Assessment item 3 Assignment 3 Value: 60% Due date: 13-Oct-2014 Return date: 03-Nov-2014 Submission method options Alternative submission method Task Please note this assignment consists mainly of questions from Horngren, C.T.,...

profilebalav.

Assessment item 3

Assignment 3

Value: 60%

Due date: 13-Oct-2014

Return date: 03-Nov-2014

Submission method options

Alternative submission method

Task

Please note this assignment consists mainly of questions from Horngren, C.T., Sundem, G.L., Stratton, W.O. Burgstahler, D., & Shatzberg, J. Introduction to management accounting, (16th edition 2014), however it also has a question from another text by Horngren. Horngren, C. T., Harrison, W. T. & Oliver M.S., (2012). Internal control and cash. Accounting (9th ed.,) Prentice Hall, which is available via Interact as Reading 5.

You are required to complete all questions, in the same sequence as listed below, and submit all necessary workings. Follow the assignment requirements (refer below to the Requirements section) very closely.

Content assessed
Topic 5, 6, 7, 8, 9, and 10.


Question 1

E7-15 E-commerce Control Procedures
Source: Horngren, C. T., Harrison, W. T. & Oliver M.S., (2012). Internal control and cash. Accounting (9th ed., pp. 386 of Reading 5). Prentice Hall. See Reading 5 in the learning materials within Interact.

The following situations suggest a strength or a weakness in e-commerce internal controls.

a. Netproducts sells merchandise over the Internet. Customers input their credit card information for payment.

b. Netproducts maintains employee information on the company intranet. Employees can retrieve information about annual leave, payroll deposits, and benefits, from any computer using their login information.

c. Netproducts maintains trend information about its customers, products, and pricing on the company’s intranet.

d. Tax identification numbers for all vendors are maintained in Netproduct’s database.

 

Requirement

1. Identify the control that will best protect the company.

 

    Question 2

E7-18 Preparing a bank reconciliation, D.J. Harrison
Source: Horngren, C. T., & Harrison, W. T. (2012). Internal control and cash. Accounting (9th ed., pp. 387-388 of Reading 5). Prentice Hall. See Reading 5 in the learning materials within Interact.

D.J. Harrison’s checkbook lists the following:

 

Date

Check No.

Item

Check

Deposit

Balance

Nov  1

 

 

 

 

$   540

4

622

Java Joe’s

$ 15

 

525

9

 

Dividends received

 

$   130

655

13

623

Skip’s Market

55

 

600

14

624

Fill-N-Go

75

 

525

18

625

Cash

60

 

465

26

626

Fernwood Golf Course

85

 

380

28

627

Upstate Realty, Co.

265

 

115

30

 

Paycheck

 

1,210

1,325

 

 

 

 

 

 

Harrison’s November bank statement shows the following:

 

Balance

 

 

 

$   540

Deposits

 

 

 

130

Debit checks

No

Amount

 

 

 

622

$     15

 

 

 

623

55

 

 

 

624

115*

 

 

 

625

   60

 

(245)

Other charges:

 

 

 

 

   Printed checks

 

 

$    35

 

   Service charge

 

 

20

    (55)

Balance

 

 

 

$   370

*This is the correct amount shown for Check No. 624

 

Requirements:

1. Prepare Harrison’s bank reconciliation as at November 30, 2012.

2. How much cash does Harrison actually have on November 30, 2012?

Answer all parts. Solve using a spreadsheet. Include the normal view and formula view and include an IF function to check balances.

Question 3

1-2 (illustrate your explanation with examples), 1-16, 1-22 (illustrate your explanation with examples), 2-5, 2-9 (illustrate your explanation with examples).
Source: Horngren, et al. (2014). Introduction to management accounting (16th ed., pp. 44, 45 & 85). Pearson.

1-2.   “The emphases of financial accounting and management accounting differ.” Explain

1-16. Name the six primary business functions (excluding support functions) that make up the value chain, and briefly describe each.

