Hi,

Looking for help in accounting case.

I have solved the income statement (excel sheet)

Need help in answering then other part (attached docx)

Thanks

Daniel Dobbins Distillery Inc. Please double space you answers and submit it to me through email or Blackboard no later than 5pm on Monday, February 6, 2017. I suspect your papers will be approximately 3 pages long but use as few or as many pages as you need to effectively and efficiently answer the questions. Please submit your spread sheet with the assignment. This can be a challenging case for students lacking an accounting background. If you become over whelmed with the case, send me an email and I can guide you in the right direction or we can arrange to meet and review the case. Questions 1. Please give a brief summary of the issue facing management in this case. 2. In your opinion, what costs should be included in Dobbin's inventory and why? 3. Assuming Dobbins decided to charge the cost of wooden aging barrels (but not other warehousing and aging costs) to inventory, what 1988 income statement items would change? What asset amounts on the balance sheet would change and what would the new amount(s) be? Assume that this change was made five years ago - i.e. this was the policy for all prior years. You do not need to list our every item that will change - most of this question will be answered with your work on the spreadsheet. 4. Assuming Dobbins decided to charge the cost of wooden aging barrels and warehouse labor costs (but not other warehousing and aging costs) to inventory, what 1988 income statement items would change? What asset amounts on the balance sheet would change and what would the new amount(s) be? Assume that this change was made five years ago - i.e. this was the policy for all prior years. You do not need to list our every item that will change - most of this question will be answered with your work on the spreadsheet. 5. What overall recommendations would you make to Dobbins management about its reporting and what sources, if any, would you consult in analyzing this problem? This question is not meant to repeat your answers from Question #2 nor is it meant to drill further into accounting principles. Rather you should discuss how you would address this problem as a general manager at Dobbins. What factors are important and what steps would you take to approach this issue? Daniel Dobbins Distillery Inc. Exhibit #2 Income Statement As Presented in the Case (Tab #1) NOTE TO STUDENTS: TAB #1 IS THE BASELINE SCENARIO: DO NOT MAKE CHANGES TO TH -----------1987 ------------- -----------1988 ------------- 30,000 30,000 1,500,000 28.00 1,500,000 28.00 Net Sales No. of barrels sold No. of gallons sold (at 50 gallons per barrel) Price per gallon Sale of whiskey to wholesalers $ Cost of Goods Sold: Federal excise tax - on barrels sold ($21.07/ gallon) Cost of product charged to sales: Bulk whiskey inventory, beg. of year Plus: Cost of whiskey produced to inventory Subtotals $ 31,605,000 $ 31,605,000 9,012,800 3,301,200 $ 12,314,000 9,012,800 Tentative Profit after deducting Product Costs $ 10,060,800 $ 2,253,200 $ 2,253,200 $ 8,141,800 $ 8,141,800 2,709,000 265,000 272,000 188,000 136,000 36,000 6,000 458,000 Gross Profit from Operations Less: Selling and advertising expenses Administrative and general expenses Total SG&A Expenses $ 42,000,000 9,012,800 2,253,200 $ 11,266,000 Less: Bulk whiskey inventory, end of year Equals Cost of Product charged to sales Other costs charged to Cost of Goods Sold Cost of barrels used during the year at $63 each Occupancy costs: factory building Occupancy costs: rented building Warehouse labor and warehouse supervisor Labor and supplies of chemical laboratory Depreciation: factory and warehouse Government supervision Cost of bottling liquor Total of Other Costs charge to COGS $ $ 42,000,000 $ $ 4,070,000 $ 5,854,000 $ 4,071,800 $ 2,287,800 1,568,000 1,000,000 Net Profit (Loss) 