Posted: July 12th, 2015

There are 5 questions in total

There are 5 questions in total

1. Suppose that you have been given a summer job as an intern at Remotely Speaking, a company that manufactures sophisticated portable two-way radio transceivers for remote-controlled military reconnaissance missions. The company, which is privately owned, has approached a bank for a loan to help finance its tremendous growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs:
1.    Depreciation on salespersons’ cars.
2.    Rent on equipment used in the factory.
3.    Lubricants used for machine maintenance.
4.    Salaries of personnel who work in the finished goods warehouse.
5.    Soap and paper towels used by factory workers at the end of a shift.
6.    Factory supervisors’ salaries.
7.    Heat, water, and power consumed in the factory.
8.    Materials used for boxing company products for shipment overseas. (Units are not normally boxed.)
9.    Advertising costs.
10.    Workers’ Compensation Insurance for factory employees.
11.    Depreciation on chairs and tables in the factory lunchroom.
12.    The wages of the receptionist in the administrative offices.
13.    Cost of leasing the corporate jet used by the company’s executives.
14.    The cost of renting rooms at a British Columbia resort for the annual sales conference.
15.    The cost of packaging the company’s product.
Required:
Classify the above costs as either product (inventoriable) costs or period (non-inventoriable) costs for purposes of preparing the financial statements for the bank.

2. Last month Mountain High, a mountain sporting goods retailer, had total sales of $3,200,000, selling expenses of $110,000, and administrative expenses of $470,000. The company had beginning merchandise inventory of $140,000, purchased additional merchandise inventory for $2,550,000, and had ending merchandise inventory of $180,000.
Required:
Prepare an income statement for the company for the month

3. Acromould Fabrication manufactures a variety of products in its factory. Data for the most recent month’s operations appear below.
Beginning raw materials inventory    $ 66,000
Purchases of raw materials    528,000
Ending raw materials inventory    78,000
Direct labour    258,000
Manufacturing overhead    456,000
Beginning work in process inventory    228,000
Ending work in process inventory    264,000
Required:
Prepare a schedule of cost of goods manufactured for the company for the month

4. The Sorrento Hotel is a four-star hotel located in downtown Montreal. The hotel’s operations vice-president would like to replace the hotel’s antiquated computer terminals at the registration desk with attractive state-of-the-art flat-panel displays. The new displays would take less space, consume less power than the old computer terminals, and provide additional security, since they can be viewed only from a restrictive angle. The new computer displays would not require any new wiring. The hotel’s chef believes the funds would be better spent on a new bulk freezer for the kitchen.
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Required:
For each of the items below, indicate by placing an X in the appropriate column whether it should be considered a differential cost, an opportunity cost, or a sunk cost in the decision to replace the old computer terminals with new flat-panel displays. If none of the categories apply for a particular item, leave all columns blank. The first item has been completed as an example.
Item    Differential Cost    Opportunity Cost    Sunk Cost
Ex.    Cost of electricity to run the terminals    X
1.    Cost of the new flat-panel displays
2.    Cost of the old computer terminals
3.    Rent on the space occupied by the registration desk
4.    Wages of registration desk personnel
5.    Benefits from a new freezer
6.    Costs of maintaining the old computer terminals
7.    Cost of removing the old computer terminals
8.    Cost of existing registration desk wiring

5. Greg Powers is employed by Gussie Company, where he assembles a component part for one of the company’s products. Greg is paid $14 per hour for regular time, and he is paid time and a half (i.e., $21 per hour) for all work in excess of 40 hours per week.
Required:
1.    Assume that during a given week Greg is idle for three hours due to machine breakdowns and that he is idle for two more hours due to material shortages. No overtime is recorded for the week. Allocate Greg’s wages for the week between direct labour cost and manufacturing overhead cost.
2.    Assume that during a following week Greg works a total of 49 hours. He has no idle time for the week. Allocate Greg’s wages for the week between direct labour cost and manufacturing overhead cost. The cause of the overtime is peak production.
3.    Greg’s company provides an attractive package of benefits for its employees. This package includes a retirement program and a health insurance program. Explain two ways that the company could handle the costs of its direct labourers’ employee benefits in its cost records.