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Pablo was reviewing the water bill for his carwash business anddetermined that the highest​ bill, $ 5,300 occurred in July when2,500 cars were washed and the lowest​ bill, $ 3, 200,occurred inFebruary when 1,900 cars were washed. What was the variable costper​ carwash?

A.$ 1.68

B.$ 1.28

C.$ 3.50

D.$ 2.12

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Sixta Kovacek
Sixta KovacekLv2
28 Sep 2019

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Lambeth Custom Cabinets (B)

Jack Lambeth, a master cabinet maker, owns and operates a shopwhere he sells custom-made cabinets. At the beginning of Septemberhis business had no outstanding debt and the following amounts wereon his books:

1. Raw materials inventory, $3,350.

2. Supplies inventory, $920.

3. Work-in-process inventory, $7,200.

Overhead

Job

Materials

Labor

(50% of Labor)

A-3

$950

$ 1,300

$650

A-4

1,050

850

425

A-5

625

900

450

Total

$2,625

$3,050

$1,525

$

7,200

4. Cash as of September 1 were $16,890.

During the month, Lambeth's woodworking crew finished jobs A-3,A-4, and A-6 but did not finish A-5. Job A-7 and A-8 was startedbut not finished during September. Overhead costs (pertainingprimarily to equipment and shop depreciation, cleaning supplies,and insurance) are applied to every job at the end of the monthunless the job is finished during the month, in which case overheadis applied when the job is finished.

During September, the followingdirect materials and direct labor costs were incurred:

Job DirectMaterials Labor

A-3 $280 $750

A-4 350 1,300

A-5 180 550

A-6 375 490

A-7 590 370

A-8 900 870

Total $2,675 $4,330

Other financial factors of importance pertaining to Septemberwere:

A. $2,675 of raw materials werepurchased during the month.

B. Supplies of $780 were purchasedwhile $590 were used and thus transferred to the manufacturingoverhead account.

C. Total increases to the laborgeneral ledger account were $6,850. (Apparently there was $2,520indirect labor charged.)

D. General and administrative expenses for the month were$3,420.

E. Collections received from customers on jobs A-3, A-4, and A-6amounted to $7,125, $10,600, and $2,750, respectively, for a totalof $20,475.

F. At the end of the month, Lambeth Custom Cabinets had nooutstanding debts.

While Jack was reviewing theSeptember data he became very concerned about the manufacturingoverhead variance (MOV). Since Jack never wanted to lay off anemployee, the MOV was always large in months when business wasslow. (Jack assigned unoccupied workers to general clean-up andrepair worl< and charged their wages to indirect labor.) Ofcourse, Lambeth realized why the MOV was so large. What he worriedabout, however, was Mrs. Carter.

Mrs. Carter, a neighbor, hadstopped in the shop one day in early September to get a price onsome cabinets she wanted built. Jack's son, Jack Jr., spoke withher. Jack Jr. was working in the shop while on summer vacationbetween his first and second year of graduate business school. JackJr. studied the plans that Mrs. Carter had and estimated the costto build her cabinets at $2,050. His job estimation sheetshowed:

Lumber $990

Finishingmaterials 100

Direct laborcost 640

Overhead 320

$2,050

When Jack Jr. quoted a price of$2,560 ($2,050 cost $510 profit) to Mrs. Carter, she said that shecould get the same thing built by Walworth Custom Kitchens for$1,950.

Furthermore, she informed Jack Jr.that, "1 would throw the dumb economics books away before I wouldpay a penny more than $1,950 for book cabinets to store them."

Jack Jr. simply told her that hisbest price would be $2,560. He explained all about labor,materials, profit, overhead, and competitive capitalism. Inaddition, he told Mrs. Carter that Walworth couldn't make money ona $1,950 price and if Walworth was really willing to build theshelves for $1,950 she would be stealing from Mr. Walworth!

Mrs. Carter was very angry when sheleft. Jack Jr. later told his father the whole story and laughed ashe said, "Heck, we can't build stuff that costs $2,050 and sell itat a price of $1,950, let alone $2,000 can we?" At that timeLambeth didn't think much about the incident but he began to wonderwhether Jack Jr. had learned anything at graduate business school.Lambeth became especially concerned when he saw Bob Walworth, whosaid, "Mrs. Carter saved me last month." It seems that Walworth hadjust delivered Mrs. Carter's new cabinets for which she paid$1,950. Jack Lambeth wondered who was right — Jack Jr. orWalworth?