1-22. ‘The problem with accounting is that accountants never get to become top managers such as CEOs.” Do you agree? Explain. Illustrate your explanation with examples.

2-5.   “It is confusing to think of fixed costs on a per-unit basis.” Do you agree? Why or why not?

2-9.   “Classification of costs into variable and fixed categories depends on the decision situation.” Explain. Illustrate your explanation with examples.

Question 4

1-48 Ethical Issues
Source: Horngren, et al. (2014). Introduction to management accounting (16th ed., p. 49). Pearson. 

Suppose you are controller of a medium-sized oil exploration company in western Texas. You adhere to the standards for ethical conduct for management accountants. How would those standards affect your behaviour in each of the following situations?

1. Late one Friday afternoon you receive a geologist’s report on a newly purchased property. It indicates a much higher probability of oil than had previously been expected. You are the only one to read the report that day. At a party on Saturday night, a friend asks about the prospects for the property.

2. An oil industry stock analyst invites you and your wife to spend a week in Tahiti free of charge. All she wants in return is to be the first to know about any financial information your company is about to announce to the public.

3. It is time to make a forecast of the company’s annual earnings. You know that some additional losses will be recognized before the company prepares its final statements. The company’s president has asked you to ignore these losses in making your predictions because a lower-than-expected earnings forecast could adversely affect the chances of obtaining a loan that is being negotiated and that will be completed before actual earnings are announced.

4. You do not know whether a particular expense is deductible for income tax purposes. You are debating whether to research the tax laws or simply assume the item is deductible. After all, if you are not audited, no one will ever know the difference. If you are audited, you can plead ignorance of the law.

 

    Question 5

2-48 Super Valu Grocery Chain, Variable and Fixed Costing
Source: Horngren, et al. (2014). Introduction to management accounting (16th ed., p. 91). Pearson.

Maintaining a clean shopping environment is a key success factor for Super Valu, a large grocery chain based in Minnesota. Three of the most costly resources to clean a supermarket are labor, equipment, and cleaning supplies. The cost driver of these resources is “number of times cleaned.” Wages for cleaning laborers (called porters) and rent for cleaning equipment are all the same regardless of the number of times the supermarket is cleaned. Supplies used for each regular daily cleaning and for each special cleaning are about the same.

A typical store has about 48,000 square feet. Regular cleaning is performed each day from midnight until 7.00 AM. Special cleaning of floors and fixtures is performed in the various departments as needed. Special cleaning varies from 10 to 30 times a month depending on the amount of traffic through the store. Thus, the number of times a store is cleaned varies from 40 to 60 times a month.

Suppose that in one of Super Valu’s stores in Minnesota, cleaning was performed 60 times during March. For the month, the cost of labor and rent on equipment was $21,000 and the cleaning supplies used cost $12,000. The sales budget for the next quarter (April through June) and better weather conditions indicate that the store will need to be cleaned 50, 46, and 35 times in April, May and June respectively.

1. Prepare a table that shows how labor cost, rent, cleaning supplies, total cost, and total cost per cleaning changes in response to the number of times the store is cleaned. Show costs for 35, 40, 45, 50, 55, and 60 cleanings. What is the predicted total cost of cleaning the Minnesota store for the next quarter?

2. Prepare a single graph that can be used to predict the fixed, variable, and total cleaning cost of the Super Valu store.

3. Suppose the manager of the Super Valu store can fire an outside cleaning company to clean the store as needed. The charge rate is $720 per cleaning. If the outside cleaning company is hired, Super Valu can lay off the workers who are now cleaning the store, eliminate the need for equipment rent, and stop purchasing cleaning supplies. Will Super Valu save money with the outside cleaning company over the next quarter? Prepare a schedule that supports your answer.

Solve using a spreadsheet. Question 2 includes preparing a spreadsheet graph. Search online for examples and also see the spreadsheet examples in the Spreadsheet Advice section in Interact and the study modules on this topic.

Solve using a spreadsheet. Section 2 includes preparing a spreadsheet graph. Search online for examples and also see the spreadsheet examples in the Spreadsheet Advice section in Interact and the study modules on this topic.

