ACC 206 NEW ASH Tutorial / Uoptutorial

ACC 206 ENTIRE COURSE(NEW)

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ACC 206 Week 1 Assignment Chapter One Problems

ACC 206 Week 1 DQ1 Cash Flows Information

ACC 206 Week 1 DQ2 Apple's Cash Flow

ACC 206 Week 2 Assignment Chapter Two and Three Problems

ACC 206 Week 2 DQ1 Stock Features

ACC 206 Week 2 DQ2 Role of Management Accounting

ACC 206 Week 2 Journal Institute of Management Accounting

ACC 206 Week 3 Assignment Chapter Four and Five Problems

ACC 206 Week 3 DQ1 Issues in Costing

ACC 206 Week 3 DQ2 CVP and the Airline Industry

ACC 206 Week 3 Journal Hershey Company

ACC 206 Week 4 Assignment Chapter Six and Seven Problems

ACC 206 Week 4 DQ1 Issues in Standard Costs and Budgeting

ACC 206 Week 4 DQ2 Flexible Budgets

ACC 206 Week 5 Assignment Chapter Eight Problems

ACC 206 Week 5 Assignment Final Paper

ACC 206 Week 5 DQ1 Long-term Decision Making

ACC 206 Week 5 DQ2 Responsibilities in Management Accounting

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ACC 206 WEEK 1 ASSIGNMENT CHAPTER ONE PROBLEMS(NEW)

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Ch 1 Critical Thinking Question 5:

Answer the following questions:

Why are noncash transactions, such as the exchange of common stock a building, included on a statement of cash flows? How are these noncash transactions disclosed?

Chapter 1 Exercise 1:

1. Classification of activities

Classify each of the following transactions as arising from an operating (O), investing (I), financing (F), or noncash investing/financing (N) activity.

a. ________ Received $80,000 from the sale of land.

b. ________ Received $3,200 from cash sales.

c. ________ Paid a $5,000 dividend.

d. ________ Purchased $8,800 of merchandise for cash.

e. ________ Received $100,000 from the issuance of common stock.

f. ________ Paid $1,200 of interest on a note payable.

g. ________ Acquired a new laser printer by paying $650.

h. ________ Acquired a $400,000 building by signing a $400,000 mortgage note.

Chapter 1 Exercise 4:

4. Overview of direct and indirect methods

Evaluate the comments that follow as being True or False. If the comment is false, briefly explain why.

a. Both the direct and indirect methods will produce the same cash flow from operating activities.

b. Depreciation expense is added back to net income when the indirect method is used.

c. One of the advantages of using the direct method rather than the indirect method is that larger cash flows from financing activities will be reported.

d. The cash paid to suppliers is normally disclosed on the statement of cash flows when the indirect method of statement preparation is employed.

e. The dollar change in the Merchandise Inventory account appears on the statement of cash flows only when the direct method of statement preparation is used.

Chapter 1 Exercise 6:

6. Equipment transaction and cash flow reporting

New equipment purchased during 20x4 totaled $280,000. The 20x4 income statement disclosed equipment depreciation expense of $41,000 and a $9,000 loss on the sale of equipment.

a. Determine the cost and accumulated depreciation of the equipment sold during 20X4.

b. Determine the selling price of the equipment sold.

c. Show how the sale of equipment would appear on a statement of cash flows prepared by using the indirect method.

Chapter 1 Problem 3:

3. Cash flow information: Direct and indirect methods

The comparative year-end balance sheets of Sign Graphics, Inc., revealed the following activity in the company's current accounts:

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ACC 206 WEEK 2 ASSIGNMENT CHAPTER TWO AND THREE PROBLEMS(NEW)

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Chapter Two and Three Problems

Please complete the following 7 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

Chapter 2 Exercise 1

1. Issuance of stock

Prepare journal entries to record the issuance of 100,000 shares of common stock at $20 per share for each of the following independent cases:

a. Jackson Corporation has common stock with a par value of $1 per share.

b. Royal Corporation has no-par common with a stated value of $5 per share.

c. French Corporation has no-par common; no stated value has been assigned

Chapter 2 Exercise 3

3. Analysis of stockholders' equity

Star Corporation issued both common and preferred stock during 20X6. The stockholders' equity sections of the company's balance sheets at the end of 20X6 and 20X5 follow.

