ACC 497 week 2 connect knowledge check

  

QUESTION 1)

Advanced Pharmaceuticals, Inc., is a wholesale distributor of prescription drugs to independent retail and hospital-based pharmacies. Management believes that top-notch customer representatives are the key factor in determining whether the company will be successful in the future. Customer representatives serve as the company’s liaison with customers—helping pharmacies monitor their stocks, delivering drugs when customer stocks run low, and providing up-to-date information on drugs from many different companies. Customer representatives must be ultra-reliable and are highly trained. Good customer representatives are hard to come by and are not easily replaced.

Customer representatives routinely record the amount of time they spend serving each pharmacy. This time includes travel time to and from the company’s central warehouse as well as time spent replenishing stocks, dealing with complaints, answering questions about drugs, informing pharmacists of the latest developments and newest products, reviewing bills, explaining procedures, and so on. Some pharmacies require more hand-holding and attention than others and consequently they consume more of the representatives’ time.

Recently, customer representatives have made more frequent complaints that it is impossible to do their jobs without working well beyond normal working hours. This has led to an alarming increase in the number of customer representatives quitting for jobs in other organizations. As a consequence, management is considering dropping some customers to reduce the workload on customer representatives. Data concerning a representative sample of the company’s customers appears below:

  

Leafcrest
  Pharmacy

Providence
  Hospital
  Pharmacy

Madison
  Clinic
  Pharmacy

Jenkins
  Pharmacy

 

Total revenues

$379,060

$2,896,080

$1,568,640

$324,400

 

Cost of drugs sold

$271,470

$2,274,480

$1,159,440

$155,920

 

Customer service   costs

$10,840

$80,400

$52,000

$14,480

 

Customer   representative time

215

1,640

760

280

    

Customer service costs include all of the costs—other than the costs of the drugs themselves—that could be avoided by dropping the customer. These costs include the hourly wages of the customer representatives, their sales commissions, the mileage-related costs of the customer representatives’ company-provided vehicles, and so on.

 Required:

1. Rank the four customers in terms of their profitability.

 

2. Customer representatives are currently paid $25 per hour plus a commission of 1% of sales revenues. If these four pharmacies are indeed representative of the company’s customers, could the company afford to pay its customer representatives more in order to retain them?

QUESTIOn 2)

Heritage Watercraft makes reproductions of classic wooden boats. The bottleneck in the production process is fitting wooden planks to build up the curved sections of the hull. This process requires the attention of the shop’s most experienced craftsman. A total of 3,200 hours is available per year in this bottleneck operation. Data concerning the company’s four products appear below:

  

Adirondack

Lake Huron

Oysterman

Voyageur

 

Unit contribution   margin

$920

$850

$438

$930

 

Annual demand   (units)

110

110

100

150

 

Hours required in   the bottleneck operation per unit

8

10

6

10

       

 

No fixed costs could be avoided by modifying how many units are produced of any product or even by dropping any one of the products.

 

Required:

1a. Calculate the total hours required in the bottleneck operation to satisfy demand for all the products.

 

1b. Is there sufficient capacity in the bottleneck operation to satisfy demand for all products?

 2a. Rank the profitability of each product line for the year based on the profitability index.

 

2b. What is the optimal production plan for the year?

 

3. What would be the total contribution margin for the optimal production plan you have proposed?

QUESTION 3)

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made. 

Data concerning the pizzeria’s costs appear below:

  

Fixed Cost
  per Month

Cost per
  Pizza

Cost per
  Delivery

 

Pizza ingredients

$

4.50

 

Kitchen staff

$

6,150

 

Utilities

$

730

$

.50

 

Delivery person

$

3.30

 

Delivery vehicle

$

750

$

1.50

 

Equipment   depreciation

$

496

 

Rent

$

2,110

 

Miscellaneous

$

850

$

.25

    

In November, the pizzeria budgeted for 1,920 pizzas at an average selling price of $19 per pizza and for 180 deliveries.

Data concerning the pizzeria’s operations in November appear below:

  

Actual
  Results

 

Pizzas

2,020

 

Deliveries

160

 

Revenue

$

39,050

 

Pizza ingredients

$

9,370

 

Kitchen staff

$

6,090

 

Utilities

$

945

 

Delivery person

$

528

 

Delivery vehicle

$

1,010

 

Equipment   depreciation

$

496

 

Rent

$

2,110

 

Miscellaneous

$

862

        

 

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

QUESTION 4)

The St. Lucia Blood Bank, a private charity partly supported by government grants, is located on the Caribbean island of St. Lucia. The blood bank has just finished its operations for September, which was a particularly busy month due to a powerful hurricane that hit neighboring islands causing many injuries. The hurricane largely bypassed St. Lucia, but residents of St. Lucia willingly donated their blood to help people on other islands. As a consequence, the blood bank collected and processed over 20% more blood than had been originally planned for the month.

A report prepared by a government official comparing actual costs to budgeted costs for the blood bank appears below. Continued support from the government depends on the blood bank’s ability to demonstrate control over its costs.

 

  

St. Lucia Blood Bank
  Cost Control Report
  For the Month Ended September 30

 

Actual Results

Planning Budget

Variances

 

Liters of blood   collected

680

500

 

Medical supplies

$

8,033

$

5,875

$

2,158

U

 

Lab tests

9,336

7,150

2,186

U

 

Equipment   depreciation

1,400

1,200

200

U

 

Rent

1,300

1,300

0

 

Utilities

338

310

28

U

 

Administration

13,665

13,500

165

U

 

Total expense

$

34,072

$

29,335

$

4,737

U

    

 

The managing director of the blood bank was very unhappy with this report, claiming that his costs were higher than expected due to the emergency on the neighboring islands. He also pointed out that the additional costs had been fully covered by payments from grateful recipients on the other islands. The government official who prepared the report countered that all of the figures had been submitted by the blood bank to the government; he was just pointing out that actual costs were a lot higher than promised in the budget.