Question 6

5-7, 5-12.
Source: Horngren, et al. (2014). Introduction to management accounting (16th ed., p. 227). Pearson. 

5-7.    What is the advantage of the contribution approach as compared with the absorption approach?

5-12. “Basing pricing on only the variable costs of a job results in suicidal underpricing.” Do you agree? Why?

 

     Question 7

5-31 Straightfoward Absorption Statement, 5-32 Straightforward Contribution Income Statement
Source: Horngren, et al. (2014). Introduction to management accounting (16th ed., p. 228). Pearson.

5-31. The Kerwin Company had the following data (in thousands) for a given period: 

 

Sales

$ 780

Direct Materials

180

Direct labor

230

Indirect manufacturing costs

210

Selling and administrative expenses

130

 There were no beginning or ending inventories. Compute the (1) manufacturing costs of goods sold, (2) gross profit, (3) operating income, and (4) conversion costs (total manufacturing costs less material costs).

Solve using a spreadsheet. Include the normal view and formula view.

 

5-32. Masa Ltd., had the following data (in millions of yen) for a given period:  

 

Sales

¥ 990

Direct Materials

250

Direct labor

140

Variable factory overhead

65

Variable selling and administrative expenses

115

Fixed factory overhead

110

Fixed selling and administrative expenses

75

There were no beginning or ending inventories. Compute the (a) variable manufacturing cost of goods sold, (b) contribution margin, and (c) operating income.

Solve using a spreadsheet. Include the normal view and formula view.

Question 8

6-3, 6-4 (illustrate your explanation with examples), 6-20 (illustrate your explanation with examples)
Source: Horngren, et al. (2014). Introduction to management accounting (16th ed., pp. 268-269). Pearson. 

6-3.   “Accountants do not ordinarily record opportunity costs in the formal accounting records.” Why?

6-4.   Distinguish between and incremental cost and a differential cost. Illustrate your explanation with examples.

6-20. There are two reasons why unit costs should be analysed with care in decision making. What are they? Illustrate your explanation with examples.

 

 

 

 

Question 9

Decision making
Please be frank and creative in answering the following questions.
a. (i)

 

Suppose you're on a TV game show, and you're given the choice of three doors. Behind one door is a brand new car, behind the others, nothing. You pick a door. The TV host, who knows what's behind the doors, chooses another door and opens it to show you that it has nothing. Should you change your decision?

Don’t think about this too deeply just yet. Do you feel (intuit?) that you should change your choice? Answer initially without researching the question. What is the thinking behind your answer. Conduct a survey of ten of your friends/colleagues to give their opinion. You may wish to provide them with a copy of the question. Include in your answer a table setting out the results of this survey. Also create a simple chart with Excel to present the results of your survey.

a (ii) After you answer the first part of this question, search the Internet for the Monty Hall problem. Provide your own explanation of the correct solution. Why do so many get the wrong answer? Did you?

b. A man goes to see his medical doctor to find out whether or not he has a deadly disease. The test is positive. The test is 95% accurate and one in one thousand men of his age has this disease. What is the probability he has the disease? He decides to seek a second opinion but the results are exactly the same. When this question was put to a group of doctors, 80% of them answered “95%”. He now plans to sell up all his assets, tell his boss what he really thinks of her, quit his job on the spot and live in Vanuatu in the time he has left. Is this a rational decision? Explain.

c. Suppose an urn contains 100 marbles, 75 red and 25 black. A marble is drawn at random from the urn and you are asked to guess what colour you believe the marble to be. The marble is then shown, replaced, and the urn's contents again randomised. The aim is to maximise the number of correct guesses. Before reading any further, what strategy would you employ? What would you guess?

Assume 4 red come out in a row. What would your next guess be? Why? Include a brief discussion of the gambler's fallacy.

d. Creatively discuss the rationality of human decision making using these and other examples. Use the Internet as a source (about 300 words for this section).

  

     Question 10

7-35 Cash Budget
Source: Horngren, et al. (2014). Introduction to management accounting (16th ed., p. 317). Pearson.

