PART ONE, Two & Three...

Trump & Trudeau Inc. (T&T) produce surf boards models, Fired, which has been produced for many years and sells for $925... (Full Question attached on pictures below)...

5

Thanks.

Manufacturing overhead was applied on the basis of machine hours at a predetermined rate of $25 per hour. T&T Inc.'s, CFO is in favour of the use of an activity-based costing system and has gathered the following information about the company's manufacturing overhead cost for 2019: Activity Centres and Cost Drivers Activity Costs Laminating (number of boards) $ 800,000 Shipments (number of shipments) 775,000 Quality Control (number of inspections) 1,280,000 Purchase Orders (number of orders) 800,000 Machine Power (machine hours) 150,000 Machine set-ups (number of set ups) 1,000,000 Total Traceable costs $ 4,805,000 Units of the Cost Driver Dude Fired 400,000 1,200,000 4,800 15,200 21,000 59,000 110,000 50,000 20,000 180,000 4,000 6,000 Total 1,600,000 20,000 80,000 160,000 200,000 10,000 Requirements: Using activity-based costing, determine whether Trump & Trudeau Inc. should continue to emphasize the Dude model and phase out the Fired model. PART TWO It has been several years now, and Trump & Trudeau Inc. (T&T) have grown substantially and created a new division to produce a specialized board game aimed at attracting youth into the world of surfing. The division is in the final development stage of a new game called "Surf Dude." T&T realize to capitalize on the winter holiday season they need to get it out to distributors, so they can stock at their retail level. The Vice President of the division is considering an offer from another manufacturer to supply the game boards for $6.05 per board. This is a common practice within this industry. T&T's CFO has developed the following cost estimates for the production of the game board: Cost Per Unit of Surf Dude Direct Material $3.50 Direct Labour 1.05 Production Overhead 2.28 Corporate Overhead Cost of Game Board The CFO has also provided the following information: The board can be produced using current machinery that has a capacity to produce 500,000 units per month and is 50% utilized. The anticipated demand for the game will not exceed 100,000 units a month, according to the sales team. Half of the production overhead is fixed. The corporate overhead allocation is based on 10% of the direct materials charge. Requirements: State whether TBT should make the game boards or buy them from the supplier. Also consider at what point does it make sense to buy the boards from the supplier. Please support your decision with the required calculations. PART THREE T&T had a great year, but they need to meet targets set by the banker, Huawell Bank Inc. They had been informed by their account manager that they have been picked to be audited and that the Chief Lending Officer Menghan Wazhunn will personally review their financial statements. Trump and Trudeau are nervous so in preparation of the meeting they are bringing in their accounting firm G20 to make sure all the ratios are in line, and specifically the margin, the turnover and ROI. They also need to make sure the minimum required rate of return which was set at 15% was met. G20 has sent in Putnov Elections to ensure all the ratios are in line, the following are the financial statements at year end January 31, 2019 for T&T Inc. PART ONE Trump & Trudeau Inc. (T&T) produce surf boards models, Fired, which has been produced for many years and sells for $925, and the Dude, a new model, which sells for $1,360. Based on the following income statement for 2018, the CFO at T&T has decided to concentrate the marketing resources on the Dude model and to begin to phase out the Fired model. Trump & Trudeau Inc. Income statement March 31, 2019 Dude Fired Total Sales $5,576,000 $20,373,125 $25,949, 125 Cost of Goods Sold 4,070,480 15,279,844 $19,350,324 Gross Margin 1,505,520 5,093,281 $ 6,598,801 Selling and Admininstrative Expen: 947,920 3,055,969 $ 4,003,889 Net profit $ 557,600 $ 2,037,313 $ 2,594,913 Units produced and sold Net profit per unit sold 4,100 $136.00 22,025 $92.50 The standard unit costs for the Dude and Fired models are as follows: Dude $700 Fired $300 70 Direct Materials Direct Labour: Dude (3.5 hrs x $20/hr.) Fired (1.5 hrs. x $20/hr.) Machine Usage: Dude (4 hrs. x $25/hr.) Fired (8 hrs. x $25/hr.) Manufacurting Overhead Standard Cost 100 150 $1,020 200 225 $755 Trump & Trudeau Inc. Balance Sheet Ending Balance Beginning Balance Assets Cash Accounts receivable Inventory Plant and equipment, net Investment in Brexit Sunk Inc. Land (undeveloped) Total assets $1,200,000 1,530,000 1,380,000 3,620,000 280,000 370,000 $8,380,000 $1,400,000 1.450,000 1,320,000 3.680,000 250.000 380,000 $8.480,000 Liabilities and Shareholders' Equity Operating Line Accounts payable Current Portion of Long-Term Debt Long-term debt Shareholders' equity Total liabilities and shareholders' equity $1,310,000 $1,700,000 $500,000 2,580,000 2,290,000 $8,380,000 $1,360,000 $1,800,000 $470,000 2,690,000 2.160,000 $8.480,000 Trump & Trudeau Inc. Income Statement $40,500,000 36,450,000 $4,050,000 Sales Less operating expenses Net operating income Less interest and taxes: Interest expense Tax expense Net