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ACCT 301 Lecture : chapter 13.docx

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bronzealpaca588
25 Feb 2013
School
University of Calgary
Department
Accounting
Course
ACCT 301
Professor
All

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Document Summary

The first article in this site is basically about the definition and importance of accountancy, its purpose and its role. We will now go further to discuss what the actual accounts look like and what they are based on. But before we do so, one must realize the distinction between the preparation of the final accounts and the bookkeeping process. The bookkeeping process is the steppingstone of accounting, as it is the process by which the transactions are recorded in the business, and the preparation of the final accounts begins from there. Therefore one must learn the mechanics of bookkeeping first, and this is the aim of the following article. Okay, suppose we are required to set up a business, the first thing that we need to do is to take a loan from the bank, or to save enough money before we actually buy any premises or whatever.

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Related Questions

Upon graduation from MegaState University, you and your roommatedecide to start your respective careers in accounting and salmonfishing in Remote, Alaska. Your career as a CPA in Remote is goingwell, as is your roommate's job as a commercial fisher. After oneyear in Remote, he approaches you with a businessopportunity.
As we are well aware, the video rental business has yet to reachRemote, and the nearest rental facility is 250 miles away. We eachput up our first year's savings of $5,000 and file for articles ofincorporation with the State of Alaska to do business as RemoteVideo World. In return for our investment of $5,000, we will eachreceive equal shares of capital stock in the corporation. Then wego to the Corner National Bank and apply for a $10,000 loan. Wetake the total cash of $20,000 we have now raised and buy 2,000videos at $10 each from a mail-order supplier. We rent the moviesfor $3 per title and sell monthly memberships for $25, allowing amember to check out an unlimited number of movies during the month.Individual rentals would be a cash-and-carry business, but we wouldgive customers until the 10th of the following month to pay for amonthly membership. My most conservative estimate is that duringthe first month alone, we will rent 800 movies and sell 200memberships. As far as I see it, we will have only two expenses.First, we will hire two high school students to run the store for30 hours each per week and pay them $5 per hour. Second, thelandlord of a vacant store in town will rent us space in thebuilding for $1,000 per month.

Assume that the bank is willing to make the $10,000 loan. Would yoube willing to join your roommate in this business? Explain yourresponse. Also, indicate any information other than that he hasprovided that you would like to have before making a finaldecision.

Hi I need help on this case study analysis below? Please dontpartially answer! I need the full ansewrs, thank you.

Five Star Tools is a small family-owned firm that manufacturesdiamond-coated cutting tools (chisels and saws) used by jewelers.Production involves three major processes. First, steel blanks(tools without the diamond coating) are cut to size. Second, theblanks are sent to a chemical bath that prepares the tools for thecoating process. In the third major process, the blanks are coatedwith diamond chips in a proprietary process that simultaneouslycoats and sharpens the blade of each tool. Following the coatingprocess, each tool is inspected and defects are repaired orscrapped. In the past two years, the company has experiencedsignificant growth and growing pains. The company is at capacity inthe coating and sharpening process, which requires highly skilledworkers and expensive equipment. Because of the bottleneck createdby this operation, the company has missed deadlines on orders fromseveral important customers.

Maxfield Turner, the son of Frederick Turner, founder of FiveStar Tools, is the president of the company. Over lunch he andBetty Spence, vice president of marketing, discussed the situation.“We’ve got to do something”, Betty began” If we don’tthink we can meet a customers order deadline, we should turn downthe business”. We can’t simply keep customers waiting for productor we’ll develop a reputation as an unreliable supplier. You knowas well as I do that this would be devastating to our business.

“I think there may be another approach, Betty,replied Max.” Someof our products are exceptionally profitable. Maybe we shouldconcentrate on them and drop some of the less profitable ones. Thatwould free up our production resources. Or maybe we can figure outa way to run more product through the coating process. If we couldjust loosen that constraint, I know we could improve our responsetime and profitability. I’ll tell you what I’ll do. I’ll get theaccounting department to prepare an analysis of productprofitability. That should help us figure out which products toconcentrate on. And I’ll get the production people thinking abouthow to free up some time in coating.” We’ll meet early next monthand try to get a handle on how to deal with our productionconstraints.”

