Final Case Study (Managerial Accounting)

Management should note that the level of activity was above what had been planned for the month. This led to an expected increase in profits of $1,100. However, the individual items on the report should not receive much management attention. The favorable variance for revenue and the unfavorable variances for expenses are entirely caused by the increase in activity.

* The variances are due to the Mile High Cycle company not forecasting for increased production. The company budgeted for the production of 10,000 cycles but the actual production was 10,800 units. When the company increased production, the production efficiency decreased. The company had to use or rework parts that added extra cost to the expenses; the reworked parts added $25,000 of extra expenses to the wheel assembly production and $45,000 to the final assembly process. The material,

The focus of EEC’s investment of the purchasing of the supplier is to cut down on

Bubba, I am writing this memo so that you can further understand the problem that you are encountering. You want to receive further funding in order for your restaurant to grow and expand across the country. The issue that the bank is having with you and the restaurant is that you are not supplying sufficient evidence for them to decide whether or not they want to grant the loan to you to expand your restaurant. Before the bank can decide on your loan, they require financial statements documenting the revenues, profits, and assets of your restaurant. These statements show the bank if you possess enough funds in order to pay back the loan but they also use it to measure the amount of potential for the restaurant because whenever a bank grants a loan to a business or business owner, they are making an investment in that individual or business.

(TCO G) – (Ignore income taxes in this problem.) Tennessee Co. is considering the production of an exterior paint that will require the purchase of new mixing machinery. The machinery will cost $700,000, is expected to have a useful life of 12 years, and is expected to have a salvage value of $100,000 at the end of 12 years. The machinery will also need a $40,000 overhaul at the

a service department’s costs have been allocated, costs are not reallocated back to it under

The Report describes a proposal for the group of 20 of doctors with regard to the creating a hospital. Due to the 500,000 population of the city $100 million dollars would actually be a great start. Because the facility would be located 30 miles from the downtown area it would allow the facility to attract patients without being crowded. On the downside this affects its financial position and market condition because of distance. A lot of patients are not able to get to the doctor due to the high gas prices. Using various strategies, such as looking into ways to connect with public transportation to deal with this problem and gain

The purpose and goal behind researching the income statements and balance sheets then calculating the ratios is mainly to help creditors and investors make their decisions easier and faster. The way we are presenting our research results helps the investors and creditors make the decision which of the companies is more worthy to invest in or loan money too without taking a risk, and lowering the chances that they will be disappointed by the results of their investment, or in the creditors case they can be almost certain the company they are loaning the money to would be worthy enough of paying the money back without a hassle.

Peter’s Peripherals assembles multimedia upgrade kits --- sets of components for adding sound and video to desktop computers. The demand for their kits for the next four quarters is estimated in the table below. Unit manufacturing cost for each kit is $160. Holding costs on each kit is $80 per quarter. Any kit that must be delivered late is assessed a backorder cost of $120. Each worker is capable of finishing 10 kits per quarter. If the company chooses to vary work force levels, it will incur costs of $400 for each additional worker; $600 for each termination. The company currently has 28 employees.

The Baltic Company is considering the purchase of a new machine tool to replace an obsolete one. The machine being used for the operation has a tax-basis book 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 more 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 percent on its investment after taxes (14 percent is the firm 's 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.

Natalie estimates that all of her baking equipment will have a useful life of 5 years or 60 months and no salvage value. (Assume Natalie decides to record a full month’s worth of depreciation, regardless of when the equipment was obtained by the business.)

Each week there are 300 pounds of material 1; 400 pounds of material 2; and 200 hours of labor. The output of product A should not be more than one-half of the total number of units produced. Moreover, there is a standing order of 10 units of product C each week.

Company operates in the Industrial Sector – Services, and Industry – Regional Airlines. According to the Standard Industrial Classification System (SIC), company belongs to the industry group 451: Air

Question 1: The situation in this case study revolves around Sally, a member of the Board of Sally Susie's Donut Shop, Inc. (SSDS). SSDS uses an accrual method of accounting and over the past three years has seen volatile sales. Sally is unhappy with her previous tax advisor and wants new advice. Our task is to outline a preliminary interview with Sally to ensure that we ask the right questions.

For instance, the concept of cost estimation which assists in estimating future expenditure as the expenditure depends on the cost of the respective activities can be applied in the setting of a budget which is simply an estimate and schedule of all costs required to be assigned to an activity. One can make an estimation of the resources required for an activity by applying the cost estimation techniques. Since there are limiting factors to each activity such as scarcity of resources for activities, the concept of constraints can be applied together with the concept of cost volume profit analysis to ensure that maximum benefits are driven from the scarce resources and the number of activities that are available. This facilitates the allocation of resources that most equitable and profitable. The theory of constraints is also applicable in the process of setting up budgets. In setting up budget one considers the amount of resources that are available and cannot therefore set a budget plan that exceeds the amount of resources that are available. This implies that the budget is constrained by the amount of