1 3,969,000 297,000 572,000 334,000 166,000 44,000 14,000 458,000 1,874,000 1,228,000 $ 2,568,000 $ 3,102,000 $ 1,503,800 $ (814,200) -----------1987 ------------- -----------1988 ------------- Cost of Inventory: Beginning of year Barrels on hand (at 50 gallons per barrel) 172,000 172,000 Cost per barrel Direct materials, indirect materials and labor Total Cost per barrel $ $ 52.40 52.40 $ $ 52.40 52.40 Total Cost (Barrels x Cost per barrel) $ 9,012,800 $ 9,012,800 Cost of Inventory: End of year Barrels on hand (at 50 gallons per barrel) 172,000 192,000 Cost per barrel Direct materials, indirect materials and labor Total Cost per barrel $ $ 52.40 52.40 Total Cost (Barrels x Cost per barrel) $ 9,012,800 $ 10,060,800 43,000 63,000 $ $ 52.40 52.40 Cost of whiskey produced to inventory No. of barrels Cost per barrel Direct materials, indirect materials and labor Total Cost per barrel $ $ 52.40 52.40 $ $ 52.40 52.40 Total Cost of whiskey produced to inventory $ 2,253,200 $ 3,301,200 2 NGES TO THIS FIRST TAB (Note: Numbers for this line item flow from the schedule below) (Note: Numbers for this line item flow from the schedule below) (Note: Numbers for this line item flow from the schedule below) 3 4 Daniel Dobbins Distillery Inc. Exhibit #2 Income Statement With Cost of Barrels included in Inventory (Tab #2) -----------1987 ------------- -----------1988 ------------- 30,000 30,000 1,500,000 28.00 1,500,000 28.00 Net Sales No. of barrels sold No. of gallons sold (at 50 gallons per barrel) Price per gallon Sale of whiskey to wholesalers $ $ $ 42,000,000 Cost of Goods Sold: Federal excise tax - on barrels sold ($21.07/ gallon) $ 31,605,000 Cost of product charged to sales: Whiskey inventory, beg. of year Plus: Cost of whiskey and barrels used Subtotals Less: whiskey inventory, end of year Equals Cost of Product charged to sales 19,848,800 4,962,200 $ 24,811,000 19,848,800 7,270,200 $ 27,119,000 19,848,800 22,156,800 Tentative Profit after deducting Product Costs Other costs charged to Cost of Goods Sold Cost of barrels used during the year at $63 each Occupancy costs: factory building Occupancy costs: rented building Warehouse labor and warehouse supervisor Labor and supplies of chemical laboratory Depreciation: factory and warehouse Government supervision Cost of bottling liquor Total of Other Costs charge to COGS $ 4,962,200 $ 5,432,800 265,000 297,000 272,000 188,000 136,000 36,000 6,000 458,000 Gross Profit from Operations Less: Selling and advertising expenses Administrative and general expenses Total SG&A Expenses 458,000 $ 723,000 $ 4,709,800 1,568,000 1,000,000 1,874,000 1,228,000 $ 5 2,568,000 Net Profit (Loss) $ 2,141,800 -----------1987 ------------- -----------1988 ------------- Cost of Inventory: Beginning of year Barrels on hand (at 50 gallons per barrel) 172,000 Cost per barrel Direct materials, indirect materials and labor Oak Aging barrel Total Cost per barrel $ $ Total Cost (Barrels x Cost per barrel) 52.40 63 115.40 172,000 $ $ 52.40 63 115.40 $ 19,848,800 $ 19,848,800 43,000 63,000 Cost of whiskey and barrels used No. of barrels Cost per barrel Direct materials, indirect materials and labor Oak Aging barrel Total Cost per barrel $ Total Cost of whiskey and barrels used $ $ 52.40 63 115.40 $ 52.40 63 115.40 $ 4,962,200 $ 7,270,200 Cost of Inventory: End of year Barrels on hand (at 50 gallons per barrel) 172,000 Cost per barrel Direct materials, indirect materials and labor Oak Aging barrel Total Cost per barrel $ $ Total Cost (Barrels x Cost per barrel) 52.40 63 115.40 $ 19,848,800 6 192,000 $ $ 52.40 63 115.40 $ 22,156,800 7 ------1988 ------------- $ 42,000,000 $ 31,605,000 (Note: Numbers for this line item flow from the schedule below) (Note: Numbers for this line item flow from the schedule below) (Note: Numbers for this line item flow from the schedule below) $ 4,962,200 $ 5,432,800 572,000 334,000 166,000 44,000 14,000 $ 755,000 $ 4,677,800 $ 3,102,000 (Note: (Note: (Note: (Note: (Note: (Note: (Note: (Note: Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) 8 $ 1,575,800 ------1988 ------------- (Note: Columns E and H to be filled in by student) (Note: Columns E and H to be filled in by student) (Note: Columns E and H to be filled in by student) 9 10 Daniel Dobbins Distillery Inc. Exhibit #2 Income Statement With Cost of Barrels and Warehouse Labor included in Inventory (Tab #3) -----------1987 ------------- -----------1988 ------------- 30,000 30,000 1,500,000 28.00 1,500,000 28.00 Net Sales No. of barrels sold No. of gallons sold (at 50 gallons per barrel) Price per gallon Sale of whiskey to wholesalers $ $ $ 42,000,000 Cost of Goods Sold: Federal excise tax - on barrels sold ($21.07/ gallon) $ 31,605,000 Cost of product charged to sales: Whiskey inventory, beg. of year Plus: Cost of whiskey, barrels and w/h labor Subtotals Less: whiskey inventory, end of year Equals Cost of Product charged to sales 20,600,440 5,150,110 $ 25,750,550 20,600,440 7,604,100 $ 28,204,540 20,600,440 23,174,400 Tentative Profit after deducting Product Costs Other costs charged to Cost of Goods Sold Cost of barrels used during the year at $63 each Occupancy costs: factory building Occupancy costs: rented building Warehouse labor and warehouse supervisor Labor and supplies of chemical laboratory Depreciation: factory and warehouse Government supervision Cost of bottling liquor Total of Other Costs charge to COGS $ 5,150,110 $ 5,244,890 265,000 297,000 272,000 136,000 36,000 6,000 458,000 Gross Profit from Operations Less: Selling and advertising expenses Administrative and general expenses Total SG&A Expenses 458,000 $ 723,000 $ 4,521,890 1,568,000 1,000,000 1,874,000 1,228,000 $ 11 2,568,000 Net Profit (Loss) $ 1,953,890 -----------1987 ------------- -----------1988 ------------- Cost of Inventory: Beginning of year Barrels on hand (at 50 gallons per barrel) 172,000 Cost per barrel Direct materials, indirect materials and labor Oak Aging barrel Warehousing labor costs Total Cost per barrel $ $ Total Cost (Barrels x Cost per barrel) 52.40 63 4 See Note #1 119.77 172,000 $ $ 52.40 63 4 119.77 $ 20,600,440 $ 20,600,440 43,000 63,000 Cost of whiskey, barrels and warehouse labor No. of barrels Cost per barrel Direct materials, indirect materials and labor Oak Aging barrel Warehousing labor costs Total Cost per barrel $ Total Cost of whiskey, barrels and w/h labor $ $ 52.40 63 4 119.77 $ 52.40 63 5 120.70 $ 5,150,110 $ 7,604,100 Cost of Inventory: End of year Barrels on hand (at 50 gallons per barrel) 172,000 Cost per barrel Direct materials, indirect materials and labor Oak Aging barrel Warehousing labor costs Total Cost per barrel $ $ Total Cost (Barrels x Cost per barrel) 52.40 63 4 See Note #1 119.77 $ 20,600,440 12 192,000 $ $ 52.40 63 5 120.70 $ 23,174,400 Note #1 to Student: There are various assumptions that could be made that would influence your input to Cells E61, H61, E74 and H74. Make whatever assumptions or estimates you need in order to enter a reasonable number in these cells. 13 ------1988 ------------- $ 42,000,000 $ 31,605,000 (Note: Numbers for this line item flow from the schedule below) (Note: Numbers for this line item flow from the schedule below) (Note: Numbers for this line item flow from the schedule below) $ 5,030,140 $ 5,364,860 572,000 166,000 44,000 14,000 $ 755,000 $ 4,609,860 $ 3,102,000 (Note: (Note: (Note: (Note: (Note: (Note: (Note: (Note: Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) Columns E and H to be filled in by student) 14 $ 1,507,860 ------1988 ------------- See Note #1 (Note: Columns E and H to be filled in by student) (Note: Columns E and H to be filled in by student) See Note #1 (Note: Columns E and H to be filled in by student) (Note: Columns E and H to be filled in by student) See Note #1 (Note: Columns E and H to be filled in by student) (Note: Columns E and H to be filled in by student) 15 16