an inquisitive person and wish to add to your knowledge base, you ask your new accountant to teach you about fund accounting that is used in nonprofit financial accounting. Specifically, you asked her the following:

Explain how fund accounting principles for nonprofit organizations affect routine revenue type journal entries.

Do you think that nonprofits should continue to abide by the wishes of contributors who donated on the basis of a specific use of their donation, or, during tough economic times, should they ask these contributors to relax any restrictions they placed on the use of these funds?

Goodwill considered impaired

How does goodwill arise in a business situation? Under what conditions is it recorded? When is goodwill considered impaired following a business combination?

Lata Inc., produces aluminum cans

1). Lata Inc., produces aluminum cans. Production of 12-ounce cans has a standard unit quantity of 4.5 ounces of aluminum per can. During the month of April, 300,000 cans were produced using 1,250,000 ounces of aluminum. The actual cost of aluminum was $0.09 per ounce and the standard price was $0.08 per ounce. There are no beginning or ending inventories of aluminum.

Calculate the total variance for aluminum for the month of April.

2).

Lata Inc., produces aluminum cans. Production of 12-ounce cans has a standard unit quantity of 4.5 ounces of aluminum per can. During the month of April, 300,000 cans were produced using 1,250,000 ounces of aluminum. The actual cost of aluminum was $0.09 per ounce and the standard price was $0.08 per ounce. There are no beginning or ending inventories of aluminum.

Calculate the materials price and usage variances using the columnar and formula approaches.

Botella, Inc. produces plastic bottles

Botella, Inc. produces plastic bottles. Each bottle has a standard labor requirement of 0.025 hours. During the month of April, 500,000 bottles were produced using 14,000 labor hours @ $9.00. The standard wage rate is $8.50 per hour.

Calculate the total variance for production labor for the month of April.

Calculate the labor rate and efficiency variances using the columnar and formula approaches.

Current, turnover, inventory, and quick ratios

I need help with current, turnover, inventory, and quick ratios. See attachment for more information.

This question has the following supporting file(s)

Accounting fraud relates to accounting information systems

Please copy and paste or click on the link below and discuss how accounting fraud relates to accounting information systems. Specifically discuss internal controls. Include whether you think this type of fraud can be controlled effectively.

http://www.accountingtoday.com/news/SEC-Refocuses-Accounting-Fraud-66893-1.html

Time is Money

Please provide a written summarization on the article “Time is Money” by Emily Oster. What is the take away of the article?

Select three public companies

Select three public companies, find their annual reports in the investors relations section of their website.

Select: Home Depot, Apple & Discover

How much cash is available for the company to pay its current debts?

Is the company in trouble or in good shape? (current ratio as evidence)

Is each company increasing or decreasing its investment in its operations? [Hint: look at “Cash Flow from Investing Activities on the Statement of Cash Flows. Then note the change in Non-Current Assets on the Balance Sheet from one year to the next.]

How well is each company doing in its operations? [Hint: Look at the three year trend in Net Income on the Income Statement and at Cash Flow from Operating Activities on the Statement of Cash Flows.]

business making framed botanical prints

For a business making framed botanical prints:

1..Prepare the following budgets for 1 quarter broken down monthly regarding your chosen item: estimated sales budget, estimated direct materials budget, estimated direct labors budget, estimated manufacturing overhead budget, estimated selling and administrative expenses, and an estimated income statement.

2. Classify all manufacturing costs and selling and administrative expenses as either variable or fixed.

3. Prepare a contribution margin income statement separating all variable and fixed costs into their own categories.

4. Determine the breakeven point in units and dollars. Also, determine the number of units and dollars that need to be sold to make a target profit of $5,000 a month.

5. Identify what types of trends you should be aware of in the industry and who the primary competitors are.

6. Answer the following question: If you had to improve the bottom line, what would you do and what concerns would you have going forward.

7. Choose a piece of equipment that you might consider purchasing to increase production of your item and address the following questions: What types of capital budgeting factors would you look at when deciding whether to do this? What would be the relevant costs that you would consider in this decision?

Prepare a personal budget, balance sheet, and cash flow statement.

With fictitious information…

Prepare a personal budget, balance sheet, and cash flow statement.

Summarize key items and findings from the personal budget, balance sheet, and cash flow statement.

Recommend and support actions for improving the financial situation.

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