7-35. Consider the budgeted income statement for Carlson Company for 20X4 in Exhibit 7-13.

 

The cash balance, May 31, 20X4, is $15,000.

Sales proceeds are collected as follows: 80% the month of sale, 10 the second month, and 10% the third month.

Accounts receivable are $44,000 on May 31, 20X4, consisting of $20,000 from April sales and $24,000 from May sales.

Accounts payable on May 31, 20X4, are $145,000.

Carlson Company pays 25% of purchases during the month of purchase and the remainder during the following month.

All operating expenses requiring cash are paid during the month of recognition, except that insurance and property taxes are paid annually in December for the forthcoming year.

 

Prepare a cash budget for June. Confine your analysis to the given data. Ignore income taxes. Use a spreadsheet, with the correct structures, to answer this question.

After you have completed your answer create a second version by changing all the data. Paste the normal view for both versions and one formula view.

Sales

 

$290

Inventory, May 31

$ 50

 

Purchases

192

 

Available for sale

242

 

Inventory, June 30

40

 

Cost of goods sold

 

202

Gross Margin

 

88

Operating expenses

 

 

    Wages

$36

 

    Utilities

5

 

    Advertising

10

 

    Depreciation

1

 

    Office expenses

4

 

    Insurance and property taxes

3

59

Operating income

 

$ 29

 

Exhibit 7-13

Carlson Company

Budgeted Income Statement for the Month Ended June 30, 20X4 (in thousands)

 

 

     Question 11

8-31 Quantity Variances 
Source: Horngren, et al. (2014). Introduction to management accounting (16th ed., p. 354). Pearson.

8-31. Lindsey Toy Company produced 13,000 stuffed bears. The standard direct-materials allowance is 1.5 kilograms per bear, at a cost per kilo of $3.20. Actually, 18,700 kilos of materials (input) were used to produce the 13,000 bears (output0.

Similarly, the standard allowance for direct labor is 5.1 hours to produce one bear, and the standard hourly labor cost is $6. But 67,100 hours (input) were used to produce the 13,000 bears. Compute the quantity variances for direct materials and direct labor.

Use a spreadsheet to answer this question. Make and paste a second version of the normal view with some changed data. Use the IF function. Paste the formula view once only.

 

     Question 12

11-46 NPV, IRR, and Payback
Source: Horngren, et al. (2014). Introduction to management accounting (16th ed., p. 485). Pearson. 

11-46. Snuffy’s Drive-In is considering a proposal to invest in a speaker system that would allow its employees to service drive-through customers. The cost of the system (including installation of special windows and drive-way modifications) is $28,000. Brad Board, manager of Snuffy’s, expects the drive-through operations to increase annual sales by $14,000, with a 25% contribution margin ratio. Assume that the system has an economic life of 10 years, at which time it will have no disposal value. The required rate of return is 10%. Ignore taxes.

1. Compute the payback period. Is it a good measure of profitability?

2. Compute the NPV. Should Brad accept the proposal? Why or Why not?

3. Using the ARR model, compute the rate of return on the initial investment.

Use a spreadsheet to answer this question. Use the Excel NPV function. As usual, paste a formula view.

Question 13

Write a business report on the significance of two of the following to managers and the function of accounting.
(a) Spreadsheets
 
(b) Black Swans (Taleb)
(c) "Gray" ethical areas in accounting. See http://danariely.com/tag/ethics/
 
(d) Six Sigma

About 300-400 words each. Use the Internet as a resource. Give examples to illustrate your discussion.

Refer to the earlier section 'Assessment Information' for essay/report writing skill resources.  The Internet can also be searched for business reporting advice

 

 

 

    • Posted: 5 years ago
    • Budget: $999999.99
    • Not rated

      accounts

      Question 3

      1-2 (illustrate your explanation with examples), 1-16, 1-22 (illustrate your explanation with examples), 2-5, 2-9 (illustrate your explanation with examples).
      Source: Horngren, et al. …