1st EditionGlencoe McGraw-Hill548 explanations
15th EditionRay H Garrison716 explanations
11th EditionBradford D. Jordan, Randolph W. Westerfield, Stephen A. Ross1,432 explanations
10th EditionDavid H Marshall, Wayne W McManus614 explanations
ACCOUNTINGiCover produces bags for carrying laptop computers. iCover sells 1,000,000 units each year at a price of $20 per unit and a contribution margin of 40%. To respond to customer complaints, iCover managers want to modify the production processes to produce higher-quality products.$
$$
\begin{matrix}
\text{Prevention costs} & \text{\$400,000}\\
\text{Appraisal costs} & \text{\$150,000}\\
\text{Internal failure costs} & \text{}\\
\text{Rework} & \text{\$325,000}\\
\text{Scrap} & \text{\$75,000}\\
\text{External failure costs} & \text{}\\
\text{Product repair costs} & \text{\$400,000}\\
\text{Lost sales for customer returns} & \text{\$650,000}\\
\text{The management accountant has forecast the following additional costs to modify the production process.} & \text{}\\
\text{Design changes} & \text{\$125,000}\\
\text{Process engineering} & \text{\$210,000}\\
\end{matrix}
$$
$ 1. Which costs of quality category are managers focusing on? Wy? 2. If the improvements result in a 55% decrease in product repair costs and a 70% decrease in lost sales from customer returns, what is the impact on the overall C0Q and the company's operating income? What should iCover do? Explain. 3. Calculate prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs and as a percentage of sales before and after the change in the production process. Comment briefly on your results. ACCOUNTINGCorporate Printing Company currently leases its only copy machine for $1,500 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Corporate would pay a commission for its printing at a rate of$20 for every 500 pages printed. The company currently charges $0.20 per page to its customers. The paper used in printing costs the company$0.05 per page and other variable costs, including hourly labor, amount to $0.10 per page. Required: 1. What is the company’s breakeven point under the current leasing agreement? What is it under the new commission-based agreement? 2. For what range of sales levels will Corporate prefer (a) the fixed lease agreement and (b) the commission agreement? 3. Do this question only if you have covered the chapter appendix in your class. Corporate estimates that the company is equally likely to sell 20,000, 30,000, 40,000, 50,000, or 60,000 pages of print. Using information from the original problem, prepare a table that shows the expected profit at each sales level under the fixed leasing agreement and under the commission-based agreement. What is the expected value of each agreement? Which agreement should Corporate choose? ACCOUNTINGThe following amounts summarize the financial position of Davis Resources on May 31, 2012:
$$
\begin{matrix}
\quad & \quad & \quad & \text{Assets} & \quad & \quad & \quad & \quad & \text{ =} & \text{Liabilities} & \text{ +} & \text{Stockholders’ Equity} & \quad & \quad\\
\quad & \text{Cash} & \text{ +} & \text{Accounts Receivable} & \text{ +} & \text{Supplies} & \text{ +} & \text{Land} & \text{ =} & \text{Accounts Payable} & \text{ +} & \text{Common Stock} & \text{ +} & \text{Retained Earnings}\\
\text{Bal} & \text{1,050} & \quad & \text{1,350} & \quad & \quad & \quad & \text{11,700} & \quad & \text{7,900} & \quad & \text{3,600} & \quad & \text{2,600}\\
\end{matrix}
$$
During June, 2012, the business completed these transactions: a. The business received cash of $8,900 and issued common stock. b. Performed services for a customer and received cash of$6,300. c. Paid $4,100 on accounts payable. d. Purchased supplies on account,$700. e. Collected cash from a customer on account, $200. f. Consulted on the design of a computer system and billed the customer for services rendered,$2,400. g. Recorded the following expenses for the month: (1) paid office rent—$1,300; (2) paid advertising—$1,000. h. Declared and paid a cash dividend of $2,000. Analyze the effects of the preceding transactions on the accounting equation of Davis Resources, Inc. Prepare the income statement of Davis Resources, Inc., for the month ended June 30, 2012. List expenses in decreasing order by amount. Prepare the statement of retained earnings of Davis Resources, Inc., for the month ended June 30, 2012. Prepare the balance sheet of Davis Resources, Inc., at June 30, 2012. ACCOUNTINGComparative figures for Apple and Microsoft follow.
$$
\begin{matrix}
\quad & \quad & \text{Apple} & \quad & \quad & \text{Microsoft}\\
\text{\$ millions} & \text{Current Year} & \text{One Year Prior} & \text{Two Years Prior} & \text{Current Year} & \text{One Year Prior} & \text{Two Years Prior}\\
\text{Inventory} & \text{\$ 2,349} & \text{\$ 2,111} & \text{\$ 1,764} & \text{\$ 2,902} & \text{\$ 2,660} & \text{\$ 1,938}\\
\text{Cost of sales} & \text{140,089} & \text{112,258} & \text{106,606} & \text{33,038} & \text{27,078} & \text{20,385}\\
\end{matrix}
$$
1. Compute inventory turnover for each company for the most recent two years shown. 2. Compute days’ sales in inventory for each company for the three years shown. 3. Comment on and interpret your findings from parts 1 and 2. Assume an industry average for inventory turnover of 15.
