Bella Pool Company sells prefabricated pools that cost $80,000 to customers for $144,000. The sales price includes an installation fee, which is valued at $20,000. The fair value of the pool is $128,000. The installation is considered a separate performance obligation and is expected to take 3 months to
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- Markson and Sons leases a copy machine with terms that include a fixed fee each month of $500 plus a charge for each copy made. The company uses the high-low method to analyze costs. If Markson paid $360 for 5,000 copies and $280 for 3,000 copies, how much would Markson pay if it made 7,500 copies?On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?Able Transport operates a tour bus that they lease with terms that involve a fixed fee each month plus a charge for each mile driven. Able Transport drove the bus 7,000 miles and paid a total of $1,360 in June. In October. Able Transport paid $1,280 for the 5,000 miles driven. If Able Transport uses the high-low method to analyze costs, how much would Able Transport pay in December, if they drove 6,000 miles?
- Self-Construction Olson Machine Company manufactures small and large milling machines. Selling prices of these machines range from 35,000 to 200,000. During the 5-month period from August 1, 2019, through December 31, 2019, Olson manufactured a milling machine for its own use. This machine was built as part of the regular production activities. The project required a large amount of time front planning and supervisory personnel, as well as that of some of the companys officers, because it was a more sophisticated type of machine than the regular production models. Throughout the 5-month period, Olson charged all costs directly associated with the construction of the machine to a special account entitled Asset Construction Account. An analysis of the charges to this account as of December 31, 2019, follows: Olson allocates factory overhead to normal production as a percent of direct labor dollars as follows: Olson uses a flat rate of 40% of direct labor dollars to allocate general and administrative overhead. During the machine testing period, a cutter head malfunctioned and did extensive damage to the machine table and one cutter housing. This damage was not anticipated and was the result of an error in the assembly operation. Although no additional raw materials were needed to make the machine operational after the accident, the following labor for rework was required: Olson has included all these labor charges in the asset construction account. In addition, it included in the account the repairs and maintenance charges of 1,340 that it incurred as a result of the malfunction. Required: 1. Compute, consistent with GAAP and common practice, the amount that Olson should capitalize for the milling machine as of December 31, 2019, when it declares the machine operational. 2. Next Level Identify the costs you included in Requirement 1 for which there are acceptable alternative procedures. Describe the alternative procedure(s) in each case.Marcotti Cupcakes bakes and sells a basic cupcake for $1.25. The cost of producing 600,000 cupcakes in the prior year was: At the start of the current year, Marcotti received a special order for 15,000 cupcakes to be sold for $1.10 per cupcake. To complete the order, the company must incur an additional $700 in total fixed costs to lease a special machine that will stamp the cupcakes with the customers logo. This order will not affect any of Marcottis other operations and it has excess capacity to fulfill the contract. Should the company accept the special order? (Show your work.)Utica Machinery Company purchases an asset for 1,200,000. After the machine has been used for 25,000 hours, the company expects to sell the asset for 150,000. What is the depreciation rate per hour based on activity?
- Cinnamon Depot bakes and sells cinnamon rolls for $1.75 each. The cost of producing 500,000 rolls in the prior year was: At the start of the current year, Cinnamon Depot received a special order for 18,000 rolls to be sold for $1.50 per roll. The company estimates it will incur an additional $1,000 in total fixed costs in order to lease a special machine that forms the rolls in the shape of a heart per the customers request. This order will not affect any of its other operations. Should the company accept the special order? (Show your work.)Steele Corp. purchases equipment for $30,000. Regarding the purchase, Steele paid shipping of $1,200, paid installation fees of $2,750, pays annual maintenance cost of $250, and received a 10% discount on sales price. Determine the acquisition cost of the equipment.Yankee Corp. agrees to provide Albany Company 24 months of coaching services. The contract sets the price at 4,000 per month, which is the normal stand-alone price that Yankee charges. After 16 months, Yankee and Albany agree to modify the contract. Yankee reduces the fee for the 8 remaining months to 3,800 per month, and Albany agrees to a 24-month extension at a cost of 3,600 per month. At the time that the contract is modified, Yankee is charging other customers 3,750 per month for the coaching service. Should Yankee and Albany treat the modification as a separate contract?
- Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)Caramel Spa Company sells prefabricated pools that cost $80,000 to customers for $144,000. The sales price includes an installation fee, which is valued at $20,000. The fair value of the pool is $128,000. The installation is considered a seperate performance obligation and is expected to take 3 months to complete. The transaction price allocated to the pool and the installation isBella Pool Company sells prefabricated pools that cost P100,000 to customers for P180,000. The sales price includes an installation fee, which is valued at P25,000. The fair value of the pool is P160,000. The installation is considered a separate performance obligation and is expected to take 3months to complete. The transaction price is allocated to the pool and the installation is:a. P155,676 and P24,324 respectivelyb. P160,000 and P25,000 respectively Show complete solution