ACC 406 Lecture Notes - Lecture 2: Denim
Document Summary
Get access
Related Documents
Related Questions
| FILL IN THE CORRECT TERMINOLOGIES IN THE BLANK SPACES | ||
| _____ 1. | a. A method of internal (managerial accounting) reporting that emphasizes the distinction between variable and fixed costs. | |
| _____ 2. | b. A discounted cash flow approach to capital budgeting that computes the present value of all future cash flows. | |
| _____ 3. | c. Determination of the maximum cost a company can spend to make a product given a set volume, selling price and desired operating profit. | |
| _____ 4. | d. An analysis of the additional costs and benefits of a proposed alternative compared with the current situation. | |
| _____ 5. | e. A historical cost that the company has already incurred which is irrelevant to the decision making process. | |
| _____ 6. | f. Costs that will not continue if an ongoing operation is changed or deleted. | |
| _____ 7. | g. An already owned production site that is not currently in use. | |
| _____ 8. | h. The maximum available benefit foregone by using a resource for a particular purpose. | |
| _____ 9. | i. The predicted future costs and revenues that will differ among alternative courses of action. | |
| _____ 10. | J. The time it will take to recoup, in the form of cash inflows from operations, the initial dollars invested in a project | |
| _____ 11. | k. Those costs of facilities and services that are shared by users | |
| _____ 12. | l. The juncture of manufacturing where separate products developed in the same process become individually identifiable. | |
| _____ 13. | m. A costing approach that considers all indirect manufacturing costs (both variable and fixed) to be product (inventoriable) costs. | |
| _____ 14. | n. Purchasing products or services from a supplier outside the company. | |
| _____ 15. | o. Capital budgeting models that focus on cash inflows and ouflows while taking into account the time value of money | |
| _____ 16. | p. Calculation of a selling price sufficient to cover the cost of producing a product as well as desired operating income | |
| _____ 17 | q. The long-term planning for investment commitments with returns spread over multiple years | |
| _____ 18. | r. A decision process that compares the differential revenues and costs of alternatives. | |
| _____ 19. | s. Costs that will continue even if a company discontinues one of its current operations | |
| _____ 20. | t. The increase in expected average annual operating income divided by the original required investment | |
Course Project Week 4
For this next part of the project you will build the Income Statement and Balance Sheet for the Bike Repair & Maintenance Shop (BRMS) for 2018. Use the information below and add another sheet to your Excel Workbook.
BRMS Information for 2018
In 2017, the repair shop was opened in October and ended the year with a ($10,500) operating loss.
| Supply Inventory of parts & supplies maintained | $3,000 | |
| Replacement parts are ordered as they are used. | ||
| Shop hours of operation: 52 weeks a year. | ||
| Monday - Friday 11am - 7pm | 8 hrs | |
| Saturday 9am - 7pm | 10 hrs | |
| Staff | FTEs | Salary |
| Manager | 1 | $ 40,000 |
| bookkeeper/purchaser | 0.8 | $ 20/hr |
| Repairers | 2.5 | $ 18.50/hr |
Employee benefits: 20% of salary for the manager; 17% of salary for all others.
| Supply costs | $ 65,000 |
| utility costs | $ 7,200 |
| marketing costs | $ 10,000 |
| other costs | $ 22,000 |
Services Provided:
Budgeted: Repair Services: $100 each for 2,600 repairs
New Packages being considered
Package A: Preventative maintenance service package $ 80
Package B: Basic inspection, lube, adjust & clean shifting braking system $ 90
Package C: Annual peak performance package $100
Package D: Basic inspection, + replace shifting cables & preventative maintenance package $250
Estimated Services Provided under the new options:
Package A: 25 per week
Package B: 15 per week
Package C: 10 per week
Package D: 5 per week
| Bike Repair & Maintenance Shop | |
| Budgeted Income Statement | |
| For the Year Ended December 31, 2018 | |
| Revenue | |
| Repair Fees | ? |
| Other Income | ? |
| Gross Revenues | ? |
| Expenses | |
| Salaries & Benefits | ? |
| Wages & benefits | ? |
| Utilities | 7,200 |
| Marketing costs | 10,000 |
| Supply costs | 65,000 |
| Other costs | 22,000 |
| Total Expenses | 104,200 |
| Operating Income | ? |
| Income tax | ? |
| Net Income | $(43,692) |
| Profit Margin | ? |
a) For the first full year of operations, BRMS was budgeted to lose over $40,000 performing repair services. These repairs have high fixed costs for the replacement parts in the repairs. If BRMS decided to expand their services to provide bicycle inspections and preventative maintenance, which use more employee time than supplies, what would the projected change in profit be?
b) If a decision is made to add more service oriented repairs is there a change in fixed and variable costs for repair services?
c) Complete a new ACTUAL Income Statement based on your decisions in a & b. Then complete the Balance sheet below.
| Bike Repair & Maintenance Shop | |
| Balance Sheet | |
| December 31, 2018 | |
| Assets | |
| Cash | $ 8,500 |
| Investments | - |
| Accounts Receivable (net) | 6,000 |
| Prepaid Expenses | 3,000 |
| Inventory | ? |
| Plant, Property & Equipment | 5,000 |
| Less: Accumulated Depreciation | (167) |
| Total Assets | $ 25,333 |
| Liabilities | |
| Accounts Payable | $ 4,500 |
| Accrued Liabilities | 700 |
| Salaries Payable | 4,000 |
| Long-term liabilities | - |
| Total Liabilities | $ 9,200 |
| Common Stock | ? |
| Retained Earnings | ? |
| Total Stockholders' Equity | ? |
| Total Liabilities & Stockholders' Equity | ? |
Next Steps: Financial Analysis for both BRBS & BRMS.
