Rainbow Cruises operates a weeklong cruise tour through the Hawaiian Islands. Passengers currently pay $1,500 for a two-person cabin, which is an all-inclusive price that includes food, beverages, and entertainment. The current cost to Rainbow per two person cabin is $1,200 for the weeklong cruise, and at this cost, Rainbow is able to earn the minimum profit margin needed to operate the business. Rainbow competes with two other cruise lines and, to date, $1,500 has been the prevailing market price for the weeklong cruises. Each cruise line provides exactly the same services to their passengers, but recently one of Rainbow’s competitors found a way to permanently lower its price to $1,250 per two-person cabin. Required: a. At a new market price of $1,250 per two-person cabin, calculate the target cost that will allow Rainbow to earn the same profit margin percentage it currently earns. b. Calculate the target cost reduction that Rainbow must achieve if it expects to remain competitive. c. Describe several cost reduction initiatives that Rainbow might explore to achieve its target cost reduction requirements.
> Prepare an answer sheet with the column headings shown here. For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on the appropriate balance sheet category and on net income by entering for each acco
> Prepare an answer sheet with the column headings shown here. For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on the appropriate balance sheet category and on net income by entering for each acco
> Prepare an answer sheet with the column headings shown here. For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on the appropriate balance sheet category and on net income by entering for each acco
> Prepare an answer sheet with the column headings shown here. For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on the appropriate balance sheet category and on net income by entering for each acco
> On November 1, 2022, Wenger Co. paid its landlord $31,800 in cash as an advance rent payment on its store location. The six-month lease period ends on April 30, 2023, at which time the contract may be renewed. Required: a. Use the horizontal model or wri
> The annual reports of the Coca Cola Co. and PepsiCo Inc. indicate the following for the year ended December 31, 2020 (amounts in millions): Required: a. Calculate ROI and ROE for each company for 2020. b. Based on the results of your ROI and ROE analysis
> Stockholders’ equity totaled $246,000 at the beginning of the year. During the year, net income was $36,000, dividends of $9,000 were declared and paid, and $30,000 of common stock was issued at par value Required: Calculate total stockholders’ equity at
> a. Use the horizontal model or write the journal entry to record the payment of a one-year insurance premium of $4,800 on April 1, 2022. b. Use the horizontal model or write the adjusting entry that will be made at the end of every month to show the amou
> Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $1,500,000 and average assets of $10,000,000. If Mannisto had used the LIFO cost flow assumption in the same year, its cost
> Husemann Co.’s assets include notes receivable from customers. During fiscal 2022, the amount of notes receivable averaged $525,000, and the interest rate of the notes averaged 4.2%. Required: a. Calculate the amount of interest revenue earned by Huseman
> Agrico Inc. accepted an 8-month, 12% (annual rate), $7,000 note from one of its customers on July 15, 2022; interest is payable with the principal at maturity. Required: a. Use the horizontal model or write the journal entry to record the interest earned
> Annual credit sales of Nadak Co. total $240 million. The firm gives a 2% cash discount for payment within 10 days of the invoice date; 90% of Nadak’s accounts receivable are paid within the discount period. Required: a. What is the total amount of cash d
> On January 1, 2022, the balance in Kubera Co.’s Allowance for Bad Debts account was $25,160. During the year, a total of $65,700 of delinquent accounts receivable was written off as bad debts. The unadjusted balance in the Allowance for Bad Debts account
> On January 1, 2022, the balance in Tabor Co.’s Allowance for Bad Debts account was $21,600. During the first 11 months of the year, bad debts expense of $24,910 was recognized. The balance in the Allowance for Bad Debts account at November 30, 2022, was
> a. Show the reconciling items in a horizontal model or write the adjusting journal entry (or entries) that should be prepared to reflect the reconciling items of Exercise 5.10. b. What is the amount of cash to be included in the August 31 balance sheet f
> a. Show the reconciling items in a horizontal model or write the adjusting journal entry (or entries) that should be prepared to reflect the reconciling items of Exercise 5.9. b. What is the amount of cash to be included in the June 30 balance sheet for