The following cost formulas were used to construct the planning budget:

 

  

Cost Formulas

 

Medical supplies

$11.75q

 

Lab tests

$14.30q

 

Equipment   depreciation

$1,200

 

Rent

$1,300

 

Utilities

$310

 

Administration

$1.80q

    

 

Required:

1. Complete the performance report for September using the flexible budget approach. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations and round your final answers to nearest whole dollar.)

QUESTION 5)

Jake’s Roof Repair has provided the following data concerning its costs:

 

  

Fixed Cost
  per Month

Cost per Repair-Hour

 

Wages and salaries

$

21,000

$

15.00

 

Parts and supplies

$

7.20

 

Equipment   depreciation

$

2,740

$

0.40

 

Truck operating   expenses

$

5,720

$

1.50

 

Rent

$

4,700

 

Administrative   expenses

$

3,810

$

0.70

    

    

For example, wages and salaries should be $21,000 plus $15.00 per repair hour. The company expected to work 2,600 repair-hours in May, but actually worked 2,500 repair-hours. The company expects its sales to be $50.00 per repair-hour.

 

Required:

Compute the company’s activity variances for May. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

QUESTION 6)

  

Carlsville Company, which began operations in 2015, invests   its idle cash in trading securities. The following transactions are from its   short-term investments in trading securities.

  

2015

 

Jan.

20

Purchased 800 shares   of Ford Motor Co. at $26 per share plus a $125 commission.

 

Feb.

9

Purchased 2,200   shares of Lucent at $44.25 per share plus a $578 commission.

 

Oct.

12

Purchased 750 shares   of Z-Seven at $7.50 per share plus a $200 commission.

 

Dec.

31

Fair value of the short-term   investments in trading securities is $130,000.

  

2016

 

Apr.

15

Sold 800 shares of   Ford Motor Co. at $29 per share less a $285 commission.

 

July

5

Sold 750 shares of   Z-Seven at $10.25 per share less a $102.50 commission.

 

July

22

Purchased 1,600   shares of Hunt Corp. at $30 per share plus a $444 commission.

 

Aug.

19

Purchased 1,800   shares of Donna Karan at $18.25 per share plus a $290 commission.

 

Dec.

31

Fair value of the   short-term investments in trading securities is $160,000.

  

2017

 

Feb.

27

Purchased 3,400   shares of HCA at $34 per share plus a $420 commission.

 

Mar.

3

Sold 1,600 shares of   Hunt at $25 per share less a $250 commission.

 

June

21

Sold 2,200 shares of   Lucent at $42 per share less a $420 commission.

 

June

30

Purchased 1,200   shares of Black & Decker at $47.50 per share plus a $595 commission.

 

Nov.

1

Sold 1,800 shares of   Donna Karan at $18.25 per share less a $309 commission.

 

Dec.

31

Fair value of the   short-term investments in trading securities is $180,000.

  

Required:

  

1.

Prepare journal entries to record these short-term investment   activities for the years shown. On December 31 of each year, prepare the   adjusting entry to record any necessary fair value adjustment for the portfolio   of trading securities.(If   no entry is required select No journal entry required in the first entry   field. Do not round your intermediate calculations.)

QUESTION 7)

[The following information applies to the questions displayed below.]
 

  

Doering   Company, a U.S. corporation with customers in several foreign countries, had   the following selected transactions for 2015 and 2016.

  

2015

  

 Apr.

8    

Sold   merchandise to Salinas & Sons of Mexico for $5,938 cash. The exchange   rate for pesos is $0.1043 on this day.

 

 July

21    

Sold   merchandise on credit to Sumito Corp. in Japan. The price of 1.5 million yen   is to be paid 120 days from the date of sale. The exchange rate for yen is   $0.0094 on this day.

 

 Oct.

14    

Sold   merchandise for 19,000 pounds to Smithers Ltd. of Great Britain, payment in   full to be received in 90 days. The exchange rate for pounds is $1.4566 on   this day.

 

 Nov.

18    

Received   Sumito’s payment in yen for its July 21 purchase and immediately exchanged   the yen for dollars. The exchange rate for yen is $0.0092 on this day.

 

 Dec.

20    

Sold   merchandise for 17,000 ringgits to Hamid Albar of Malaysia, payment in full   to be received in 30 days. On this day, the exchange rate for ringgits is   $0.4501.

 

 Dec.

31    

Recorded   adjusting entries to recognize exchange gains or losses on Doering’s annual   financial statements. Rates for exchanging foreign currencies on this day   follow.

  

 

 Pesos (Mexico)

$

0.1055    

 

 Yen (Japan)

0.0093    

 

 Pounds (Britain)

1.4620    

 

 Ringgits (Malaysia)

0.4456    

       

 

  

2016

  

 Jan.

12    

Received full   payment in pounds from Smithers for the October 14 sale and immediately   exchanged the pounds for dollars. The exchange rate for pounds is $1.4699 on   this day.

 

 Jan.

19    

Received   Hamid Albar’s full payment in ringgits for the December 20 sale and   immediately exchanged the ringgits for dollars. The exchange rate for   ringgits is $0.4420 on this day.

  

Required:

 

1.

Prepare   journal entries for the Doering transactions and adjusting entries. (Do not round your intermediate calculations. Enter your   answers in whole dollars.)

QUESTION 8)

  

2.

Compute the foreign exchange gain or loss to be reported on   Doering’s 2015 income statement. (Do not round your intermediate calculations. Round your final answers   to the nearest whole dollar. Losses should be indicated by a minus sign.)