20X6 20X5

Preferred stock, $100 par value, 10% $580,000 $500,000

Common stock, $10 par value 2,350,000 1,750,000

Paid-in capital in excess of par value

Preferred 24,000 —

Common 4,620,000 3,600,000

Retained earnings 8,470,000 6,920,000

Total stockholders' equity $16,044,000 $12,770,000

a. Compute the number of preferred shares that were issued during 20X6.

b. Calculate the average issue price of the common stock sold in 20X6.

c. By what amount did the company's paid-in capital increase during 20X6?

d. Did Star's total legal capital increase or decrease during 20X6? By what amount?

Chapter 2 Problem 1

1. Bond computations: Straight-line amortization

Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1. The bonds pay interest on March 1 and September 1 and mature in 10 years. Assume the independent cases that follow.

  • Case A—The bonds are issued at 100.
  • Case B—The bonds are issued at 96.
  • Case C—The bonds are issued at 105.
  • Southlake uses the straight-line method of amortization.

    Instructions:

    Complete the following table:

    Case A Case B Case C

    a. Cash inflow on the issuance date _______ _______ _______

    b. Total cash outflow through maturity _______ _______ _______

    c. Total borrowing cost over the life of the bond issue _______ _______ _______

    d. Interest expense for the year ended December 31, 20X1 _______ _______ _______

    e. Amortization for the year ended December 31, 20X1 _______ _______ _______

    f. Unamortized premium as of December 31, 20X1 _______ _______ _______

    g. Unamortized discount as of December 31, 20X1 _______ _______ _______

    h. Bond carrying value as of December 31, 20X1 _______ _______ _______

    Chapter 3 Exercise 1

    1. Product costs and period costs

    The costs that follow were extracted from the accounting records of several different manufacturers:

    1. Weekly wages of an equipment maintenance worker

    2. Marketing costs of a soft drink bottler

    3. Cost of sheet metal in a Honda automobile

    4. Cost of president's subscription to Fortune magazine

    5. Monthly operating costs of pollution control equipment used in a steel mill

    6. Weekly wages of a seamstress employed by a jeans maker

    7. Cost of compact discs (CDs) for newly recorded releases of Rush, Billy Joel, and Bryan Adams

    a. Determine which of these costs are product costs and which are period costs.

    b. For the product costs only, determine those that are easily traced to the finished product and those that are not.

    Chapter 3 Exercise 2

    2. Definitions of manufacturing concepts

    Interstate Manufacturing produces brass fasteners and incurred the following costs for the year just ended:

    Materials and supplies used

    Brass $75,000

    Repair parts 16,000

    Machine lubricants 9,000

    Wages and salaries Machine operators 128,000

    Production supervisors 64,000

    Maintenance personnel 41,000

    Other factory overhead Variable 35,000

    Fixed 46,000

    Sales commissions 20,000

    Compute:

    a. Total direct materials consumed

    b. Total direct labor

    c. Total prime cost

    d. Total conversion cost

    Chapter 3 Exercise 5

    5. Schedule of cost of goods manufactured, income statement

    The following information was taken from the ledger of Jefferson Industries, Inc.:

    Direct labor $85,000 Administrative expenses $59,000

    Selling expenses 34,000 Work in. process

    Sales 300,000 Jan. 1 29,000

    Finished goods Dec. 31 21,000

    Jan. 1 115,000 Direct material purchases 88,000

    Dec. 31 131,000 Depreciation: factory 18,000

    Raw (direct) materials on hand Indirect materials used 10,000

    Jan. 1 31,000 Indirect labor 24,000

    Dec. 31 40,000 Factory taxes 8,000

    Factory utilities 11,000

    Prepare the following:

    a. A schedule of cost of goods manufactured for the year ended December 31.

    b. An income statement for the year ended December 31.

    Chapter 3 Problem 3

    3. Manufacturing statements and cost behavior

    Tampa Foundry began operations during the current year, manufacturing various products for industrial use. One such product is light-gauge aluminum, which the company sells for $36 per roll. Cost information for the year just ended follows.

    Per Unit Variable Cost Fixed Cost

    Direct materials $4.50 $ —

    Direct labor 6.5 —

    Factory overhead 9 50,000

    Selling — 70,000

    Administrative — 135,000

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    ACC 206 WEEK 2 JOURNAL INSTITUTE OF MANAGEMENT ACCOUNTING(NEW)

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    Institute of Management Accounting

    While there are many instances of overlap between financial accounting and management accounting, each group’s primary focus is different. Review the Institute of Management Accounting’s (IMA) website, specifically the “About IMA” and the “Resources and Publications” sections of the website. Are you surprised by the topics that management accountants are focusing on? Why or why not? What interests you more, financial accounting or management accounting?