> Prepare a bank reconciliation as of August 31 from the following information: a. The August 31 balance shown on the bank statement is $9,050. b. There is a deposit in transit of $1,300 at August 31. c. Outstanding checks at August 31 totaled $1,620. d. I
> A friend has $5,000 that he has saved from his part-time job. He will need his money, plus any interest earned on it, in six months and has asked for your help in deciding whether to put the money in a bank savings account at 3% interest or to lend it to
> Write the journal entry(ies) for each of the transactions of Exercise 4.7. Data from Exercise 4.7: Record transactions and calculate financial statement amounts. The transactions relating to the formation of Blue Co. Stores Inc. and its first month of o
> This exercise provides practice in understanding the operation of T-accounts and transaction analysis. For each situation, you must solve for a missing amount. Use a T-account for the balance sheet account, show in a horizontal model, or prepare journal
> Answer these questions that are related to the following Interest Payable T-account: a. What is the amount of the February 28 adjustment? b. What account would most likely have been credited for the amount of the February transactions? c. What account wo
> A bookkeeper prepared the year-end financial statements of Giftwrap, Inc. The income statement showed net income of $216,000, and the balance sheet showed ending retained earnings of $810,000. The firm’s accountant reviewed the bookkeeper’s work and dete
> Proco had an account payable of $63,000 due to Shirmoo Inc., one of its suppliers. The amount was due to be paid on January 31. Proco did not have enough cash on hand then to pay the amount due, so Proco’s treasurer called Shirmoo’s treasurer and agreed
> On May 1, 2022, Tabor Co. received an $21,000 note from a customer in settlement of an $21,000 account receivable from that customer. The note bore interest at the rate of 9% per annum, and the note plus interest was payable April 30, 2023. Required: Use
> During the month of April, Riley Co. had cash receipts from customers of $780,000. Expenses totaled $624,000, and accrual basis net income was $218,000. There were no gains or losses during the month. Required: a. Calculate the revenues for Riley Co. for
> On February 1, 2022, the balance of the retained earnings account of Blue Power Corporation was $132,000. Revenues for February totaled $47,000, of which $41,500 was collected in cash. Expenses for February totaled $54,000, of which $38,400 was paid in c
> Enter the following column headings across the top of a sheet of paper: Enter the transaction or adjustment letter in the first column and show the effect, if any, of the transaction entry or adjustment on the appropriate balance sheet category or on the
> Enter the following column headings across the top of a sheet of paper. Enter the transaction or adjustment letter in the first column and show the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or o
> Evans Inc. had current liabilities at April 30 of $275,000. The firm’s current ratio at that date was 2.1. Required: a. Calculate the firm’s current assets and working capital at April 30. b. Assume that management paid $27,500 of accounts payable on Apr
> Prepare an answer sheet with the column headings shown after the following list of transactions. Record the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the a
> Prepare an answer sheet with the column headings shown after the following list of transactions. Record the effect, if any, of the transaction entry or adjusting entry on the appropriate balance sheet category or on the income statement by entering the a
> Write the journal entry(ies) for each of the transactions of Exercise 4.8. Data from Exercise 4.8: The following are the transactions relating to the formation of Gray Mowing Services Inc. and its first month of operations. Prepare an answer sheet with
> Your friend Amber has approached you seeking advice concerning two investment opportunities that she is presently considering. Her classmate Simone has asked her for a loan of $5,000 to help establish a small business; her neighbor Riley would like to bo
> For the year ended December 31, 2022, Settles Inc. earned an ROI of 12.6%. Sales for the year were $120 million, and average asset turnover was 2.8. Average stockholders’ equity was $25 million. Required: a. Calculate Settles Inc.’s margin and net income
> a. Firm A has a margin of 7%, sales of $980,000, and ROI of 19.6%. Calculate the firm’s average total assets. b. Firm B has net income of $259,200, turnover of 0.9, and average total assets of $1,800,000. Calculate the firm’s sales, margin, and ROI. Roun
