On January 1, Year 1, a contractor began work on a $3.2 million construction contract that is expected to be completed in 3 years. The contractor concludes that it is appropriate to recognize revenue over time using the input method based on costs incurred (cost-to-cost method). At the inception date, the estimated cost of construction was $2.4 million. The following data relate to the actual and expected construction costs:

Year 1 Year 2 Year 3
Costs incurred $720,000 $1,170,000 $1,110,000
Expected future costs $1,680,000 $810,000 $0

For this long-term construction contract, the contractor needs to calculate the estimated dollar values of the revenue and gross profit (loss) to be recognized each year. Complete the contractor's long-term construction contract using the information above. Write the appropriate amounts in the associated cells. Indicate losses by using a leading minus (-) sign. Round all amounts to the nearest dollar. If no entry is necessary, enter a zero (0).

Revenue Gross profit (loss)
Year 1
Year 2

Answer:

                   Revenue    Costs Incurred   Gross profit (loss)

Year 1         $768,000        $720,000            $48,000

Year 2     $1,248,000       $1,170,000               78,000

Year 3      $1,184,000       $1,110,000                74,000

Total      $3,200,000     $3,000,000          $200,000

Explanation:

a) Data and Calculations:

Construction contract = $3.2 million

Completion period = 3 years

Estimated cost of construction = $2.4 million

Construction costs:

                                             Year 1          Year 2         Year 3   Total Costs

Costs incurred               $720,000  $1,170,000   $1,110,000   $3 million

% of annual costs to total  24%               39%          37%           100%

Expected future costs $1,680,000    $810,000   $0

Annual Revenue            $768,000 $1,248,000  $1,184,000   $3.2 million

Revenue Calculation:

Costs incurred/Total costs * $3,200,000

                   Revenue    Costs Incurred   Gross profit (loss)

Year 1         $768,000        $720,000            $48,000

Year 2     $1,248,000       $1,170,000               78,000

Year 3      $1,184,000       $1,110,000                74,000

Total      $3,200,000     $3,000,000          $200,000

b) The revenue for each year is based on the costs incurred, as determined by the contractor.

AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February:
Fixed Component Variable Component Actual Total
per Month per Job for February
Revenue $276 $35,890
Technician wages $8,600 $8,450
Mobile lab operating expenses $4,600 $34 $9,200
Office expenses $2,800 $3 $3,070
Advertising expenses $1,580 $1,650
Insurance $2,890 $2,890
Miscellaneous expenses $930 $1 $375
The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $4,600 plus $34 per job, and the actual mobile lab operating expenses for February were $9,200. The company expected to work 140 jobs in February, but actually worked 150 jobs.
Required:
Complete the flexible budget performance report showing AirQual Test Corporation’s revenue and spending variances and activity variances for February.

As part of its commitment to quality, the J. J. Borden manufacturing company is proposing to introduce just-in-time (JIT) production methods. Managers of the company have an intuitive feel regarding the financial benefits associated with a change to JIT, but they would like to have some data to inform their decision making in this regard. You are provided with the following data:
Item ExistingSituation AfterAdopting JIT
Manufacturing costs as percentage of sales:
Product-level support 15 % 4 %
Variable manufacturing overhead 28 10
Direct materials 30 20
Direct manufacturing labor 20 13
Other financial data:
Sales revenue $ 1,430,000 $ 1,810,000
Inventory of WIP 260,000 46,000
Other data:
Manufacturing cycle time 60 days 30 days
Inventory financing costs (per annum) 10 % 10 %
Required:
As the management accountant for the company, prepare an estimate the financial benefits associated with the adoption of JIT. Specifically, what is the estimated change in annual operating income attributable to the JIT implementation?

The service-profit chain is designed to help managers better understand the key linkages in a service delivery system that drive customer loyalty, revenue growth, and higher profits.

a. True
b. False

On January 2, 2021, Miller Properties paid $28 million for 1 million shares of Marlon Company's 6 million outstanding common shares. Miller's CEO became a member of Marlon's board of directors during the first quarter of 2021.
The carrying amount of Marlon's net assets was $117 million. Miller estimated the fair value of those net assets to be the same except for a patent valued at $36 million above cost. The remaining amortization period for the patent is 10 years.
Marlon reported earnings of $54 million and paid dividends of $6 million during 2021. On December 31, 2021, Marlon's common stock was trading on the NYSE at $27.50 per share.
Required: 2. Assume Miller accounts for its investment in Marlon using the equity method. Ignoring income taxes, determine the amounts related to the investment to be reported in its 2021. (Do not round intermediate calculations. Enter all amounts as positive values. Enter your answers in millions rounded to 1 decimal places, (i.e., 5,500,000 should be entered as 5.5).):
a. Income statement million
b. Balance sheet million
c. Statement of cash flows
Operating cash flow million
Investing cash flow million

An economic profit includes implicit costs and accounting profit does not. A distinction between them is important because an accounting profit is a relative amount of money. Some amount of accounting profit may or may not be a sufficient amount of profit to keep an entrepreneur in:________

a. Performed $29,400 of services on account.
b. Collected $17,500 cash on accounts receivable.
c. Paid $4,400 cash in advance for an insurance policy.
d. Paid $570 on accounts payable.
e. Recorded the adjusting entry to recognize $3,700 of insurance expense.
f. Recorded the adjusting entry to recognize $300 accrued interest revenue.
g. Received $9,500 cash for services to be performed at a later date.
h. Purchased land for $1,560 cash.
i. Purchased supplies for $1,800 cash.
Required:
Record each of the above transactions in general journal form and then show the effect of the transaction in a horizontal statements model. The first transaction is shown as an example. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Transaction Account Titles Debit Credit
a Accounts receivable 29,400
Service revenue 29,400
Show the effect of the transaction in a horizontal statements model. The first transaction is shown as an example. (In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, NC for net change in cash and NA to indicate the element is not affected by the event. Enter any decreases to account balances with a minus sign.)