    Carefully review the Grading Rubric for the criteria that will be used to evaluate your journal entry.

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    ACC 206 WEEK 3 ASSIGNMENT CHAPTER FOUR AND FIVE PROBLEMS(NEW)

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    Chapter 4 and 5 Problems

    Please complete the following 7 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

    Chapter 4 Exercise 3

    3. Cost flows and overhead application

    Cleveland Metals uses a job cost system and applies factory overhead to production at a predetermined rate of 180% of direct labor cost. Data pertaining to recent operations follow.

  • Job no. 636 was the only job in process on January 1 of the current year. The Work in Process account contained a $24,600 balance on this date.
  • Jobs no. 637, 638, and 639 were started during January.
  • Total direct material requisitions and directlabor incurred during January amounted to $89,200 and $114,500, respectively.
  • The only job that remained in process on January 31 was job no. 638, with costs of $15,000 for direct materials and $20,000 for direct labor.
  • a. Compute the total cost of the work in process inventory on January 31.

    b. Compute the cost of jobs completed during January, and present the proper journal entry to reflect job completion.

    Chapter 4 Exercise 7

    7. Overhead application: Working backward

    The Towson Manufacturing Corporation applies overhead on the basis of machine hours. The following divisional information is presented for your review:

    Division A Division B

    Actual machine hours 22,500 ?

    Estimated machine hours 20,000 ?

    Overhead application rate $4.50 $5.00

    Actual overhead $110,000 ?

    Estimated overhead ? $90,000

    Applied overhead ? $86,000

    Over- (under-) applied overhead ? $6,500

    Find the unknowns for each of the divisions.

    Chapter 4 Problem 2

    2. Computations using a job order system

    General Corporation employs a job order cost system. On May 1 the following balances were extracted from the general ledger;

    Work in process $ 35,200

    Finished goods 86,900

    Cost of goods sold 128,700

    Work in Process consisted of two jobs, no. 101 ($20,400) and no. 103 ($14,800). During May, direct materials requisitioned from the storeroom amounted to $96,500, and direct labor incurred totaled $114,500. These figures are subdivided as follows:

    Direct Materials Direct Labor

    Job No. Amount Job No. Amount

    101 $5,000 101 $7,800

    115 19,500 103 20,800

    116 36,200 115 42,000

    Other 35,800 116 18,000

    $96,500 Other 25,900

    $114,500

    Job no. 115 was the only job in process at the end of the month. Job no. 101 and three "other" jobs were sold during May at a profit of 20% of cost. The "other" jobs contained material and labor charges of $21,000 and $17,400, respectively.

    General applies overhead daily at the rate of 150% of direct labor cost as labor summaries are posted to job orders. The firm's fiscal year ends on May 31.

    Instructions:

    a. Compute the total overhead applied to production during May.

    b. Compute the cost of the ending work in process inventory.

    c. Compute the cost of jobs completed during May.

    d. Compute the cost of goods sold for the year ended May 31.

    Chapter 5 Exercise 1

    1. High-low method

    The following cost data pertain to 20X6 operations of Heritage Products:

    Quarter 1 Quarter 2 Quarter 3 Quarter 4

    Shipping costs $58,200 $58,620 $60,125 $59,400

    Orders shipped 120 140 175 150

    The company uses the high-low method to analyze costs.

    a. Determine the variable cost per order shipped.

    b. Determine the fixed shipping costs per quarter.

    c. If present cost behavior patterns continue, determine total shipping costs for 20X7 if activity amounts to 570 orders.

    Chapter 5 Exercise 2

    The treasurer anticipates the following costs for the event, which will be held at the Regency Hotel:

    Room rental $300

    Dinner cost (per person) 25

    Chartered buses 500

    Favors and souvenirs (per person) 5

    Band 900

    Each person would pay $40 to attend; 200 attendees are expected.

    a. Will the event be profitable for the sorority? Show computations.

    b. How many people must attend for the sorority to break even?

    c. Suppose the sorority encouraged its members to drive to the hotel and did not charter the buses. Further, a planned menu change will reduce the cost per meal by $2. If each member will still be charged $40, compute the contribution margin per person.

    Chapter 5 Exercise 3

    3. Break-even and other CVP relationships

    Cedars Hospital has average revenue of $180 per patient day. Variable costs are $45 per patient day; fixed costs total $4,320,000 per year.

    a. How many patient days does the hospital need to break even?

    b. What level of revenue is needed to earn a target income of $540,000?

    c. If variable costs drop to $36 per patient day, what increase in fixed costs can be tolerated without changing the break-even point as determined in part (a)?

