ACCTG424 Lecture Notes - Pastry Chef, Girl Distribution Company

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violetchinchilla775

8 Apr 2014

School

University of Alberta

Department

Accounting

Course

ACCTG424

Professor

Trish Stringer

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Document Summary

Voltaire, a renowned pastry chef employed at a four-star hotel, has decided to open his own exclusive pastry shop. He has ,000 to invest and the information he has obtained is as follows: There is a 55% probability the market size in the area will be 600,000 pastries per year and a 45% chance it will be 450,000 pastries per year. Price per pastry is assumed to be . 00 and this is the basis for predicting voltaire"s market share. The market share voltaire will capture depends on where he locates. Location a costs ,000 annual rent where voltaire will capture 30% of the pastry market (his market share). Fixed costs excluding rent are estimated at ,000 per year. Location b costs ,000 annual rent where voltaire will capture 22% of the pastry market (his market share). Fixed costs excluding rent are estimated at ,000 per year. (600,000 * 55%) + (450,000 * 45%) = 330,000 +202,500 = 532,500 units.

Related Questions

1. Peter Takesha, the manager of testing services at a medicaldiagnostics firm, purchased a new lab testing machine last year for$30,000. This year a new machine, which is faster and more reliablethan Peterâs current model, is on the market. In deciding whetherto purchase the new machine, should Peter consider how much he paidfor the old machine? Should he consider the value of the oldmachine in the used equipment market?

2. Parrish Plumbing provides plumbing services to residentialcustomers from Monday through Friday. Ken Parrish, the owner,believes that it is important for his employees to have Saturdayand Sunday off to spend with their families. However, he alsorecognizes that this policy has implications for profitability, andhe is considering staying open on Saturday.

Ken estimates that if his company stays open on Saturday, it cangenerate $2,500 of daily revenue each day for 52 days per year. Theincremental daily costs will be $700 for labor, $500 for parts,$100 for transportation, and $200 for office staff. These costs donot include a share of monthly rent or a share of depreciationrelated to office equipment.

Ken is determined not to have employees work on Sunday, but hewould like to know the opportunity cost of not working on Saturday.Provide Ken with an estimate of the opportunity cost, and explainwhy you do not have to consider rent or depreciation of officeequipment in your estimate.

3. During the month of August, Star Plastics had $70,000 oflabor costs that were traced to specific jobs. The company also had$50,000 of indirect labor related to supervisory pay. (Hint: Thereshould be separate journal entries for direct and indirectlabor.)

Required: Prepare journal entries to record labor cost duringAugust.

4. During the month of August, Star Plastics applied overhead tojobs using an overhead rate of $3 per dollar of direct labor.Direct labor in August was $100,000. Actual overhead in August was$260,000. Assume that actual overhead was composed of the followingitems.

Indirect materials	$40,000
Indirect Labor	$80,000
Utilities	$25,000
Depreciation	$60,000
Repair	$55,000
Total	$260,000

Required:

a. Prepare ajournal entry to record overhead applied to jobs.

b. Prepare ajournal entry to record actual overhead.

salmonantelope712

PRODUCTS R'US, INC. - CHINA PROJECT Brian Smith has been the champion of the Pacific Rim market within Products R'Us for the past few years. The emerging buying power in this sector has led to an increasing amount of business for Products R'Us. Smith was finding himself at a growing competitive disadvantage due to comparative processing and freight costs. Smith had argued forcefully that without a Pacific Rim manufacturing facility, he would soon be unable to compete in this important market. Six months ago, a five million dollar facility to be situated in China focusing on basic products had been given the green light - provided he could justify the investment. Smith had been negotiating with the Chinese government and gathering both market and manufacturing data since that decision. He was now ready to compile it for a final report. First, from the company's construction group, process engineers and his own faceto-face negotiations, to get the plant built and running relatively smoothly, he drew up the following:

1) The Chinese government would waive all taxes for the first 5 years and donate the land use for the first 10 years.