If Cho's boss is interested in a graphical representation of the relationship between the price and quantity of televisions demanded, you would advise your coworker to construct_____________ using the data provided. However, if Cho's boss is more interested in the detailed numbers used to construct this visual representation, you would instead advise your coworker that_________ would be more appropriate.

Which phrase best completes the list?
Characteristics of the U.S. Economy
Free market with some government regulation
Competition between businesses encouraged
A. No centralized banking system
B. Banks owned mostly by the government
o o
Ο Ο
C. Tax rates set by private companies
D. Individuals and businesses given economic freedom

Camptown Togs, Inc., a children’s clothing manufacturer, has always found payroll processing to be costly because it must be done by a clerk so that the number of piece-goods coupons received by each employee can be collected and the types of tasks performed by each employee can be calculated. Not long ago, an industrial engineer designed a system that partially automates the process by means of a scanner that reads the piece-goods coupons. Management is enthusiastic about this system because it utilizes some personal computer systems that were purchased recently. It is expected that this new automated system will save $45,000 per year in labor. The new system will cost about $30,000 to build and test prior to operation. It is expected that operating costs, including income taxes, will be about $5,000 per year. The system will have a five-year useful life. The expected net salvage value of the system is estimated to be $3,000.
(a) Identify the cash inflows over the life of the project.
(b) Identify the cash outflows over the life of the project.
(c) Determine the net cash flows over the life of the project.

Which of the following best illustrates Hofstede's definition of collectivism?
a. Managers at Honest Tea expect that all employees will have an interest and part in environmental sustainability
b. The founder of Honest Tea stresses the importance of equality and opportunity
c. An employee of Honest Tea prefers to work alone and puts him- or herself above others
d. The managers of Honest Tea prefer tradition over change
e. Employees in Honest Tea have high levels of anxiety about uncertainty

Manufacturing overhead for the month was underapplied by $6,000. The company allocates any underapplied or overapplied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. The journal entry to record the allocation of any underapplied or overapplied manufacturing overhead for January would include the following:
Work In Process Finished Goods Cost of Goods Sold Total
Direct materials $10,670 $12,000 $81,120 $103,790
Direct labor 11,630 15,000 101,400 128,030
Manufacturing
overhead applied 9,680 9,680 68,640 88,000
Total $31,980 $36,680 $251,160 $319,820
Manufacturing overhead for the month was underapplied by $6,000.
The Corporation allocates any underapplied or overapplied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the manufacturing overhead applied during the month in those accounts.
The journal entry to record the allocation of any underapplied or overapplied manufacturing overhead for May would include the following:
a. credit to Work in Process of $31,980.
b. debit to Work in Process of $660.
c. credit to Work in Process of $660.
d. debit to Work in Process of $31,980.

Tammy, a resident of Virginia, is considering purchasing a $100,000 North Carolina bond that yields 4.6% before tax. She is in the 35% Federal marginal tax bracket and the 5% state marginal tax bracket. She is aware that State of Virginia bonds of comparable risk are yielding 4.5%. However, the Virginia bonds are exempt from Virginia tax, but the North Carolina bond interest is taxable in Virginia. Tammy can deduct any state taxes paid on her Federal income tax return. In your analysis, assume that the bond amount is $100,000.

The Oxford Company uses a job order cost system and applies factory overhead to jobs on the basis of direct labor cost. During the month of July, the following activities took place in the work-in-process account:

Beginning $15,000
Direct materials 10,000
Direct labor 30,000
Overhead applied 15,000
  
At the end of July, only one job (Job #15), was still in process. This job has been charged with $2,000 of direct materials cost.
Required:
Determine the amount of direct labor cost incurred and overhead applied in the ending inventory of work-in-process on July 31.

Problem 4-8 Sales and Growth [LO2] The most recent financial statements for Alexander Co. are shown here: Income Statement Balance Sheet Sales $ 42,950 Current assets $ 17,580 Long-term debt $ 37,070 Costs 35,550 Fixed assets 68,350 Equity 48,860 Taxable income $ 7,400 Total $ 85,930 Total $ 85,930 Taxes (21%) 1,554 Net income $ 5,846 Assets and costs are proportional to sales. The company maintains a constant 35 percent dividend payout ratio and a constant debt-equity ratio. What is the maximum dollar increase in sales that can be sustained assuming no new equity is issued

preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $1.70 per direct labor-hour; the budgeted fixed manufacturing overhead is $116,000 per month, of which $30,000 is factory depreciation. If the budgeted direct labor time for December is 4,000 hours, then the predetermined manufacturing overhead per direct labor-hour for December would be:

Wildhorse Locomotive Corporation purchased for $604,000 a 40% interest in Lopez Railways, Inc. This investment enables Wildhorse Locomotive to exert significant influence over Lopez Railways. During the year, Lopez Railways earned net income of $159,000 and paid dividends of $27,000. Prepare ZaneLocomotive’s journal entries related to this investment.

Lincoln, Inc., which uses a volume-based cost system, produces cat condos that sell for $140 each. Direct materials cost $22 per unit, and direct labor costs $15 per unit. Manufacturing overhead is applied at a rate of 280% of direct labor cost. Nonmanufacturing costs are $34 per unit. What is the gross profit margin for the cat condos

Eric wants to invest in government securities that promise to pay $1,000 at maturity. The opportunity cost (interest rate) of holding the security is 13.80%. Assuming that both investments have equal risk and Ericâs investment time horizon is flexible, which of the following investment options will exhibit the lower price?

a. An investment that matures in four years
b. An investment that matures in five years