    Chapter 5 Problem 6

    6. Direct and absorption costing

    The information that follows pertains to Consumer Products for the year ended December 31, 20X6.

    Inventory, 1/1/X6 24,000 units

    Units manufactured 80,000

    Units sold 82,000

    Inventory, 12/31/X6 ? units

    Manufacturing costs:

    Direct materials $3 per unit

    Direct labor $5 per unit

    Variable factory overhead $9 per unit

    Fixed factory overhead $280,000

    Selling & administrative expenses:

    Variable $2 per unit

    Fixed $136,000

    The unit selling price is $26. Assume that costs have been stable in recent years.

    Instructions:

    a. Compute the number of units in the ending inventory.

    b. Calculate the cost of a unit assuming use of:

    1. Direct costing.

    2. Absorption costing.

    c. Prepare an income statement for the year ended December 31, 20X6, by using direct costing.

    d. Prepare an income statement for the year ended December 31, 20X6, by using absorption costing.

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    ACC 206 WEEK 3 JOURNAL HERSHEY COMPANY(NEW)

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    Hershey Company

    Go the Hershey website to learn how to make Hershey chocolate. Review the process and take a look at some of the videos. Pay particular attention to the process steps of milling and pressing, mixing the ingredients, and refining.

    In at least one paragraph, describe the costing system that you would recommend Hershey use to account for its cost of goods sold and why. Include a few product costs you think would be traceable, which costs should be allocated, and how Hershey should account and apply the manufacturing overhead costs.

    Carefully review the Grading Rubric for the criteria that will be used to evaluate your journal entry.

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    ACC 206 WEEK 4 ASSIGNMENT CHAPTER SIX AND SEVEN PROBLEMS(NEW)

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    Chapter 6 and 7 Problems

    Please complete the following 8 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

    Chapter 6 Exercise 2

    2. Schedule of cash collections

    Sugarland Company sells a single product and anticipates opening a new facility in Charlotte on May 1 of the current year. Expected sales during the first three months of activity are: May, $60,000; June, $80,000; and July, $85,000. Thirty percent of all sales are for cash; the remaining 70% are on account. Credit sales have the following collection pattern:

    Chapter 6 Exercise 4

    4. Production and cash-outlay computations

    RPR, Inc., anticipates that 120,000 units of product K will be sold during May. Each unit of product K requires four units of raw material A. Actual inventories as of May 1 and budgeted inventories as of May 31 follow.

    Chapter 6 Exercise 5

    5. Abbreviated cash budget; financing emphasis

    An abbreviated cash budget for Big Chuck Enterprises follows.

    Chapter 6 Problem 3

    3. Comprehensive budgeting

    The balance sheet of Watson Company as of December 31, 20X1, follows.

    Chapter 7 Exercise 3

    3. Variances for direct materials and direct labor

    Banner Company manufactures flags of various countries. Each flag has a standard of eight square feet of fabric and three hours of direct labor time. Information about recent production activity follows.

    Chapter 7 Exercise 5

    5. Overhead variances

    Nova Manufacturing applies factory overhead to products on the basis of direct labor hours. At the beginning of the current year, the company's accountant made the following estimates for the forthcoming period:

  • Estimated variable overhead: $500,000
  • Estimated fixed overhead: $400,000
  • Estimated direct labor hours: 40,000
  • It is now 12 months later. Actual total overhead incurred in the manufacture of 7,900 units amounted to $895,100. Actual labor hours totaled 39,800. Assuming a direct labor standard of five hours per finished unit, calculate the following:

    a. Variable overhead efficiency variance

    b. Fixed overhead volume variance

    c. Overhead spending variance

    Chapter 7 Problem 1

    1. P26-A1 Basic flexible budgeting (L.O. 2)

    Centron, Inc., has the following budgeted production costs:

    Direct materials $0.40 per unit

    Direct labor 1.80 per unit

    Variable factory overhead 2.20 per unit

    Fixed factory overhead

    Supervision $24,000

    Maintenance 18,000

    Other 12,000

    The company normally manufactures between 20,000 and 25,000 units each quarter. Should output exceed 25,000 units, maintenance and other fixed costs are expected to increase by $6,000 and $4,500, respectively.