Prepare journal entries for the transaction for September.

Record the beginning balances in the General Ledger. Post theSeptember transaction from #1 into the General Ledger.

Prepare a Balance Sheet and Income Statement for September30th

Prepare a Variable Costing Income Statement for September30th

Based on what you know about the cost structure of LambethCustom Cabinets, could Lambeth make a profit and/or a positivecontribution margin on Mrs. Carter's order at a selling price of$1,950?

Hint: Use Excel to completerequirements 1-4.

So far I have:

Job Cost

A-3 Materials Labor Overhead Total Transfer to FG WIP
Beg. Bal. 950.00 1,300.00 650.00 2,900.00
Sept. Act. 280.00 750.00 375.00 1,405.00
Total $ 1,230.00 $ 2,050.00 $ 1,025.00 $ 4,305.00 $ 4,305.00
A-4 Materials Labor Overhead Total
Beg. Bal. 1,050.00 850.00 425.00 2,325.00
Sept. Act. 350.00 1,300.00 650.00 2,300.00
Total $ 1,400.00 $ 2,150.00 $ 1,075.00 $ 4,625.00 $ 4,625.00
A-5 Materials Labor Overhead Total
Beg. Bal. 625.00 900.00 450.00 1,975.00
Sept. Act. 180.00 550.00 275.00 1,005.00
Total $ 805.00 $ 1,450.00 $ 725.00 $ 2,980.00 $ 2,980.00
A-6 Materials Labor Overhead Total
Beg. Bal. $ - $ - $ - $ -
Sept. Act. 375.00 490.00 245.00 $ 1,110.00
Total $ 375.00 $ 490.00 $ 245.00 $ 1,110.00 $ 1,110.00
A-7 Materials Labor Overhead Total
Beg. Bal. $ -
Sept. Act. 590.00 370.00 185.00 1,145.00
Total $ 590.00 $ 370.00 $ 185.00 $ 1,145.00 $ 1,145.00
A-8 Materials Labor Overhead Total
Beg. Bal. $ - $ - $ - $ -
Sept. Act. 900.00 870.00 435.00 2,205.00
Total $ 900.00 $ 870.00 $ 435.00 $ 2,205.00

$ 2,205.00

J/E

Date Act. # D C
9/2 103 $ 2,675.00
100 $ 2,675.00
Purchase of Raw Materials
9/4 104 $ 780.00
100 $ 780.00
Purchase of Supplies
502 $ 590.00
104 $ 590.00
Supplies Used
9/10 110 $ 4,330.00
502 $ 2,520.00
100 $ 6,850.00
Labor Incurred
9/12 501 $ 3,420.00
100 $ 3,420.00
Gen. and Admin. Expense
9/15 100 $ 7,125.00
106 $ 7,125.00
Collections Received for A-3
100 $ 10,600.00
106 $ 10,600.00
Collections Received for A-4
100 $ 2,750.00
106 $ 2,750.00

Collections Received for A-6

G/L

#100 Cash
Date Description D C Balance
9/1 Beg. Bal. $ 16,890.00
9/2 Purchase RM $ 2,675.00 $ 14,215.00
9/4 Purchase Supplies $ 780.00 $ 13,435.00
9/10 Labor Incurred $ 6,850.00 $ 6,585.00
9/12 G&A Exp. $ 3,420.00 $ 3,165.00
9/15 Collections Received A-3 $ 7,125.00 $ 10,290.00
9/15 Collections Received A-4 $ 10,600.00 $ 20,890.00
9/15 Collections Received A-6 $ 2,750.00 $ 23,640.00
#103 Raw Materials
9/1 Beg. Bal. $ 3,350.00
9/2 Purchase RM $ 2,675.00 $ 6,025.00
#104 Supplies
9/1 Beg. Bal. $ 920.00
9/4 Purchase Supplies $ 780.00 $ 1,700.00
9/4 Supplies Used $ 590.00 $ 1,110.00
#106 Accounts Receivable
9/1 Beg. Bal. $ 20,475.00
9/15 Collections Received A-3 $ 7,125.00 $ 13,350.00
9/15 Collections Received A-4 $ 10,600.00 $ 2,750.00
9/15 Collections Received A-6 $ 2,750.00 $ -
#110 WIP Control
9/1 Beg. Bal. $ 7,200.00
9/10 Labor Incurred $ 4,330.00 $ 11,530.00
#112 Finished Goods
#401 Sales
#501 Gen. & AdminExp.
9/12 G&A Exp. $ 3,420.00 $ 3,420.00
#502 MOH Control
9/4 Supplies Used $ 590.00 $ 590.00
9/10 Labor Incurred $ 2,520.00 $ 3,110.00
#503 MOH Allocated
#505 CGS

I need to know if what I have is correct so far and where I'mheaded next. Is COGS going to be a debit of 10040? MOH All. creditof 2165?

