Briefly summarized their mission

Walmart

Briefly summarized their mission.

Draft a financial perspective section of a balanced scorecard that reflects their initiatives and mission.

Cite three objectives for improving their financial position and how it relates to the overall mission.

Develop at least one measure, target, and initiative for each.

Sunshine State Fruit Company makes 80,000 boxes

Sunshine State Fruit Company makes 80,000 boxes a year at the following costs:

Materials 112,000

Labor 20,000

Indirect manufacturing costs:

Variable 16,000

Fixed 60,000

Suppose Weyerhaeuser agrees to supply Sunshine State with boxes for $2.10 per box.

1. What would Sunshine State save by buying the boxes from Weyerhaeuser?

2. What qualitative factors should Sunshine State consider in this decision?

3. Suppose the fixed costs represent depreciation on equipment that was purchased for $600,000 and is just about at the end of its 10-year life. Replacement equipment will cost $800,000 and will last 10 years. In this case, how much, if any, would Sunshine State save by buying the boxes from Weyerhaeuser?

Doulas County’s Photocopying

Doulas County’s Photocopying

Equipment Replacement

Old Equipment Proposed Replacement Equipment

Useful life in years 5 3

Current age in years 2 0

Useful life remaining, in year 3 3

Original cost $25,000 $15,000

Accumulated amortization $10,000 0

Book Value $15,000 Not acquired yet

Disposal value(in cash) now $6,000 Not acquired yet

Disposal value in two years 0 0

Annual cash operating costs for power maintenance, toner, and supplies $14,000 $9,000

Assume the new equipment will have a three year life. Ignore taxes.

1. What are the relevant and irrelevant costs.

2. Would a list of only relevant costs be more clear than the list from #1?

3. Prepare an analysis to support your choice of alternatives.

A Super Classic Boats Limited produces custom wood boats

A Super Classic Boats Limited produces custom wood boats. Each boat is unique and built upon customer order. During October 2012, Classic Boats began production of three customer orders – Boat A, Boat B and Boat C. The followings are selected data for the month of October:

(1) Purchased production materials totaling $225,000

(2) Direct material and direct labor used:

Boat 1 Boat 2 Boat 3

Direct material cost ($) 38,800 19,300 22,500

Direct labor cost ($) 7,400 5,900 3,250

Direct labor hours (Hrs) 350 275 150

(3) Indirect material used for the three jobs: $43,500

(4) Machine hours for the three jobs: 114 hours (estimated total machine hours for

the year is 3,690 hours)

(5) The manufacturing process is mainly labor intensive and it is estimated that

9,840 labor hours is the total for the current year of operation.

(6) Estimated the overhead cost for the year 2012 is $59,040.

1. Calculate the pre-determined overhead rate based on labor.

2. Calculate the manufacturing cost for Boat 1, Boat 2 and Boat 3.

3. If the actual overhead cost of the month for Boat 1 and Boat 2 are $2,000 and $1,700 respectively, calculate the amount of over or under allocation of overhead cost to the management.

4. This company also produces the small safety boats for emergency. The company incurred monthly fixed operating cost of $150,000 which includes sales and administrative expenses. The variable cost per unit for producing each unit of safety boat costs $450.This includes direct material cost, direct labor costs and factory overhead costs. The company produced 500 units per month and the selling price is $1,000 per unit. How much is

i) the unit contribution margin of the product and

ii) the break-even sales in units and ringgit ($).

You are thinking of starting your own business

You are thinking of starting your own business. You have some very innovative ideas about a new kind of manufactured product, but you are not sure if your business and financial savvy is adequate to launch your business alone. You know that successful start-ups require not only great innovative ideas but also a keen business sense and an understanding of the numbers.

You think that your idea is financially feasible but need another set of accounting eyes. Therefore, you hired a chief financial officer (CFO) to assist you. She has the basic financial managerial skills needed to finance the business itself and develop banking relationships, but she has only rudimentary skills in profit planning, cost accounting, budgeting, and variance analysis.

Over the coming weeks, you and the CFO will be able to answer the following critical questions:

Can this new business be a financial success?

How sensitive will the profits be to business volume and other variables in the business (some which you can control and some that are not controllable)?

How should the financial statements be prepared?

What kind of internal accounting system should be set up?

Because your newly hired CFO is accustomed to primarily a financial management role, you want to make sure she understands how managerial accounting differs from cost accounting. Write an e-mail to her that includes the following:

At least 4 critical differences between financial accounting and managerial accounting.