    During the recent quarter ended March 31, Centron produced 25,500 units and incurred the following costs:

    Direct Materials $10,710

    Direct Labor 47,175

    Variable factory overhead 51,940

    Fixed factory overhead

    Supervision 24,500

    Maintenance 23,700

    Other 16,800

    Total production costs $174,825

    Instructions:

    a. Prepare a flexible budget for 20,000, 22,500, and 25,000 units of activity.

    b. Was Centron's experience in the quarter cited better or worse than anticipated? Prepare an appropriate performance report and explain your answer.

    c. Explain the benefit of using flexible budgets (as opposed to static budgets) in the measurement of performance.

    Chapter 7 Problem 5

    5. P26-B3 Straightforward variance analysis (L.O. 5)

    Arrow Enterprises uses a standard costing system. The standard cost sheet for product no. 549 follows.

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    ACC 206 WEEK 5 ASSIGNMENT CHAPTER EIGHT PROBLEMS(NEW)

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    Chapter Eight Problems

    Please complete the following 5 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

    Chapter 8 Exercise 1:

    1. Basic present value calculations

    Calculate the present value of the following cash flows, rounding to the nearest dollar:

    a. A single cash inflow of $12,000 in five years, discounted at a 12% rate of return.

    b. An annual receipt of $16,000 over the next 12 years, discounted at a 12% rate of return.

    c. A single receipt of $15,000 at the end of Year 1 followed by a single receipt of $10,000 at the end of Year 3. The company has a 10% rate of return.

    d. An annual receipt of $8,000 for three years followed by a single receipt of $10,000 at the end of Year 4. The company has a 12% rate of return.

    Chapter 8 Exercise 4:

    4. Cash flow calculationsand net present value

    On January 2, 20X1, Bruce Greene invested $10,000 in the stock market and purchased 500 shares of Heartland Development, Inc. Heartland paid cash dividends of $2.60 per share in 20X1 and 20X2; the dividend was raised to $3.10 per share in 20X3. On December 31, 20X3, Greene sold his holdings and generated proceeds of $13,000. Greene uses the net-present- value method and desires a 16% return on investments.

    a. Prepare a chronological list of the investment's cash flows. Note: Greene is entitled to the 20X3 dividend.

    b. Compute the investment's net present value, rounding calculations to the nearest dollar.

    c. Given the results of part (b), should Greene have acquired the Heartland stock? Briefly explain.

    Chapter 8 exercise 5:

    5. Straightforwardnet present value and internal rate of return

    The City of Bedford is studying a 600-acre site on Route 356 for a new landfill. The startup cost has been calculated as follows:

    Purchase cost: $450 per acre

    Site preparation: $175,000

    The site can be used for 20 years before it reaches capacity. Bedford, which shares a facility in Bath Township with other municipalities, estimates that the new location will save $40,000 in annual operating costs.

    a. Should the landfill be acquired if Bedford desires an 8% return on its investment? Use the net-present-value method to determine your answer.

    Chapter 8 Problem 1:

    1. Straightforward net-present-value and payback computations

    STL Entertainment is considering the acquisition of a sight-seeing boat for summer tours along the Mississippi River. The following information is available:

    Cost of boat $500,000

    Service life 10 summer seasons

    Disposal value at the end of 10 seasons $100,000

    Capacity per trip 300 passengers

    Fixed operating costs per season (including straight-line depreciation) $160,000

    Variable operating costs per trip $1,000

    Ticket price $5 per passenger

    All operating costs, except depreciation, require cash outlays. On the basis of similar operations in other parts of the country, management anticipates that each trip will be sold out and that 120,000 passengers will be carried each season. Ignore income taxes.

    Instructions:

    By using the net-present-value method, determine whether STL Entertainment should acquire the boat. Assume a 14% desired return on all investments,- round calculations to the nearest dollar.

    Chapter 8 Problem 4:

    4. Equipment replacement decision

    Columbia Enterprises is studying the replacement of some equipment that originally cost $74,000. The equipment is expected to provide six more years of service if $8,700 of major repairs are performed in two years. Annual cash operating costs total $27,200. Columbia can sell the equipment now for $36,000; the estimated residual value in six years is $5,000.

    New equipment is available that will reduce annual cash operating costs to $21,000. The equipment costs $103,000, has a service life of six years, and has an estimated residual value of $13,000. Company sales will total $430,000 per year with either the existing or the new equipment. Columbia has a minimum desired return of 12% and depreciates all equipment by the straight-line method.

    Instructions:

    a. By using the net-present-value method, determine whether Columbia should keep its present equipment or acquire the new equipment. Round all calculations to the nearest dollar, and ignore income taxes.

    b. Columbia's management feels that the time value of money should be considered in all long-term decisions. Briefly discuss the rationale that underlies management's belief.