2) Costs to build the facility, $2,000,000.

3) Machinery and equipment costs, $3,000,000.

4) Training and other start-up costs, $350,000

After shake-down, from his discussions with marketing, manufacturing and accounting people, he estimated the following on an annual basis:

5) Sales, $15,000,000 with approximately 20% outstanding in receivables at the end of the year.

6) Raw material purchases, $8,000,000, of which $1,500,000 will be unpaid at year end.

7) Variable cost of goods manufactured, (raw materials) 50% of sales.

8) Fixed cost of goods manufactured excluding depreciation charges for plant and equipment, $2,500,000 (all of which will be paid by year end).

9) Variable distribution costs, 15% (all of which will be paid by year end).

10) Administration costs, $400,000 (all of which will be paid by year end).

11) Since this will be a JIT facility, no inventory of finished goods is expected (Amazing! Right?).

12) Development budget is set at $1,000,000 to adapt the product mix to local demands.

13) Tax accountant has noted that the building can be depreciated over 10 years, and the equipment over three.

14) Tax accountant has also noted that due to the uncertainty of future benefit, accounting rules state that the training and other start-up costs should be written off.

15) Historically, bad debts in this area of the globe are approximately 2% of sales. Please note that these are summary transactions. Over the year there would be voluminous transactions taking place in a different chronological order. Of interest for this exercise is how the accountant would go about collating this data into financial statements, and how well the financial statements reflect what is happening in the business.

Assignment build a balance sheet, income statement, and statement of cash flows from the above information.

beigeporcupine586

Project 1 Prepare job costing information for the following: Joseph runs an electrical contracting business and employs six electricians. He is only involved in supervision but on occasion will assist if needed. He charges direct labour hours at $45.00 per hour. Three of Josephâs electricians are working on a job that involves wiring and fitting fixtures in a new house for Mr and Mrs Fleet. All materials and fixtures used have come from inventory. Each electrician spends half an hour at the beginning of each day on administration tasks and travels for half an hour to get to the job. They also spend half an hour at the end of the day undertaking administrative tasks. If they finish a job late afternoon and there is not enough time to start another they return to base and fill the time with other administrative tasks. Geoff Smith is responsible for the initial wiring. He calculates that he will need two rolls of electrical cabling and that it will take him 12 hours to complete the job. He works on the job on 15/10/11 and 18/10/11. He completes a materials requisition form and the cost per roll of electrical cable is $85.00. Peter Jones is responsible for fitting all fixtures. He has to fit 23 double power points and 15 down lights. Takes seven hours, so he works for longer to get it done in one day (there are no overtime penalties to worry about). He works on the site on 18/10/11. His materials requisition form shows that the power points are $7.50 per unit and the down lights are $25 each. Brian Brown is the senior electrician and he wired the switchboard, the circuit breakers and checked the work undertaken by the others. He expected this to take about four hours but he was there for seven hours because of problems encountered. He began his work on 22/10/11 and completed the remaining four hours on 25/10/11. The switchboard cost was $190.00 and the circuit breakers were $19.00 each. Twelve were needed. Brian took the afternoon of the 22nd and the morning of the 25th off for recreation leave. He went straight from the job to take his leave and went to the job from his leave without going to the workshop. Recreation leave is costed as administration. Each electrician normally starts at 8.30 am and has lunch from 12.30 until 1.00 pm. At the beginning of the financial year Joseph examined all of his overhead costs; vehicle leases, rent on premises, inventory, replacement of specialised equipment, depreciation, indirect labour, indirect materials, salary on-costs and insurance. These include his fixed and his variable costs. He calculated overall costs to be $662,500. 1 If each of his six electricians worked 46 weeks at 40 hours per week, what are his overhead costs?

rubyminnow674

ACCTG424 Lecture Notes - Pastry Chef, Girl Distribution Company

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