> An investor has accumulated $25,000 and is looking for the best rate of return that can be earned over the next year. A bank savings account will pay 3%. A one-year bank certificate of deposit will pay 6%, but the minimum investment is $30,000. Required:
> Your friend has two investment opportunities that she is considering and has asked for your advice regarding how she should proceed. One will have an 9% rate of return on an investment of $12,000; the other will have a 12% rate of return on an investment
> From the following data, calculate the retained earnings balance as of December 31, 2021:
> Memorial Hospital is considering the acquisition of a new diagnostic scanning machine. The investment required to get the machine operational will be $1,895,000. The machine will be capable of performing 8,000 scanning procedures per year, but based on t
> Jay Oullette, CEO of Bumper to Bumper Inc., anticipates that his company’s year-end balance sheet will show current assets of $300,000 and current liabilities of $200,000. Oullette has asked your advice concerning a possible early payment of $75,000 of a
> CarCare Garage Company is considering an investment in a new tune-up computer. The cost of the computer is $48,000. A cost analyst has calculated the discounted present value of the expected cash flows from the computer to be $52,650, based on the firm’s
> A task force of capital budgeting analysts at Morrison Ltd. collected the following data concerning the drilling and production of known petroleum reserves at an offshore location: Required: a. Calculate the net present value of the proposed investment i
> National Leasing is evaluating the cost of capital to use in its capital budgeting process. Over the recent past, the company has averaged a return on equity of 13% and a return on investment of 10%. The company can currently borrow short-term money for
> Capital budgeting analysis involves the use of many estimates. Required: For each of the following estimation errors, state whether the net present value of the project will be too high or too low: a. The investment is too high. b. The cost of capital is
> Use the appropriate factors from Table 6.4 or Table 6.5 to answer the following questions. Required: a. Spencer Co.’s common stock is expected to have a dividend of $5 per share for each of the next 10 years, and it is estimated that the market value per
> ABC Company produces product X, product Y, and product Z. All three products require processing on specialized finishing machines. The capacity of these machines is 1,800 hours per month. ABC Company wants to determine the product mix that should be achi
> Product X has a contribution margin of $150 per unit and requires three hours of machine time. Product Y requires four hours of machine time and provides $200 of contribution margin per unit. Required: If the capacity of machine time is limited to 600 ho
> Redbud Company uses a certain part in its manufacturing process that it buys from an outside supplier for $36 per part plus another $5 for shipping and other purchasing-related costs. The company will need 18,000 of these parts in the next year and is co
> Waterway Engine Inc. produces engines for the watercraft industry. An outside manufacturer has offered to supply several component parts used in the engine assemblies, which are currently being produced by Waterway. The supplier will charge Waterway $620
> At the beginning of the current fiscal year, the balance sheet for Davis Co. showed liabilities of $160,000. During the year, liabilities decreased by $9,000, assets increased by $33,000, and paid-in capital increased from $15,000 to $96,000. Dividends d
> EagleEye Ltd., a manufacturer of digital cameras, is considering entry into the digital binocular market. EagleEye currently does not produce binoculars of any style, so this venture would require a careful analysis of relevant manufacturing costs to cor
> SureLock Manufacturing Co. makes and sells several models of locks. The cost records for the ZForce lock show that manufacturing costs total $23.25 per lock. An analysis of this amount indicates that $13.40 of the total cost has a variable cost behavior
> ADP Mining Company mines an iron ore called Alpha. During the month of August, 350,000 tons of Alpha were mined and processed at a cost of $675,000. As the Alpha ore is mined, it is processed into Delta and Pi, where 60% of the Alpha output becomes Delta
> The cost formula for the maintenance department of Rambo Ltd. is $9,700 per month plus $3.85 per machine hour used by the production department. Required: a. Calculate the maintenance cost that would be budgeted for a month in which 13,400 machine hours
> Romano Corporation has three operating divisions and requires a 12% return on all investments. Selected information is presented here: Required: a. Calculate the missing amounts for each division. b. Comment on the relative performance of each division.