Because she will be responsible for the annual budget, explain to her each of the following:

The importance of an annual budget;

The process used to create the annual budget.

Unit manufacturing costs

Air Production Company produces pneumatic lifts used to assist emergency rescue teams used to assist victims of auto and other accidents. The costs of manufacturing and marketing the pneumatic lifts at the company’s normal volume of 3000 per month are shown in Exhibit 1.

Exhibit 1

Unit manufacturing costs:

Variable materials $495

Variable labor $795

Variable Overhead $475

Fixed Overhead $640

Total unit manufacturing costs $2,405

Unit marketing costs:

Variable $235

Fixed $745

Total unit marketing costs $980

Total unit costs $3,385

Questions:

The following refers to the data given in exhibit 1. Treat each problem separately. Unless otherwise stated, assume a selling price of $4250 per lift. Ignore income taxes. Assume no beginning or ending inventories.

Using the contribution margin income statement format prepare:

1. A schedule that shows income at the following amounts of production: 350,000; 390,000; 450,000 and 500,000#.

2. Assume that the relevant range holds for production levels at this range of activity.

3. Include the impact of taxes on income at each level of activity. In other words, show income before and after taxes in the schedule.

Evaluating a special order

1. Evaluating a special order

Miyamoto Jewelers is considering a special order for 10 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $389.95 and its unit product cost is $264 as shown below.

Direct Materials ……………………………………..$143.00

Direct Labor……………………………………………. 86.00

Manufacturing Overhead……………………….. 35.00

Unit Product Cost……………………………………$264.00

Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $7 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional material costing $6 per bracelet and would also require acquisition of a special tool costing $465 that would have no other use once the special order is completed. This order would have no effect on the company’s regular sales and the order could be fulfilled using the company’s existing capacity without affecting any other order.

Required:

What effect would accepting this order have on the company’s net operating income if a special price of $349.95 is offered per bracelet for this order? Should the special order be accepted at this price?

2. Uncertain Future Cash Flows

Union Bay Plastics is investigating the purchase of automated equipment that would save $100,000 each year in direct labor and inventory carrying costs. This equipment costs $750,000 and is expected to have a 10-year useful lift with no salvage value. The company’s required rate of return is 15% on all equipment purchases. This equipment would provide intangible benefits such as greater flexibility and higher-quality output that are difficult to estimate and yet are quite significant.

Required:

(Ignore income taxes)

What dollar value per year would the intangible benefits have to have in order to make the equipment an acceptable investment?

3. Production Budget

Chrystal Telecom has budgeted the sales of its innovative mobile phone over the next four months as follows:

Sales in Units

July………………………………………………………………………30,000

August………………………………………………………………….45,000

September…………………………………………………………..60,000

October……………………………………………………………….50,000

The company is now in the process of preparing a production budget for the third quarter. Past experience has shown that end-of-month finished goods inventories must equal 10% of the next month’s sales. The inventory at the end of Jun was 3,000 units.

Required:

Prepare a production budget for the third quarter showing the number of units to be produced each month and for the quarter in total.

4. Manufacturing Overhead Budget

The direct labor budget of Krispin Corporation for the upcoming fiscal year includes the following budgeted direct labor-hours.

1st quarter 2nd quarter 3rd quarter 4th quarter

Budgeted direct labor-hours………. 5,000 4,800 5,200 5,400

The company’s variable manufacturing overhead rate is $1.75 per direct labor-hour and the company’s fixed manufacturing overhead is $35,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $15,000 per quarter.

Required:

1. Construct the company’s manufacturing overhead budget for the upcoming fiscal year.

2. Compute the company’s manufacturing overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year. Round off to the nearest whole cent.

