On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows

ACCOUNTING

P3-5A On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows.

No. Debits No. Credits
101 Cash $4,880 154 Accumulated Depreciation $1,500
112 Accounts Receivable 3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Store Equipment 15,000 212 Salaries Payable 500
311 Common Stock 15,000
320 Retained Earnings 3,600
$25,400 $25,400
During September the following summary transactions were completed.
Sept. 8 Paid $1,400 for salaries due employees, of which $900 is for September.
10 Received $1,200 cash from customers on account.
12 Received $3,400 cash for services performed in September.
15 Purchased store equipment on account $3,000.
17 Purchased supplies on account $1,200.
20 Paid creditors $4,500 on account.
22 Paid September rent $500.
25 Paid salaries $1,250.
27 Performed services on account and billed customers for services provided $1,500.
29 Received $650 from customers for future service.
Adjustment data consist of:
1. Supplies on hand $1,200.
2. Accrued salaries payable $400.
3. Depreciation is $100 per month.
4. Unearned service revenue of $1,450 is earned.

Instructions
(a) Journalize the September transactions. (Your instructor may advise you to post to ledger accounts, that should be turned in as part of the problem.)
(b) Prepare a trial balance at September 30.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.

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Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies

Aunt Ethel's Fancy Cookie Company

Problem 1
Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies: Macaroon, Sugar, and Buttercream. The batch size for the cookies is limited to 1,000 cookies based on the size of the ovens and cookie molds owned by the company. Based on budgetary projections, the information listed below is available:
Macaroon Sugar Buttercream
Projected sales in units
500,000 800,000 600,000
PER UNIT data:
Selling price $0.80 $0.75 $0.60
Direct materials $0.20 $0.15 $0.14
Direct labor $0.04 $0.02 $0.02 Hours per 1000-unit batch:
Direct labor hours 2 1 1
Oven hours 1 1 1
Packaging hours 0.5 0.5 0.5
Total overhead costs and activity levels for the year are estimated as follows:
Activity Overhead costs Activity levels
Direct labor 2,400 hours
Oven $210,000 1,900 oven hours
Packaging $150,000 950 packaging hours $360,000
Questions: 1. Determine the activity-cost-driver rate for packaging costs (3 points).
2. Using the ABC system, for the sugar cookie, compute the estimated overhead costs per thousand cookies (3 points).
3. Using the ABC system, for the sugar cookie, compute the estimated operating profit per thousand cookies (3 points).
4. Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated overhead costs per thousand cookies (3 points).
5. Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated operating profit per thousand cookies (3 points).
6. Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why? (3 points).
Problem 2:
What is activity-based management and how can it be used to improve the profitability of a company? (12 points).

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The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity

ACCOUNTING

The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 45,000 machine- hours. In addition, capacity is 52,000 machine-hours and the actual activity for the year is 47,100 machine-hours. All of the manufacturing overhead is fixed and is $1,029,600 per year. For simplicity, it’s assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.

Required:
A. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.
B. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.

C. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.

D. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

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Comprehensive Problem 1 Kelly Consulting

ACCOUNTING

Comprehensive Problem 1 Kelly Consulting
Comprehensive Problem 1 Kelly Pitney

VERSIONS:

Accounting, 23rd Edition SOLUTION
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2010


Accounting, 24th Edition SOLUTION
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2012


For ACT101 and ACT300 SOLUTION
Kelly Pitney began her consulting business, Kelly Consulting, on April 1, 2008