income $350,000 350,000 700,000 $3.350,000 Dividends paid last year Minimum required return $1,500,000 15% Manufacturing overhead was applied on the basis of machine hours at a predetermined rate of $25 per hour. T&T Inc.'s, CFO is in favour of the use of an activity-based costing system and has gathered the following information about the company's manufacturing overhead cost for 2019: Activity Centres and Cost Drivers Activity Costs Laminating (number of boards) $ 800,000 Shipments (number of shipments) 775,000 Quality Control (number of inspections) 1,280,000 Purchase Orders (number of orders) 800,000 Machine Power (machine hours) 150,000 Machine set-ups (number of set ups) 1,000,000 Total Traceable costs $ 4,805,000 Units of the Cost Driver Dude Fired 400,000 1,200,000 4,800 15,200 21,000 59,000 110,000 50,000 20,000 180,000 4,000 6,000 Total 1,600,000 20,000 80,000 160,000 200,000 10,000 Requirements: Using activity-based costing, determine whether Trump & Trudeau Inc. should continue to emphasize the Dude model and phase out the Fired model. PART TWO It has been several years now, and Trump & Trudeau Inc. (T&T) have grown substantially and created a new division to produce a specialized board game aimed at attracting youth into the world of surfing. The division is in the final development stage of a new game called "Surf Dude." T&T realize to capitalize on the winter holiday season they need to get it out to distributors, so they can stock at their retail level. The Vice President of the division is considering an offer from another manufacturer to supply the game boards for $6.05 per board. This is a common practice within this industry. T&T's CFO has developed the following cost estimates for the production of the game board: Cost Per Unit of Surf Dude Direct Material $3.50 Direct Labour 1.05 Production Overhead 2.28 Corporate Overhead Cost of Game Board The CFO has also provided the following information: The board can be produced using current machinery that has a capacity to produce 500,000 units per month and is 50% utilized. The anticipated demand for the game will not exceed 100,000 units a month, according to the sales team. Half of the production overhead is fixed. The corporate overhead allocation is based on 10% of the direct materials charge. Requirements: State whether TBT should make the game boards or buy them from the supplier. Also consider at what point does it make sense to buy the boards from the supplier. Please support your decision with the required calculations. PART THREE T&T had a great year, but they need to meet targets set by the banker, Huawell Bank Inc. They had been informed by their account manager that they have been picked to be audited and that the Chief Lending Officer Menghan Wazhunn will personally review their financial statements. Trump and Trudeau are nervous so in preparation of the meeting they are bringing in their accounting firm G20 to make sure all the ratios are in line, and specifically the margin, the turnover and ROI. They also need to make sure the minimum required rate of return which was set at 15% was met. G20 has sent in Putnov Elections to ensure all the ratios are in line, the following are the financial statements at year end January 31, 2019 for T&T Inc. PART ONE Trump & Trudeau Inc. (T&T) produce surf boards models, Fired, which has been produced for many years and sells for $925, and the Dude, a new model, which sells for $1,360. Based on the following income statement for 2018, the CFO at T&T has decided to concentrate the marketing resources on the Dude model and to begin to phase out the Fired model. Trump & Trudeau Inc. Income statement March 31, 2019 Dude Fired Total Sales $5,576,000 $20,373,125 $25,949, 125 Cost of Goods Sold 4,070,480 15,279,844 $19,350,324 Gross Margin 1,505,520 5,093,281 $ 6,598,801 Selling and Admininstrative Expen: 947,920 3,055,969 $ 4,003,889 Net profit $ 557,600 $ 2,037,313 $ 2,594,913 Units produced and sold Net profit per unit sold 4,100 $136.00 22,025 $92.50 The standard unit costs for the Dude and Fired models are as follows: Dude $700 Fired $300 70 Direct Materials Direct Labour: Dude (3.5 hrs x $20/hr.) Fired (1.5 hrs. x $20/hr.) Machine Usage: Dude (4 hrs. x $25/hr.) Fired (8 hrs. x $25/hr.) Manufacurting Overhead Standard Cost 100 150 $1,020 200 225 $755 Trump & Trudeau Inc. Balance Sheet Ending Balance Beginning Balance Assets Cash Accounts receivable Inventory Plant and equipment, net Investment in Brexit Sunk Inc. Land (undeveloped) Total assets $1,200,000 1,530,000 1,380,000 3,620,000 280,000 370,000 $8,380,000 $1,400,000 1.450,000 1,320,000 3.680,000 250.000 380,000 $8.480,000 Liabilities and Shareholders' Equity Operating Line Accounts payable Current Portion of Long-Term Debt Long-term debt Shareholders' equity Total liabilities and shareholders' equity $1,310,000 $1,700,000 $500,000 2,580,000 2,290,000 $8,380,000 $1,360,000 $1,800,000 $470,000 2,690,000 2.160,000 $8.480,000 Trump & Trudeau Inc. Income Statement $40,500,000 36,450,000 $4,050,000 Sales Less operating expenses Net operating income Less interest and taxes: Interest expense Tax expense Net income $350,000 350,000 700,000 $3.350,000 Dividends paid last year Minimum required return $1,500,000 15%