Berry Farm produces organic tomatoes and strawberries. In June 2021, it transported 115 boxes of strawberries with a price of $21 per box to the Bay Farmers' Market. Berry Farm paid an upfront fee of $160 to present its products at the market for one week, and the market earns a 25% profit margin on each item sold, but Berry Farm is responsible for any items that remain unsold at the end of the week. Required: The market was able to sell 75 boxes of strawberries to customers. How much revenue should Berry Farm recognize with respect to this transaction?

Berry Farm produces organic tomatoes and strawberries. In June 2021, it transported 115 boxes of strawberries with a price of $21 per box to the Bay Farmers' Market. Berry Farm paid an upfront fee of $160 to present its products at the market for one week, and the market earns a 25% profit margin on each item sold, but Berry Farm is responsible for any items that remain unsold at the end of the week. Required: The market was able to sell 75 boxes of strawberries to customers. How much revenue should Berry Farm recognize with respect to this transaction?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 12EB: Able Transport operates a tour bus that they lease with terms that involve a fixed fee each month...

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Kaune Food Products Company manufactures canned mixed nuts with an average manufacturing cost of 52 per case (a case contains 24 cans of nuts). Kaune sold 150,000 cases last year to the following three classes of customer: The supermarkets require special labeling on each can costing 0.04 per can. They order through electronic data interchange (EDI), which costs Kaune about 61,000 annually in operating expenses and depreciation. Kaune delivers the nuts to the stores and stocks them on the shelves. This distribution costs 45,000 per year. The small grocers order in smaller lots that require special picking and packing in the factory; the special handling adds 25 to the cost of each case sold. Sales commissions to the independent jobbers who sell Kaune products to the grocers average 8 percent of sales. Bad debts expense amounts to 9 percent of sales. Convenience stores also require special handling that costs 30 per case. In addition, Kaune is required to co-pay advertising costs with the convenience stores at a cost of 15,000 per year. Frequent stops are made to each convenience store by Kaune delivery trucks at a cost of 30,000 per year. Required: 1. Calculate the total cost per case for each of the three customer classes. (Round unit costs to four significant digits.) 2. Using the costs from Requirement 1, calculate the profit per case per customer class. Does the cost analysis support the charging of different prices? Why or why not? 3. What if Kaune charged the average price per case to all customer classes? How would that affect the profit percentages?
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.)
Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the annual ordering cost. 2. Compute the annual carrying cost. 3. Compute the cost of Ottiss current inventory policy. Is this the minimum cost? Why or why not?
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?
Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 16 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40 percent of next months sales are in the finished goods inventory. Ingles also purchases sufficient materials to ensure that materials inventory is 60 percent of the following months scheduled production. Ingless sales budget in units for the next quarter is as follows: Ingless ending inventories in units for July 31 are as follows: Required: 1. Calculate the number of tables to be produced during August. 2. Disregarding your response to Requirement 1, assume the required production units for August and September are 2,100 and 1,900, respectively, and the July 31 materials inventory is 4,000 units. Compute the number of table legs to be purchased in August. 3. Assume that Ingles Corporation will produce 2,340 units in September. How many employees will be required for the Assembly Department in September? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.) (CMA adapted)
NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Based solely on financial factors, explain why NoFat should accept or reject PUs special sales offer.
NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Assume for this question that NoFat rejected PUs special sales offer because the 2.20 price suggested by PU was too low. In response to the rejection, PU asked NoFat to determine the price at which it would be willing to accept the special sales offer. For its regular sales, NoFat sets prices by marking up variable costs by 10%. If Allyson decides to use NoFats 10% markup pricing method to set the price for PUs special sales offer, a. Calculate the price that NoFat would charge PU for each pound of olestra. b. Calculate the relevant profit that NoFat would earn if it set the special sales price by using its markup pricing method. (Hint: Use the estimate of relevant costs that you calculated in response to Requirement 1b.) c. Explain why NoFat should accept or reject the special sales offer if it uses its markup pricing method to set the special sales price.
NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Assume for this question that Allysons relevant analysis reveals that NoFat would earn a positive relevant profit of 10,000 from the special sale (i.e., the special sales alternative). However, after conducting this traditional, short-term relevant analysis, Allyson wonders whether it might be more profitable over the long term to downsize the company by reducing its manufacturing capacity (i.e., its plant machinery and plant facility). She is aware that downsizing requires a multiyear time horizon because companies usually cannot increase or decrease fixed plant assets every year. Therefore, Allyson has decided to use a 5-year time horizon in her long-term decision analysis. She has identified the following information regarding capacity downsizing (i.e., the downsizing alternative): The plant facility consists of several buildings. If it chooses to downsize its capacity, NoFat can immediately sell one of the buildings to an adjacent business for 30,000. If it chooses to downsize its capacity, NoFats annual lease cost for plant machinery will decrease to 9,000. Therefore, Allyson must choose between these two alternatives: Accept the special sales offer each year and earn a 10,000 relevant profit for each of the next 5 years or reject the special sales offer and downsize as described above. Assume that NoFat pays for all costs with cash. Also, assume a 10% discount rate, a 5-year time horizon, and all cash flows occur at the end of the year. Using an NPV approach to discount future cash flows to present value, a. Calculate the NPV of accepting the special sale with the assumed positive relevant profit of 10,000 per year (i.e., the special sales alternative). b. Calculate the NPV of downsizing capacity as previously described (i.e., the downsizing alternative). c. Based on the NPV of Requirements 5a and 5b, identify and explain which of these two alternatives is best for NoFat to pursue in the long term.
Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of 25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process 6,500 orders per year. The cost of each PC system is 1,100 per year. In addition to the salaries, Elliott spends 27,560 for forms, postage, and other supplies (assuming 26,000 purchase orders are processed). During the year, 25,350 orders were processed. Required: 1. Classify the resources associated with purchasing as (1) flexible or (2) committed. 2. Compute the total activity availability, and break this into activity usage and unused activity. 3. Calculate the total cost of resources supplied (activity cost), and break this into the cost of activity used and the cost of unused activity. 4. (a) Suppose that a large special order will cause an additional 500 purchase orders. What purchasing costs are relevant? By how much will purchasing costs increase if the order is accepted? (b) Suppose that the special order causes 700 additional purchase orders. How will your answer to (a) change?
Berry Farm produces organic tomatoes and strawberries. In June 2024, it transported 125 boxes of strawberries with a price of $24 per box to the Bay Farmers’ Market. Berry Farm paid an upfront fee of $200 to present its products at the market for one week, and the market earns a 20% profit margin on each item sold, but Berry Farm is responsible for any items that remain unsold at the end of the week. Required: The market was able to sell 80 boxes of strawberries to customers. How much revenue should Berry Farm recognize with respect to this transaction?
Caffeine trades whenever the Mall is open and during 2020 consumed on average 76 vacuum packed containers of coffee every 14 days. Each container costs £15.75, with an annual holding cost per container of £9.00 and an order processing/delivery cost of £38 per order. Orders are placed on an “as required” basis and the coffee bar occasionally runs out of supplies. In 2020 Caffeine’s Finance Director says that they spent a total of £36,645 on coffee supplies inclusive of delivery and holding costs. Caffeine’s Food and Beverage Manager, Simba Oluwatudimu, wants to open a second outlet within the Centre, which is expected to double the volume of coffee required, and recognises that there is a need for a more structured way of purchasing coffee and also an opportunity to seek volume discounts from Weald Tea and Coffee with higher purchase volumes. Initial negotiations with the coffee supplier has resulted in an offer to supply the Caffeine blend at £14.00 per container for 2021,…
A local electronic repair shop uses 15,000 units of mobile batteries each year. It costs RO 30 to place and receive an order. It cost of material is RO 15 per unit and carrying cost is 24% of the cost per unit. Calculate the Economic Order Quantity for the shop, number of orders and total inventory costs. 2. Beta Merchandising Company purchases mobiles directly from manufacturers and sells it to small retailers. The following transactions occurred during 2020: March, 21st: 80 mobiles on hand @ RO 40 each. May, 14th: 120 mobiles purchased @ RO 50 each. July, 10th: 80 mobiles purchased @ RO 60 each. September 16th: 50 mobiles purchased @ 80 each Alpha merchandising sold 300 mobiles during 2020 Required: Compute the Cost of Inventory sold during 2020 and the value of closing inventory under the following cost inventory methods. (a). First in, first out (FIFO) (b). Last in, first out (LIFO) (c) Average cost method