(Case pertains to theory of constraints by Eli Goldratt)

A. What steps can be taken to loosen the constraint incoating and sharpening?

B. Consider Model C210 and Model D400 chisels. Whichproduct should be emphasized if the constraint in coating andsharpening cannot be loosened?

C. Focusing only on the Model C210 chisel and the modelD400 chisel, what would be the benefit to the firm of gaining onemore hour of production time in coating andsharpening?

D. In coating and sharpening, the operator begins by inspectingitems that have arrived from the chemical bath. If rough edges orblemishes are detected, the operator will smooth and/or buff theitems before actual coating or sharpening takes place. (Note thatthis process is in addition to the inspection that takes place at aseparate inspection station following coating and sharpening.)

In order to save valuable time in coating and sharpening,management is considering forming a separate inspection stationbefore the coating and sharpening process, that will be staffed onan as needed basis by existing employee from a department havingexcess capacity, This will free up 240 hours in coating andsharpening (average 5 min per hour x 8 hours daily x 365 daysannual / 60) Average Contribution margin per hour in coating andsharpening is $850. Based on this information, estimate theincremental profit per year associated with adding the newinspection station

Ch7 Case 2 Five Star Tools

Model C210 Chisel

Model D400 Chisel

Selling price

$500

$850

Less Variable Cost :

Direct Material

$150

$180

Direct Labor

$85

$180

Variable OH

$15

$60

Contribution Margin

$250

$430

Less Allocated Fixed cost

$185

$230

Profit per unit

$65

$200

Time in coating and sharpening to produce 1 unit

0.20

0.80

Feasibility Study and Business Plan Development:

One vehicle for acquiring an understanding of the entrepreneurial process is through the preparation of a start-up business plan. The focus of this experience is to select a concept and create a complete and persuasive business plan. Writing a business plan requires you to ask tough questions about the nature of the business.

What are the benefits of your product or service?

What is the target market and how will you penetrate it?

How will you develop and produce the product or service?

What is required from the management team?

What are the risks of the venture and what can you do to reduce them?

What are the financial implications of the plan?

What resources, including funding, are required to successfully create the business plan?

To understand the related entrepreneurial process, students will take a hands-on approach. Students will decide upon a concept and develop a feasibility study after being approved. Based on that work, you will develop a comprehensive business plan. In most cases, the primary objective of your business plan will be to receive funding if you want to become an entrepreneur. Your plan will be prepared in three phases and you will submit the plan as a written and soft document and present it to the class.

Phase 1: Concept Approval – The initial task is to select and propose a business idea to the instructor for approval. ( Project type is Beauty Salon ).

Phase 2: The Feasibility Plan – This experience begins with the creation of a feasibility plan. This will evolve into a business plan that will be a tool to assist you to put the concepts we have addressed in class in action. Resources will be provided to help you with the plan, including software that can assist you through the process. After you propose and select the type of business and begin the process of assessing its feasibility and potential, the objective is to make this a positive, obtainable, and valuable experience.

Phase 3: The Business Plan – The course is designed to provide resources to assist you throughout the development of the plan. This includes the opportunity to review previous plans. You can “approach” a mentor that will be an industry or subject matter expert to assist you with the planning process.

The Written Plan: The body of the written business plan should be no more than 25 pages including the executive summary and all financial statements. The business plan’s financial section will include a complete set of financial statements (income statement, balance sheet, cash flow) for the initial three to five years of the venture. An assumption list will accompany the statements. Detailed spreadsheets and appendices can follow the text; however, the total plan should not exceed 30 pages.

Plans must include an explanation of the offering to investors that indicate the investment required, expected ROI, deal structure, marketing plan, operations plan, and management team description. Potential exit or company sustainability strategies also must be included.

Business Plan Presentation: Strong written and oral skills greatly facilitate success in the business world. Those individuals that can effectively communicate their ideas will have an advantage over those that cannot.

( Will be Project type is Beauty Salon ). Use an assumption list the statements