Acct Mid-Term Solutions Essay

Examination II leave select fiver of the following questions for the mid-term exam. You should be able to answer all of them. You may expire together in study groups and analyze and answer the questions. Obviously, the exam go out be an individual effort.1Accounting and ControlThe controller of a small insular college is complaining about the amount of work she is required to do at the beginning of each month. The president of the university requires the controller to submit a monthly cross by the fifth day of the following month. The monthly narrative contains pages of financial data from consummations. The controller was heard tell aparting, Why does the president request all this discipline? He probably doesnt read one-half of the discipline. Hes an old English professor and probably doesnt roll in the hay the difference between a cost and a revenue. indispensablea. What is the probable role of the monthly report?Ans The monthly report is the report card for the Unive rsitys internal method of accounting establishment, these monthly reports argon a formal part of the Universitys information dust, that provides data and association for decision making (pg.2 of text). These reports be part of a system of controls, these controls effectiveness the organization to account for their monthly transactions and the president needs to know this so that he can defend and reconcile the position of his lodge. These reports are useful to the president so that he can manage the in-and-outflow of resources that save up the Universitys board members and employees interests aligned. For the president, the role of these monthly reports are to provide information for necessary planning and decision making and to also help displace and monitor people within the university (pg. 3 of text).b. What is the controllers accountability with respect to a president who doesnt know much accounting? Ans It is the controllers responsibility to ensure the President un derstands what the reports say/symbolize and based upon those results, make suggestions on decisions. Their responsibilities involve assuring the reports are accurate, meet accounting standards by following accounting principles and procedures, and having a wet fiducial understanding of the business so that the numbers in his report tell a story about the Universitys position in the mart and the current state of its operational drivers (pg.10&11 of text).2Cost, Volume, Profit summaryLeslie Mittelberg is considering the wholesaling of a leather hand nucleotide from Kenya. She must travel to Kenya to check on quality and transportation. The trip bequeath cost $3000. The cost of the handbag is $10 and transportation to the United States can occur through the postal system for $2 per handbag or through a freight community which will ship a container that can hold up to a gram handbags at a cost of $ thousand. The freight company will charge $1000 even if less than 1000 handbags ar e shipped. Leslie will try to sell the handbags to retailers for $20. Assume there are no other(a) cost and benefits.Requireda. What is the break-even point if shipping is through the postal system? Ans Break Even Point = Total Fixed cost / (Unit Price Unit Variable Costs) BEP = $3000 / ($20 $12)= 375 handbagsb. How many units must be sold if Leslie uses the freight company and she wants to eat up a mesh of $1000? Ans Total Revenue Total Costs= ProfitTR-TC=1000 $20x-($3000+$1000+$10x) =$1000$10x=$5000 x=500 handbags.c. At what output aim would the two shipping methods yield the same profit? Ans =TR-TC shipment =$10x-$4000 Postal =$8x-$3000 ( Twoequations same unknown, set equal 10x-4000=8x-3000( 2x=1000 ( x=500 handbagsd. Suppose a large discount store asks to spoil an additional 1000 handbags beyond normal sales. Which shipping method should be used and what is the minimum sales price Leslie should consider in exchange those 1000 handbags? Ans At a 1000 handbags, freight shipping should be used because the UVC to ship a bag would be $1 as opposed to $2 through postal. The minimum price of the bag should cover Leslies VC just to break even, VC=10(1000)+1000=$11,000/1000bags = $11.00. 3Asset ReplacementThe Baltic participation is considering the purchase of a new instrument tool to replace an ancient one. The machine being used for the operation has a tax-basis book note value of $80,000, with an annual depreciation expense of $8,000. It has a resale value today of $40,000, is in good working order, and will last, physically, for at least 10 much(prenominal) years. The proposed machine will perform the operation so much more efficiently and Baltic engineers estimate that labor, material, and other direct costs of the operation will be reduced $60,000 a year if it is installed. The proposed machine costs $240,000 delivered and installed, and its economic life is estimated at 10 years, with zero salvage value. The company expects to earn 14 per c entum on its investment after taxes (14 percent is the dissipateds cost of capital). The tax rate is 40 percent, and the firm uses straight-line depreciation. Any gain or loss on the sale of the machine at retirement is subject to tax at 40 percent.Should Baltic buy the new machine?4Transfer PricesThe important Division of the Carlson Company manufactures yield X at a inconstant cost of $40 per unit. Alpha Divisions fixed costs, which are sunk, are $20 per unit. The market price of X is $70 per unit. genus Beta Division of Carlson Company uses harvest X to make Y. The variable costs to convert X to Y are $20 per unit and the fixed costs, which are sunk, are $10 per unit. The product Y sells for $80 per unit.Requireda. What transfer price of X causes divisional managers to make alter decisions that maximize Carlson Companys profit if each division is treated as a profit midway? Ans The minimum price Alpha can accept is $40+$20** = $40. The maximum Beta can pay is $80-$20-$10** or $60.**To have sunken fixed costs a firm would have to be operating in the short-run, the sunken fixed costs are unrecoverable and are already paid, these costs shouldnt be considered when ascertain whether or not to shut down.The transfer price must be set in such a way as to father the two parties to make the transfer. In essence, the transfer price must tumble incentives to the Alpha Division to want to make the transfer and give incentives to the Beta Division to buy (b/c theyre both profit centers, decentralized decision makers). In other words, the following two constraints must be satisfiedAlphaTP $40 (variable cost)Beta DivisionTP $60 (selling price ($80) variable costs to complete ($20)) where TP = transfer price ( $40