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ACC650

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Complete Problems 2-37 and 3-47 in the textbook.

Complete Problem 2-37 in a Word document and Problem 3-47 using Excel. Please note, you must show your work in Excel, which includes providing the formulas in the cells, not just the summary value. You may not earn full points if you do not show your work in detail.

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2.37 Consider the following cost items: 1. Salaries of players on the Boston Red Sox. 2. Year-end completed goods of Levi Strauss jeans. 3. Executive compensation costs at Home Depot 4. Advertising costs for Sony. 5. Costs incurred during the period to insure a Ford plant against fire and flood losses. 6. Current year's depreciation on a Carnival Cruise Line ship. 7. The cost of chemicals and paper used during the period by Kodak. 8. Assembly-line wage cost incurred at a Kana bicycle plant. 9. Year-end production in process at Gateway Computer. 10. The cost of products sold to customers of a Target store. 11. The cost of products sold to distributors of a carpet manufacturer, such as Shaw or Dalton. Required: 1. Evaluate the costs just cited, and determine whether the associated dollar amounts would be found on the firm's balance sheet, income statement, or schedule of cost-of-goods-manufactured. (Note: In some cases, more than one answer will apply.) Items Firms Balance sheet Income Statement Salaries of players on the Boston Red Sox. Year-end completed goods of Levi Strauss jeans Executive compensation costs at Home Depot Advertising costs for Sony. Costs incurred during the period to insure a Ford plant against fire and flood losses Current year's depreciation on a Carnival Cruise Line ship The cost of chemicals and paper used during the period by Kodak. Assembly-line wage cost incurred at a Kana bicycle plant Year-end production in process at Gateway Computer The cost of products sold to customers of a Target store The cost of products sold to distributors of a carpet manufacturer, such as Shaw or Dalton Cost-of-goodsmanufactured X X X X X X X X X X X X 2. What major asset will normally be insignificant for service enterprises and relatively substantial for retailers, wholesalers, and manufacturers? Briefly discuss. The asset that differs among these businesses is inventory. Service businesses typically carry no or very little inventory. Retailers and wholesalers normally stock considerable inventory. Manufacturers also carry significant inventories, typically subdivided into three categories: raw material, work in process and finished goods. 3. Briefly explain the major differences between income statements of service enterprises versus those of retailers, wholesalers, and manufacturers. The income statement of service business normally has separate sections for operating revenues, operating expenses, and other income (expenses). In contrast, those of retailers, wholesalers and manufacturers disclose sales revenue, followed immediately by cost of goods sold and gross margin. Operating expenses are listed next followed by other income (expenses). 4. Picture the operations of a firm such as Dell Inc, one that is involved in direct sales and mass customization of products. What would be the major difference in the balance sheet of this type of organization versus the balance sheet of a company that engages in more traditional manufacturing activities, that is, producing goods and waiting for customer orders to arrive? The basic difference falls in the area of inventory. Traditional manufacturers produce finished goods, which are then placed in warehouses awaiting sale. In contrast, with direct-sales, masscustomization firm, the receipt of a sales order triggers the manufacturing process as well as the purchasing system, the latter to acquire needed raw materials. Finished-goods and raw-material inventories (along with work in process) of mass-customizers are, therefore, much lower than the inventories carried by traditional firms. 2.38 Required: 1. Calculate Lone Oak's manufacturing overhead for the year. Indirect labor: $109,000 Building depreciation: $80,000*75% = $60,000 Other factory costs: $342,000 Total Manufacturing Overhead: $511,000 2. Calculate Lone Oak’s cost of goods manufactured. Raw material Inventory 1st Jan: Raw material purchased: Less: Raw material inventory Dec. 31 Raw material used in production Direct Labor Manufacturing overhead Total manufacturing costs Beginning work in process inventory Total cost of Goods manufactured $16,000 + $176,000 $192,000 - $18,200 $173,800 $255,000 + $511,000 $939,800 + $35,800 $975,600 - $62,100 $913,500 3. Compute the company's cost of goods sold. Beginning finished Goods Inventory Add: cost of Goods manufactured Goods available for sale Less: Ending finished Goods inventory Cost of Goods sold $112,100 + $913,500 $1,025,600 - $97,900 $927,700 4. Determine net income for 20x 1, assuming a 30% income tax rate. Net Income: Sales Revenue Cost of goods sold Gross margin Selling and administrative expenses: Salaries Building depreciation (80,000*25%) Other $1,495,000 - $927,700 $567,300 $133,000 $20,000 $195,000 $348,000 Income before taxes Income tax expense ($220,600*30%) Net Income $219,300 - $65,790 $153,510 5. Determine the number of completed units manufactured during the year. Lone Oak’s sold 11,500 units during the year ($1,495,000/ 130 units). Since 160 of the units came from finished-goods inventory (1,350 – 1,190), the company would have manufactured 11,340 units (11,500 – 160) 6. Build a spreadsheet: Construct an Excel spreadsheet to solve all of the preceding requirements. Show how the solution will change if the following data change: indirect labor is $115,000 and other factory costs amount to $516,000. Solution2.38.xlsx
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Accounting Problems
Name
Professor
Course
Date

1

Problem 2–37
1. Evaluate the costs just cited, and determine whether the associated dollar amounts
would be found on the firm’s balance sheet, income statement, or schedule of costof-goods-manufactured. (Note: In some cases, more than one answer will apply.)
Items

Firms
Income
Balance Statement
sheet

Salaries of players on the Boston Red Sox.
Year-end completed goods of Levi Strauss jeans
Executive compensation costs at Home Depot
Advertising costs for Sony.
Costs incurred during the period to insure a Ford plant
against fire and flood losses
Current year's depreciation on a Carnival Cruise Line ship
The cost of printer ink and paper used during the period
by Shutterfly.
Assembly-line wage cost incurred at a Kana bicycle plant
Year-end production in process at Lenovo computer
manufacturer.
The cost of products sold to customers of a Target store
The cost of products sold to distributors of a carpet
manufacturer, such as Shaw Floors

schedule of
Cost-ofgoodsmanufactured

X
X

X
X
X
X
X
X
X
X

X
X
X

2. What major asset will normally be insignificant for service enterprises and
relatively substantial for retailers, wholesalers, and manufacturers? Briefly discuss.
The asset that differs among these businesses is inventory. Invento...


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