Due Sunday at 11pm Central Standard Time

 

ACC 206 Week 4 Assignment

 

Please complete the following exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

 

1. Comprehensive budgeting

The balance sheet of Watson Company as of December 31, 20X1, follows.

WATSON COMPANY
Balance Sheet
December 31, 12X1
Assets
Cash		$4,595
Accounts receivable		10,000
Finished goods (575 units x $7.00)		4,025
Direct materials (2,760 units x $0.50)		1,380
Plant & equipment	$50,000
Less: Accumulated depreciation	10,000	40,000
Total assets		$60,000
Liabilities & Stockholders’ Equity
Accounts payable to suppliers		$14,000
Common stock	$25,000
Retained earnings	21,000	46,000
Total liabilities &. stockholders’ equity		$60,000

 

The following information has been extracted from the firm’s accounting records:

1.     All sales are made on account at $20 per unit. Sixty percent of the sales are collected in the month of sale; the remaining 40% are collected in the following month. Forecasted sales for the first five months of 20X2 are: January, 1,500 units,- February, 1,600 units; March, 1,800 units; April, 2,000 units; May, 2,100 units.

2.     Management wants to maintain the finished goods inventory at 30% of the following month’s sales.

3.     Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the following month’s production needs.

4.     Seventy percent of all purchases are paid in the month of purchase; the remaining 30% are paid in the subsequent month.

5.     Watson’s product requires 30 minutes of direct labor time. Each hour of direct labor costs $7.

Instructions:

a.     Rounding computations to the nearest dollar, prepare the following for January through March:

1) Sales budget

2) Schedule of cash collections

3) Production budget

4) Direct material purchases budget

5) Schedule of cash disbursements for material purchases
6) Direct labor budget

b.     Determine the balances in the following accounts as of March 31:

1) Accounts Receivable

2) Direct Materials

3) Accounts Payable

 

2. Basic flexible budgeting
Centron, Inc., has the following budgeted production costs:

Direct materials	$0.40 per unit
Direct labor	1.80 per unit
Variable factory overhead	2.20 per unit
Fixed factory overhead
Supervision	$24,000
Maintenance	18,000
Other	12,000

 

The company normally manufactures between 20,000 and 25,000 units each quarter. Should output exceed 25,000 units, maintenance and other fixed costs are expected to increase by $6,000 and $4,500, respectively.

During the recent quarter ended March 31, Centron produced 25,500 units and incurred the following costs:

 

Direct Materials		$10,710
Direct Labor		47,175
Variable factory overhead		51,940
Fixed factory overhead
Supervision		24,500
Maintenance		23,700
Other		16,800
Total production costs		$174,825

 

 

 

Instructions:

a.     Prepare a flexible budget for 20,000, 22,500, and 25,000 units of activity.

b.     Was Centron’s experience in the quarter cited better or worse than anticipated? Prepare an appropriate performance report and explain your answer.

c.     Explain the benefit of using flexible budgets (as opposed to static budgets) in the measurement of performance.

 

 

3. Straightforward variance analysis

Arrow Enterprises uses a standard costing system. The standard cost sheet for product no. 549 follows.

Direct materials: 4 units @ $6.50		$26.00
Direct labor: 8 hours @ $8.50		68
Variable factory overhead: 8 hours	@ $7.00	56
Fixed factory overhead: 8 hours	@ 2.5	20
Total standard cost per unit		$170.00

 

The following information pertains to activity for December:

1.     Direct materials acquired during the month amounted to 26,350 units at $6.40 per unit. All materials were consumed in operations.

2.     Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity.

3.     Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the year.

4.     Actual production amounted to 6,500 completed units.

 

Instructions:

a.     Compute Arrow’s direct material variances.

b.     Compute Arrow’s direct labor variances.

c.     Compute Arrow’s variances for factory overhead.

 

Assignment 2: LASA 1—The S’No Risk Program

In the mid-eighties, the Toro company launched a promotion in which snowblower purchasers could refund a portion of their purchase if the next winter brought modest snowfalls. The amount of their refund was tied to snowfall amounts and so, the program was prey to certain risks and uncertainties. You will explore those risks and choices from a variety of perspectives.

Review the case study “The Toro Company S’No Risk Program” by David E. Bell (1994) from this module’s assigned readings. Click here to download the Toro Excel worksheet which contains data exhibits from the article; the exhibit titles match the tabs long the bottom of the worksheet. Use this tool to conduct your data analysis for this assignment.

Analyze the risks of the program from the following points of view:

Toro
The insurance company
The consumers
Write a 4–6 page analysis paper that addresses the following:

Why did the insurance company raise the rates so much? How would you estimate a fair insurance rate?
From the perspective of the consumer, how were the paybacks structured and how might they be restructured to entice you at an equal or lower cost of insurance? How does the program influence your decision to purchase?
What are the common decision traps which each group in point (2) is susceptible to? Develop a matrix or decision tree in order to compare the groups. How does the program impact the consumer’s “regret”? (Hint: Map the possible outcomes for the consumer)
From either Toro’s or the insurance company’s perspective, how would you frame your argument to achieve your desired objective?
Was the program successful? Why or why not?
If you were Dick Pollick, would you repeat the program? Assume you manage the S’No Risk program and argue your case. To what biases are you susceptible in this case?

You have developed a new line of high-end organic balsamic vinegars.  Several of your varieties are being used in restaurants in Chicago and have been well accepted by chefs and customers. You have decided to launch the product in both the retail and wholesale markets. 

 

Determine your pricing objectives and develop your pricing strategy. Support your decisions.

 

Using the following information, apply your strategy and determine your pricing as well as break even in units. Support your decisions.

 

Bottle, Label and Production (direct material and labor)	$9.12  per 12 oz. bottle
Advertising & promotion	$218,000
Company Overhead	$354,000

 

 

 

 

 

Minimum of 250 words (not counting the references). Paragraphs need to be between five to nine sentences. Be careful with originality as this will be submitted through a plagiarism checker – turnitin.com

 

There are some 200 economic integration agreements in effect around the world already, far more than even a few years ago. Virtually every country is now party to one or more free trade agreements. Supporters argue that free trade is good for nations.

• What is the basis for their support? That is, what are the specific benefits that countries seek by joining an economic bloc?
• What is the main economic bloc for your country?
• From your perspective, what advantages has bloc membership brought to your country?
• What disadvantages has bloc membership produced?