Using the information below for BRBS complete the financial metric analyses as indicated in Chapter 9 of the textbook for both BRMS (above) & BRBS.
The Income Statement for the Buy-Right Bike Shop is provided below for 2017 and 2018.
| BUY-RIGHT BIKE STORE | ||
| Income Statement | ||
| 2018 | 2017 | |
| Sales - Online | $ 11,080,000 | $ 6,240,000 |
| Sales - In store | 580,400 | 312,000 |
| Sales returns | 221,600 | |
| Gross Revenues | 11,438,800 | 6,552,000 |
| Cost of Goods sold | 5,540,000 | 3,276,000 |
| Contribution Margin | $ 5,898,800 | $ 3,276,000 |
| Expenses | ||
| Salaries & Benefits | $ 144,000 | $ 139,206 |
| Wages & benefits | 391,880 | 274,997 |
| Utilities | 13,200 | 13,000 |
| Marketing costs | 200,000 | 200,000 |
| Contributions & Community Involvement | 58,040 | 31,200 |
| Other costs | 1,375,000 | 1,200,000 |
| Operating Income | 3,716,680 | 1,417,597 |
| Income tax | 1,077,837 | 411,103 |
| Net Income | $ 2,638,843 | $ 1,006,494 |
| Profit Margin | 23% | 15% |
| Sales volume | ||
| Bike C - online | 95,000 | 60,000 |
| Bike A - online | 4,800 | - |
| Bike C - in store | 5,100 | 3,000 |
| Bike A - in store | 200 | - |
| total Sales volume | 100,000 | 63,000 |
The Balance Sheet for Buy-Right Bike Store is provided below:
| Buy-Right Bike Store | ||
| Balance Sheet | ||
| December 31, 2018 | ||
| Assets | ||
| Cash | $ 1,500,000 | |
| Investments | 225,000 | |
| Accounts Receivable (net) | 1,250,000 | |
| Prepaid Expenses | 30,000 | |
| Inventory | 58,280 | |
| Plant, Property & Equipment | 1,800,000 | |
| Less: Accumulated Depreciation | 60,000 | |
| Total Assets | $ 4,923,280 | |
| Liabilities | ||
| Accounts Payable | 83,250 | |
| Accrued Liabilities | 4,414 | |
| Salaries Payable | 7,913 | |
| Long-term liabilities | 30,000 | |
| Total Liabilities | $ 125,577 | |
| Common Stock | 1,152,366 | |
| Retained Earnings | 3,645,337 | |
| Total Stockholders' Equity | $ 4,797,703 | |
| Total Liabilities & Stockholders' Equity | $ 4,923,280 | |
The following list, in alphabetical order, shows the various items that regularly appear on the financial statements of Maple Park Theatres Corp. The amounts shown for balance sheet items are balances as of September 30, 2017 (with the exception of retained earnings, which is the balance on September 1, 2017), and the amounts shown for income statement items are balances for the month ended September 30, 2017.
| Accounts payable | $17,600 | Furniture and fixtures | $34,000 | |
| Accounts receivable | 6,410 | Land | 26,000 | |
| Advertising expense | 14,500 | Notes payable | 20,000 | |
| Buildings | 60,000 | Projection equipment | 25,000 | |
| Capital stock | 50,000 | Rent expenseâmovies | 50,600 | |
| Cash | 15,230 | Retained earnings | 73,780 | |
| Concessions revenue | 60,300 | Salaries and wages expense | 46,490 | |
| Cost of concessions sold | 23,450 | Ticket sales | 95,100 | |
| Dividends paid during the month | 8,400 | Water, gas, and electricity | 6,700 |
1. Using the data given, prepare an income statement for the month ended September 30, 2017.
| Maple Park Theatres Corp. | ||
| Income Statement | ||
| For The Month Ended September 30, 2017 | ||
| Revenues: | ||
| Ticket sales | $ | |
| Total revenues | $ | |
| Expenses: | ||
| $ | ||
| Total expenses | ||
| $ | ||
2. Using the data given, prepare a statement of retained earnings for the month ended September 30, 2017.
| Maple Park Theatres Corp. | |
| Statement Of Retained Earnings | |
| For The Month Ended September 30, 2017 | |
| $ | |
| $ | |
3. Using the data given, prepare a balance sheet at September 30, 2017.
| Maple Park Theatres Corp. | |
| Balance Sheet | |
| September 30, 2017 | |
| Assets | |
| $ | |
| Total assets | $ |
| Liabilities and stockholders' equity | |
| $ | |
| Total liabilities and stockholders' equity | $ |
4. You have $1,000 to invest. You want to use it to buy stock in Maple Park? Which of the following information would you least consider before making a final decision?
| 1. | Whether the company is operating at a profit? |
| 2. | The amount of dividends paid by the company. |
| 3. | The amount of salaries the company pays. |
| 4. | Current market price of the stock. |