> The Northern Division of Allied Inc. has operating income of $32,000 on sales revenue of $320,000. Divisional operating assets are $160,000, and management of Allied has determined that a minimum return of 15% should be expected from all investments. Req
> Vogel Co. produces three models of heating and air conditioning thermostat components. The following table summarizes data about each model: Required: a. Criticize the preceding presentation. On what basis does the $10,000 of company fixed expenses appea
> The president of Eaglesway Inc. attended a seminar about the contribution margin model and returned to her company full of enthusiasm about it. She requested that last year’s traditional model income statement be revised, and she receiv
> Fiberworks Company is a manufacturer of fiberglass toy boats. The company has recently implemented a standard cost system and has designed the system to isolate variances as soon as possible. During the month of May, the following results were reported f
> Oakton Inc. manufactures end tables, armchairs, and other wood furniture products from high-quality materials. The company uses a standard costing system and isolates variances as soon as possible. The purchasing manager is responsible for controlling di
> At the beginning of its current fiscal year, Willie Corp.’s balance sheet showed assets of $67,600 and liabilities of $33,000. During the year, liabilities decreased by $5,000. Net income for the year was $20,400, and net assets at the
> Four Seasons Industries has established direct labor performance standards for its maintenance and repair shop. However, some of the labor records were destroyed during a recent fire. The actual hours worked during August were 3,000, and the total direct
> Smallman’s Garage uses standards to plan and control labor time and expense. The standard time for an engine tune-up is 4 hours, and the standard labor rate is $20 per hour. Last week, 36 tune-ups were completed. The labor efficiency variance was 12 hour
> For the stamping department of a manufacturing firm, the standard cost for direct labor is $15 per hour, and the production standard calls for 1,000 stampings per hour. During February, 198 hours were required for actual production of 186,000 stampings.
> Following is a partially completed performance report for a recent week for direct labor in the binding department of a book publisher: The original budget is based on the expectation that 4,000 books would be bound; the standard is 25 books per hour at
> Western Manufacturing produces a single product. The original budget for April was based on expected production of 17,500 units; actual production for April was 16,600 units. The original budget and actual costs incurred for the manufacturing department
> Olympia Productions Inc. makes award medallions that are attached to ribbons. Each medallion requires 18 inches of ribbon. The sales forecast for March is 4,000 medallions. Estimated beginning inventories and desired ending inventories for March are as f
> A cost analyst for Stamper Manufacturing Co. has assembled the following data about the Model 24 stamp pad: The piece of sheet metal from which eight pad cases can be made costs $0.18. This amount is based on the number of sheets in a 4,000- pound bundle
> MDA Inc. processes corn into corn starch and corn syrup. The company’s productivity and cost standards follow: From every bushel of corn processed, ten pounds of starch and five pounds of syrup should be produced. Standard direct labor and variable overh
> Lakeway Manufacturing Co. manufactures and sells household cleaning products. The company’s research department has developed a new cleaner for which a standard cost must be determined. The new cleaner is made by mixing 15 quarts of triphate solution and
> Oakwood Creations Co. makes decorative candle pedestals. An industrial engineer consultant developed ideal time standards for one unit of the Berkley model pedestal. The standards follow, along with the cost accountant’s determination o
> McDonald’s Corp. McDonald’s conducts operations worldwide and is managed in two primary geographic segments: U.S., and International Operated Markets, which is comprised of Australia, Canada, France, Germany, Italy, th
> Scottsdale Co. has actual sales for July and August and forecast sales for September, October, November, and December as follows: Based on past experience, it is estimated that 40% of a month’s sales are collected in the month of sale,