Uncorrected Misstatements and Performance Materiality. AaronRivers, CPA, is auditing the financial statements of ChargerCompany, a client for the past five years. During past audits ofCharger, Rivers identified some immaterial misstatements (most ofwhich relate to isolated matters and do not have commoncharacteristics). A summary of these misstatements follows. (Toillustrate, in 2012, the misstatements would have reduced netincome by $13,200 if corrected) Year Effect on Net Income Effect onAssets Effect on Liabilities Effect on Equity 2012 ($13,200)($20,000) ($6,800) ($13,200) 2013 5,000 12,000 7,000 5,000 2014(9,250) (11,000) (1,750) (9,250) 2015 (2,000) (5,500) (3,500)(2,000) 2016 1,000 1,000 0 1,000 During the most recent audit,Rivers concluded that sales totaling $11,000 were recognized as ofDecember 31, 2017, that did not meet the criteria for recognitionuntil 2018. When Rivers discussed these sales with Chris Turner,Charger Company's chief financial officer, Turner asked Riversabout the performance materiality level used in the audit, whichwas $25,000. Upon learning of this, Turner remarked, "Then there'sno need to worry . . . it's not a material amount. Why should webother with this item?" Required: a. How does the misstatementidentified in 2017 affect net income, assets, liabilities, andequity in 2017? (Assume a 35 percent tax rate for Charger.) b.Comment upon Turner's remark to Rivers. Is Turner's reasoningcorrect? c. Upon doing some research, Rivers learned of therollover method and iron curtain method for evaluating theperformance materiality of misstatements. Briefly define each ofthese methods. d. How would Rivers evaluate the performancemateriality of the $11,000 sales cutoff error in 2017 under therollover method and iron curtain method? e. Based on your responseto part (d), what adjustments (if any) would Rivers propose toCharger Company's financial statements under the rollover methodand iron curtain method? ? Subsequent Events, SubsequentlyDiscovered Facts, and Omitted Procedures. Jay Ralph completed theDecember 31, 2017, audit of Raider Company on February 3, 2018;Raider's financial statements and Ralph's reports on Raider'sfinancial statements and internal control over financial reportingwere released on February 12, 2018. During April 2018, Ralph's firmconducted a quality review over selected audits that had beencompleted during the most recent year, and the audit of RaiderCompany was randomly selected for review. The reviewer identifiedthe following matters that Ralph had not addressed during the auditof Raider: 1. On February 9, 2018, Ralph learned of the followingevents during his post-audit meeting with Raider's chief operatingofficer. a. A class-action lawsuit was brought against RaiderCompany by some of its former employees for workplacediscrimination. An attorney on behalf of a class of employees filedthe lawsuit on January 10, 2018. The letter from Raider's attorneysdid not identify this lawsuit. b. One of Raider's major customersis experiencing significant financial difficulties; this customer'saccount receivable balance on December 31, 2017, was $1.2 million,which represented 2 percent of Raider's total accounts receivableon that date. 2. Because of an important deadline for submittingthe financial statements to lenders for evaluation, Raider did notmodify its financial statements for the preceding events despitethe fact that they were material. Raider's justification was thatbecause the events occurred after the date of the financialstatements, they were not required to be disclosed in the financialstatements. Ralph acquiesced to Raider's wishes and did not modifythe report on Raider's financial statements. 3. On March 16, 2018,Ralph initially learned of the following events affecting RaiderCompany, neither of which was disclosed in Raider's financialstatements: a. Raider Company declared a significant dividendpayable to its shareholders. This dividend was declared on March14, 2018, to be paid to Raider's shareholders of record on May 16,2018. b. Raider Company activated a portion of its line of crediton February l, 2018, by borrowing $2.5 million. This additionalobligation increased Raider Company's long¬-term liabilities by 10percent. 4. Reviewing Ralph's audit documentation, it does notappear that any tests were con­ ducted to evaluate the need forimpairment of the carrying value of Raider Company's property,plant, and equipment. Required: For each of the preceding items,describe what actions Ralph should take after the firm's qualityreview identified these issues.

