Unless you need to edit, it's safer to stay in Protected View. Enable Editing 1... 2.1 3 5 .. .6 Question 3 (30 marks) A- ABC company has two divisions--Women and Men. The divisions have the following revenues and expenses: Women Men Sales $ 500,000 $ 550,000 Variable costs 200,000 275,000 Traceable fixed costs 150,000 180,000 Allocated common corporate costs 135,000 170,000 Net income (loss) $ 15,000 $ (75,000) The management of ABC is considering the elimination of the Men Division. If the Men Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Required: Should the Company drop Men division? Explain Support you answer with the necessary calculations (7.5 marks) B-XYZ Company manufactures and sell wooden product. It wants to prepare cash budget for the second quarter of the year. The company's sales budget for the second quarter given below: April May June Total Budgeted Credit Sales $470,000 $670,000 $230,000 $1,370,000 Credit sales are collected as follows: 25% in the same month of sale, 65% in the month following sale, and 10% in the second month following sale - February sales totaled $400,000, and March sales totaled $430,000. Required: 1. Prepare the cash collection schedule for the second quarter. 2. What is the accounts receivable balance on June 30th? (7.5 marks) Summer 2019/2020 B124/THE-Final (V1) Page 4 of 5 Comments Tracking I Part 1 - Answer the following question Question 140 marks) A- Tracy Underhill operates as a sole trader. Below is a trial balance extracted from her books as at 31 December 2017. Trial balance for Tracy Underhill as at 31 December 2017 Debit Credit f f Sales revenue 695,000 Inventory (as at 1 January 2017) 105,800 Purchases 625,200 Non-current assets at cost: Equipment 100,000 Motor vehicle 80,000 Accumulated depreciation: Equipment 10,000 Motor vehicle 10,000 Insurance 14,700 Rent 30,000 Heating and lighting 10,000 Salaries and wages 40,000 Motor expenses 15,300 Miscellaneous expenses 28,500 Receivables 110,000 Allowance for receivables 14,000 Payables 101,500 Cash 71,000 Bank loan 100,000 Capital 300,000 Total 1.230.500 1.230.500 Additional information is provided for use in preparing the company's adjustments: 1 The value of closing inventory is 102,500. 2 Interest is payable on the bank loan at eight per cent per annum. The annual amount due as at 31 December 2017 had not yet been paid. 3 Tracy has paid her rent until 31 March 2018. Her annual rent is 24,000. 4 Office equipment has a useful life of ten years and a residual value of 0. It is to be depreciated on a straight-line basis. 5 The motor vehicle with a useful life of ten years and an estimated residual value of 30,000 is to be depreciated on a straight-line basis at a rate of 10%. 6 Tracy finds that receivables of 10,000 need to be written off as irrecoverable. 7 The allowance for receivables is to be set at ten per cent of the remaining outstanding receivables as at 31 December 2017 8 The heating bill will arrive on 5 January and about 1,000 is expected to relate to the period until 31 December B124/ THE-Final (V1) Page 2 of 5 Summer 2019/2020 New Delete Comment Show Comments Acce Track Changes Reviewing Pane Comments Tracking Cl Reguired 1) Make the end-of-period adjustments entries 2) Prepare Tracy's income statement for the year ended December 31, 2017 3) Prepare Tracy's balance sheet as at December 31, 2017 (11 Mars) (9 Marks) (10 Marks) B- What will be the effect on financial statements if an accrued expense is not recorded at the end of the year? (4 marks) C-On June 30 of the current calendar year, Apricot Co. paid $9,500 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to expense accounts at the time of cash payment. Required: 1- Prepare the adjusting entry on December 31 for Apricot Co. 2-Show the effect of the adjusting entry on Income statement and balance sheet at the end of the Current calendar year (6 marks) Part 2 - Answer the following questions Question 2 (30 marks) A- Keys Company accumulates the following data concerning a mixed cost, using miles as the activity level Miles Driven Total Cost January 10,000 $15,000 February 8.000 13,500 March 9,000 14,400 April 7,500 12,500 Required: 1. Compute the variable and fixed cost elements using the high-low method 2. If it is estimated that 12,000 miles will be drive in May, what is the expected total cost for May? (7.5 Maria) B- XYZ Company sells its only product for $40 per unit. Its total fixed costs are $180,000 per annum. Its CM ratio is 20% XYZ plans to sell 16,000 units this year, Required 1. Calculate CM per unit and the variable cost per unit. 2. Calculate break-even point in unit sales and in dollar sales? 3. Calculate the unit sales and dollar sales required to achieve a target profit of $60,000 per year? 4. Assume that the company is able to reduce its variable costs by 54 per unit and accordingly the sales price per unit will also be reduced by 5% a) Calculate the company's new break-even point in unit sales and in dollar sales? b) Calculate dollar sales required to achieve a target profit of $60,000? 5. In your opinion, did you think the company would be better off with the assumed reductions in (4)? Why? (12.5 mi) Tack ACCE Show Comments Comment Reviewing Pane Changes Comments Tracking C-Management of Farah Corporation has asked your help as an intern in preparing some key reports for April. Direct labor cost was $25,000 Total manufacturing costs during April were $176,000. Direct labor cost was 20% of prime cost. Required: Calculate direct material cost and the manufacturing overhead cost. (5 marks) D-Sun Company and Moon Company are identical in all respects except that most of Sun company costs are variable, and most of Moon company costs are fixed. In case sales increase (for both companies), which of the two companies will tend to realize the greatest increase in its net income? Why? (5 marks) Question 3 (30 marks) A- ABC company has two divisions-- Women and Men. The divisions have the following revenues and expenses Women Men Sales $ 500,000 $ 550,000 Variable costs 200,000 ,275,000 Traceable fixed costs 150,000 180,000 Allocated common corporate costs 135,000 170,000 Net income (loss) $ 15,000 $ (75,000) I The management of ABC is considering the elimination of the Men Division. If the Men Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision Required: Should the Company drop Men division? Explain. Support you answer with the necessary calculations (1.5 marks) B-XYZ Company manufactures and sell wooden product. It wants to prepare cash budget for the second quarter of the year. The company's sales budget for the second quarter given below: April May June Total Budgeted Credit Sales $470,000 $670,000 $230,000 $1,370,000 - Credit sales are collected as follows: 25% in the same month of sale, 65% in the month following sale, and 10% in the second month following sale - February sales totaled $400,000, and March sales totaled $430,000. Required: 1. Prepare the cash collection schedule for the second quarter 2. What is the accounts receivable balance on June 30th? (1.5 marks) C-ABC Corporation has estimated the following information for first quarter of 2020 for one of its products: January Units to be produced Desired ending inventory of finished godds 128,000 30,000 February 140,000 36,000 March 152,000 38,000 The ending inventory at December 2019 was 28,000 units. Required: Prepare the Production Budget and the Sales Budget for the first quarter of 2020, assuming selling price per imit is $20. (10 marks) D- The following information has been take from a manufacturing company for the year 2019: Sales revenues 36,000 - opening inventory of materials 10,000 - closing inventory of materials 8,000 - opening inventory of finished goods 6,000 - closing inventory of finished goods 4,000 - cost of goods produced 26,000 Required: Calculate cost of goods sold and gross profit for the year ended December 31, 2019