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    ACC 206 WEEK 5 ASSIGNMENT FINAL PAPER(NEW)

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    Final Paper

    Focus of the Final Paper

    You’ve just been hired onto ABC Company as the corporate controller. ABC Company is a manufacturing firm that specializes in making cedar roofing and siding shingles. The company currently has annual sales of around $1.2 million, a 25% increase from the previous year. The company has an aggressive growth target of reaching $3 million annual sales within the next 3 years. The CEO has been trying to find additional products that can leverage the current ABC employee skillset as well as the manufacturing facilities.

    As the controller of ABC Company, the CEO has come to you with a new opportunity that he’s been working on. The CEO would like to use the some of the shingle scrap materials to build cedar dollhouses. While this new product line would add additional raw materials and be more time-intensive to manufacture than the cedar shingles, this new product line will be able to leverage ABC’s existing manufacturing facilities as well as the current staff. Although this product line will require added expenses, it will provide additional revenue and gross profit to help reach the growth targets. The CEO is relying on you to help decide how this project can be afforded Provide details about the estimated product costs, what is needed to break even on the project, and what level of return this product is expected to provide.

    In order to help out the CEO, you need to prepare a six- to eight-page report that will contain the following information (including exhibits, but excluding your references and title page). Refer to the accompanying Excel spreadsheet (available through your online course) for some specific cost and profit information to complete the calculations.

    Final Paper Spreadsheet

    I. An overall risk profile of the company based on current economic and industry issues that it may be facing.

    II. Current company cash flow

    a. You need to complete a cash flow statement for the company using the direct method.

    b. Once you’ve completed the cash flow statement, answer the following questions:

    i. What does this statement of cash flow tell you about the sources and uses of the company?

    ii. Is there anything ABC Company can do to improve the cash flow?

    iii. Can this project be financed with current cash flow from the company? Why or why not?

    iv. If the company needs additional financing beyond what ABC Company can provide internally (either now or sometime throughout the life of the project), how would you suggest the company obtain the additional financing, equity or corporate debt, and why?

    III. Product cost: ABC Company believes that it has an additional 5,000 machine hours available in the current facility before it would need to expand. ABC Company uses machine hours to allocate the fixed factory overhead, and units sold to allocate the fixed sales expenses. ABC Company expects that it will take twice as long to produce the expansion product as it currently takes to produce its existing product.

    a. What is the product cost for the expansion product?

    b. By adding this new expansion product, it helps to absorb the fixed factory and sales expenses. How much cheaper does this expansion make the existing product?

    c. Assuming ABC Company wants a 40% gross margin for the new product, what selling price should it set for the expansion product?

    d. Assuming the same sales mix of these two products, what are the contribution margins and break-even points by product?

    IV. Potential investments to accelerate profit: ABC company has the option to purchase additional equipment that will cost about $42,000, and this new equipment will produce the following savings in factory overhead costs over the next five years:

    Year 1, $15,000

    Year 2, $13,000

    Year 3, $10,000

    Year 4, $10,000

    Year 5, $6,000

    ABC Company uses the net-present-value method to analyze investments and desires a minimum rate of return of 12% on the equipment.

    a. What is the net present value of the proposed investment ignore income taxes and depreciation?

    b. Assuming a 5-year straight-line depreciation, how will this impact the factory’s fixed costs for each of the 5 years (and the implied product costs)? What about cash flow?

    c. Considering the cash flow impact of the equipment as well as the time-value of money, would you recommend that ABC Company purchases the equipment? Why or why not?

    V. Conclusion:

    a. What are the major risk factors that you see in this project?

    b. As the controller and a management accountant, what is your responsibility to this project?

    c. What do you recommend the CEO do?

    Writing the Final Paper

    1. Must be six to eight double-spaced pages in length, and formatted according to APA style as outlined in the Ashford Writing Center.

    2. Must include a title page with the following:

    a. Title of paper

    b. Student’s name

    c. Course name and number

    d. Instructor’s name

    e. Date submitted

    3. Must begin with an introductory paragraph that has a succinct thesis statement.

    4. Must address the topic of the paper with critical thought.

    5. Must end with a conclusion that reaffirms your thesis.

    6. Must document all sources in APA style, as outlined in the Ashford Writing Center.

    7. Must include a separate reference page, formatted according to APA style as outlined in the Ashford Writing Center.

    Carefully review the Grading Rubric for the criteria that will be used to evaluate your assignment.c

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