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3 years ago

Income Statement, Direct and Indirect Cost Concepts, Service Company

Business

1 answer:

Fofino [41]3 years ago

8 0

Answer:

Send It Packing

1. The cost of materials used for packaging and mailing services during May is $11,550.

2. The prime cost for May is $51,170 (direct materials and labor and direct overhead)

3. The conversion cost for May is $43,700 (labor and overhead)

4. The total cost of services for May is $55,250

5. Income Statement for the month of May

Service Revenues $102,100

Cost of services:

Cost of materials used $11,550

Cost direct labor used 25,570

Overhead incurred 18,130 $55,250

Gross profit $46,850

Franchise fee $5,105

Advertising expense 2,750

Administrative costs 3,650 $11,505

Net income $35,345

6. The overhead incurred has $14,050 direct and $4,080 indirect costs. The direct cost was paid to the courier companies for delivery services. The indirect costs were incurred for rent, utilities, and insurance.

Explanation:

a) Data and Calculations:

Beginning inventory of materials = $1,050

Purchases of materials = $11,450

Materials available for use = $12,500

Ending inventory of materials = $950

Cost of materials used = $11,550

Cost direct labor used = 25,570

Overhead incurred = 18,130

Franchise fee (5% of $102,100) 5,105

Advertising expense = 2,750

Administrative costs 3,650

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At May 1, 2020, Sheridan Company had beginning inventory consisting of 190 units with a unit cost of $7.30. During May, the comp

s2008m [1.1K]

Answer:

$6.71 per unit

Explanation:

The computation of average cost method is given below:-

Beginning Inventory

= 190 units × $7.30

= $1,387

Purchases

= 720 units × $7.30

= $5,256

Purchases

= 590 units × $5.80

= 3,422

Total units = 1,500

Total cost = $10,065

So, average cost per unit

Total cost ÷ Total number of units

= $10,065 ÷ 1,500

= $6.71 per unit

Therefore, to calculate the average cost per unit for May we simply divide 10,065 from 1,500

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4 years ago

Puff Co. acquired 40% of Straw, Inc.'s voting common stock on January 2, Year 1, for $400,000. The carrying amount of Straw's ne

Sonbull [250]

Answer:

Investment revenue = $52,000

Explanation:

Since Puff uses the equity method, the original journal entry to record the purchase of 40% of the shares should have been:

Dr Investment in Straw 400,000

Cr Cash 400,000

After one year, Straw earned $150,000 in net income, but it also had equipment with a fair market value higher than carrying value also depreciable by $100,000. So the net income must be adjusted = $150,000 - ($100,000 x 20%) = $130,000. The journal entry to record the adjusted income should be ($130,000 x 40%):

Dr Investment in Straw 52,000

Cr Investment revenue 52,000

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3 years ago

An unexpected frost in the orange groves of California would causea. a decrease in the supply of orange juice, increasing the eq

rodikova [14]

Answer:

The correct answer is option a.

Explanation:

Unfavorable weather in the orange groves of California will adversely affect the production of oranges. This will cause a reduction in the supply of oranges. As a result, the price of oranges will decline.

Now, these oranges are used as input in making orange juice. The increase in input price will lead to an increase in the cost of production. This will further lead to a decrease in the supply of orange juice. Consequently, the equilibrium price of orange juice will increase.

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4 years ago

On January 1, 2021, Essence Communications issued $800,000 of its 10-year, 8% bonds for $700,302. The bonds were priced to yield

aev [14]

Answer:

before decrease in rates: 706,483

after rate decrease: 751,360

interest expense 35,015.12

discount on BP 3,015.12

cash 32,000

--bonds first interest payment--

interest expense 35,165.87

discount on BP 3,165.87

cash 32,000

--second interest payment--

unrealized loss 44,877

discount on bonds payable 44,877

--to adjust bonds valuation--

Explanation:

First, we solve for the present value of the bond to get the proceeds from the issuance.

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

C 32,000

time 20

rate 0.05

$32000 \times \frac{1-(1+0.05)^{-20} }{0.05} = PV\\$

PV $398,790.7310

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity 800,000.00

time 20.00

rate 0.05

$\frac{800000}{(1 + 0.05)^{20} } = PV$

PV 301,511.59

PV c $398,790.7310

PV m $301,511.5863

Total $700,302.3173

Now, we do the table for the first year:

# / Principal/ paid / interest / Amort/End. P

1 700,302 32000 35015.12 3015.12 703,317

2 703,317 32000 35165.87 3165.87 706,483

Now, we have to redo the calculations for the bonds market value considering a decrease in the market rate to 9%

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

C 32,000

time 18

rate 0.045

$32000 \times \frac{1-(1+0.045)^{-18} }{0.045} = PV\\$

PV $389,119.7377

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity 800,000.00

time 18.00

rate 0.045

$\frac{800000}{(1 + 0.045)^{18} } = PV$

PV 362,240.30

PV c $389,119.7377

PV m $362,240.2951

Total $751,360.0328

We adjust for: 751,360 - 706,483 = 44,877

This will be an unrealized loss as the liability increases but, will be realized on the redemption of the bonds or at the end of the bonds' life.

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3 years ago

what marginal costs and benefits might a tour boat operator consider when deciding whether to purchase a new boat?

VladimirAG [237]

Answer

The tour boat operator needs to decide whether to buy a new boat to increase the income obtained per day or increase the number of trips made per day and avoid buying a new boat.

Explanation

Marginal cost measures the change in cost over the change in quantity. Marginal benefit is a measurement of change in benefits over change in quantity. The boat operator is going to buy a new boat. Will the marginal cost (how the boat cost) be greater than the marginal benefit( income from increased number of boats).

7 0

3 years ago