1. Jeremy earned $260,000 in salary and $9,000 in interest income during the year. Jeremy has two qualifying dependent children who live with him. He qualifies to file as head of household and has $20,500 in itemized deductions. Neither of his dependents qualifies for the child tax credit. (use the tax rate schedules.). (Do not round intermediate calculations. Round "Income tax liability" to 2 decimal places.)

a. Use the 2017 tax rate schedules to determine Jeremy’s taxes due.

Description Amount
(1) Gross income ?
(2) For AGI deductions ?
(3) Adjusted gross income $0
(4) Standard deduction ?
(5) Itemized deductions ?
(6) ? ?
(7) Personal and dependency exemptions ?
(8) Taxable income $0
Income tax liability ?

2. b. Assume that in addition to the original facts, Jeremy has a long-term capital gain of $12,500. What is Jeremy’s tax liability including the tax on the capital gain?

Description Amount
(1) Gross income ?
(2) For AGI deductions ?
(3) Adjusted gross income $0
(4) Standard deduction ?
(5) Itemized deductions ?
(6) ? ?
(7) Personal and dependency exemptions ?
(8) Taxable income $0
Income tax liability ?

3. c. Assume the original facts except that Jeremy had only $3,000 in itemized deductions. What is Jeremy’s total income tax liability?

Description Amount
(1) Gross income ?
(2) For AGI deductions ?
(3) Adjusted gross income $0
(4) Standard deduction ?
(5) Itemized deductions ?
(6) ? ?
(7) Personal and dependency exemptions ?
(8) Taxable income $0
Income tax liability ?

4. Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their relationship was strained and Jasper insisted on filing a separate tax return. In year 4, the couple divorced. Both Jasper and Crewella filed single tax returns in year 4. In year 5, the IRS audited the couple’s joint year 2 tax return and each spouse’s separate year 3 tax returns. The IRS determined that the year 2 joint return and Crewella’s separate year 3 tax return understated Crewella’s self-employment income, causing the joint return year 2 tax liability to be understated by $13,300 and Crewella’s year 3 separate return tax liability to be understated by $6,700. The IRS also assessed penalties and interest on both of these tax returns. Try as it might, the IRS has not been able to locate Crewella, but they have been able to find Jasper. (Leave no cells blank - be certain to enter "0" wherever required.)

a. What amount of tax can the IRS require Jasper to pay for the Dahvill’s year 2 joint return?

Amount of tax: ?

5. Trudy and Ben file a joint return. Trudy’s reported income creates $200 of income tax and Ben’s reported income creates $180 of income tax. In addition to the reported income, Trudy has unreported income on which she owes $50 of income tax. How much of the $430 potential tax liability is Ben liable for?

a. $50

b. $180

c. $380

d. $430

6. James received $25,000 of compensation from his employer and he received $1,900 of interest from a municipal bond. What is the amount of James’s gross income?

a. $0

b. $1,900

c. $25,000

d. $26,900

7. Which of the following is a from AGI deduction?

a. moving expenses

b. rental and royalty expenses

c. business expenses for a self employed taxpayer

d. charitable contributions

8.Which of the following is not an itemized deduction?

a. personal casualty losses

b. medical expenses

c. personal property taxes for a personal use automobile

d. charitable contributions

e. none of the choices are correct

9. In May of year 1, David left his wife Juliette. While the couple was apart, they were not legally divorced. Juliette found herself having to financially provide for the couple’s only child (6 years of age) and to pay all the costs of maintaining the household. When Juliette filed her tax return for year 1, she filed a return separate from David. What is Juliette’s most favorable filing status for year 1?

a. head of household

b. single

c. married filing separately

d. qualifying widow

10. Caroline and her husband Chris got divorced in May of this year. During the year, Caroline provided all the support for herself and her 23-year-old child Hans (not a full-time student) who lived in the same home as Caroline for the entire year. Hans earned $29,000 this year. What is the Caroline’s most favorable filing status for the year?

a. head of household

b. married filing separately

c. surviving spouse single

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