6. Prepare a Report Showing Activity Variances

Air Meals is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The company’s planning budget for December appears below:

Air Meals

Planning Budget

For the Month Ended December 31

Budgeted meals (q) …………………………………………………….. 20,000

Revenue ($3.80 q) ………………………………………………………. $76,000

Expenses:

Raw Materials (2.30q) ……………………………………………….. 46,000

Wages and Salaries ($6,400 + $0.25q) ……………………….. 11,400

Utilities (2,100 + $0.05q) ……………………………………………. 3,100

Facility Rent ($3,800) …………………………………………………. 3,800

Insurance ($2,600) ……………………………………………………… 2,600

Miscellaneous ($700 + $0.10q) …………………………………… 2,700

Total expenses ………………………………………………………………. 69,600

Net operating income ……………………………………………………. $ 6,400

In December, 21,000 meals were actually served. The company’s flexible budget for this level of activity follows:

Air Meals

Flexible Budget

For the Month Ended December 31

Budgeted meals (q) …………………………………………………….. 21,000

Revenue ($3.80 q) ………………………………………………………. $79,800

Expenses:

Raw Materials (2.30q) ……………………………………………….. 48,300

Wages and Salaries ($6,400 + $0.25q) ……………………….. 11,650

Utilities ($2,100 + $0.50q) …………………………………………. 3,150

Facility Rent ($3,800) ………………………………………………… 3,800

Insurance ($2,600) ……………………………………………………… 2,600

Miscellaneous ($700 + $0.10q) …………………………………… 2,800

Total expenses ………………………………………………………………. 72,300

Net operating income ……………………………………………………. $ 7,500

Required:

1. Prepare a report showing the company’s activity variances for December.

2. Which of the activity variances should be of concern to management? Explain

7. Residual Income

Midlands Design Ltd. Of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of Œ£400,000 on sales of Œ£2,000,000. The company’s average operating assets for the year were Œ£2,200,000 and its minimum required rate of return was 16%. (The currency in the United Kingdom is the pound, denoted by Œ£)

Required:

Compute the company’s residual income for the year.

8. Effects of Changes in Sales, Expenses, and Assets on ROI

BusServ.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below:

Sales …………………………………………………. $8,000,000

Net operating income ………………………. $800,000

Average operating assets …………………. $3,200,000

Required:

Consider each question below independently. Carry out all computations to two decimal places.

1. Compute the company’s return on investment (ROI).

2. The entrepreneur who founded the company is convinced that sales will increase next year by 150% and that net operating income will increase by 400%, with no increase in average operating assets. What would the company’s ROI?

3. The Chief Financial Officer of the company believes a more realistic scenario would be a $2 million increase in sales, requiring an $800,000 increase in average operating assets, with a resulting $250,000 increase in net operating income. What would be the company’s ROI in this scenario?

The unrealized intercorporate

What portion of the unrealized intercorporate profit is eliminated in a downstream sale? In an upstream sale? Explain.The unrealized intercorporate

Intercorporate sales considered to be realized

When are profits on intercorporate sales considered to be realized? Explain. How are unrealized profits on current-period intercorporate sales treated in preparing the income statement for (a) the selling company and (b) the consolidated entity? Explain.

Perform an Internet search using the term

Perform an Internet search using the term, flexible budgets, and locate an article (from 2012) from the results of your search.

After reading the article, write a brief response that summarizes and comments on the article.

Wal-Mart’s mission and strategy from the perspective of its potential

Using Wal-Mart’s mission and strategy from the perspective of its potential, prospective, and present customers, create a customer service perspective of a balanced scorecard. Include:

– Three objectives for the organization’s customer service perspective and show how they relate to the mission, vision and strategy of the organization.

– A meaningful performance measure (metric).

– An expected level of performance (target).

– Program that needs to be developed to ensure successful implementation of the organization’s strategy (initiative).

Comment briefly on the relationships of the customer service objectives that you’ve identified here to the financial objectives. How do they help to fulfill those objectives? Do you need to change any of the financial measures after completing this work?

What is accrual-basis accounting

This Microsoft Power Point contains detail step by step information about each topic. Calculations and journal entries are included. The following topics are covered:

What is accrual-basis accounting?

What is cash-basis accounting?

What is the time period assumption?

What is the revenue recognition principle

What is the matching principle?

What are the basics of recording adjusting entries?

What are deferrals and accruals?

How are adjusting entries recorded for deferrals and accruals?

What is an adjusted trial balance and how are financial statements prepared from it?

Managers accountable for spending overrun

Suggest some ways to hold managers accountable for spending overruns. Recommend when capital projects should be abandoned due to subsequent cost overruns. Support your position.

Given Walmart’s overall strategy

Given Walmart’s overall strategy, provide four objectives, measures, targets and initiatives lined with the overall strategy that would be appropriate for the CUSTOMER SERVICE perspective of a balanced scorecard.

Comments on how these likely map to the financial measures in the financial perspective of the scorecard.

Product costing differ from job costing

How does product costing differ from job costing? Provide an example of each.

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