> Brooklyn Studio’s sales are all made on account. The firm’s collection experience has been that 25% of a month’s sales are collected in the month the sale is made, 60% are collected in the month follo
> Osage Inc. has actual sales for May and June and forecast sales for July, August, September, and October as follows: Required: a. The firm’s policy is to have finished goods inventory on hand at the end of the month that is equal to 80%
> Each gallon of Old Brut, a popular aftershave lotion, requires three ounces of ocean scent. Budgeted production of Old Brut for the first three quarters of 2022 is as follows: Management’s policy is to have on hand at the end of every q
> Gillman Co. is forecasting sales of 80,600 units of product for August. To make one unit of finished product, five pounds of raw materials are required. Actual beginning and desired ending inventories of raw materials and finished goods are as follows: R
> Colorado Business Tools manufactures calculators. Costs incurred in making 12,500 calculators in February included $42,500 of fixed manufacturing overhead. The total absorption cost per calculator was $11.75. Required: a. Calculate the variable cost per
> Angora Creations Co. manufactures wool sweaters. Costs incurred in making 45,000 sweaters in September included $180,000 of fixed manufacturing overhead. The total absorption cost per sweater was $34.80. Required: a. Calculate the variable cost per sweat
> Staley Toy Co. makes toy flutes. Two manufacturing overhead application bases are used; some overhead is applied on the basis of machine hours at a rate of $7.20 per machine hour, and the balance of the overhead is applied at the rate of 250% of direct l
> Trendy Creations Tie Co. manufactures neckties and scarves. Two overhead application bases are used; some overhead is applied on the basis of raw material cost at a rate of 150% of material cost, and the balance of the overhead is applied at the rate of
> Creative Lighting Inc. makes specialty table lamps. Manufacturing overhead is applied to production on a direct labor hours basis. During June, the first month of the company’s fiscal year, $110,880 of manufacturing overhead was applied to Work in Proces
> From the following data, calculate the retained earnings balance as of December 31, 2022:
> Janson Inc. produces pickup truck bumpers. Overhead is applied on the basis of machine hours required for cutting and fabricating. A predetermined overhead application rate of $25.40 per machine hour was established for 2022. Required: a. If 5,000 machin
> Nautical Footwear Inc. manufactures women’s boating shoes. Manufacturing overhead is assigned to production on a machine-hour basis. For 2022, it was estimated that manufacturing overhead would total $487,200 and that 33,600 machine hours would be used.
> Ironstone Inc. produces ceramic coffee mugs and pencil holders. Manufacturing overhead is assigned to production using an application rate based on direct labor hours. Required: a. For 2022, the company’s cost accountant estimated that total overhead co
> The management of Rocko’s Pizzeria is considering a special promotion for the last two weeks of May, which is normally a relatively low-demand period. The special promotion would involve selling two medium pizzas for the price of one, plus 1 cent. The me
> Jen and Barry’s ice cream shop charges $2.20 for a cone. Variable expenses are $0.66 per cone, and fixed costs total $2,600 per month. A Valentine’s Day promotion is being planned for the second week of February. During this week, a person buying a cone
> D&R Corp. has annual revenues of $375,000, an average contribution margin ratio of 32%, and fixed expenses of $150,000. Required: a. Management is considering adding a new product to the company’s product line. The new item will have $9.52 of variable co
> O’Reilly Inc. makes and sells many consumer products. The firm’s average contribution margin ratio is 25%. Management is considering adding a new product that will require an additional $18,000 per month of fixed expenses and will have variable expenses
> Calculate the missing amounts for each of the following firms:
> Calculate the missing amounts for each of the following firms:
> The following information provides the amount of cost incurred in March for the cost items indicated. During March, 4,000 units of the firm’s single product were manufactured. Required: a. How much cost would you expect to be incurred f
> The information presented here represents selected data from the December 31, 2022, balance sheets and income statements for the year then ended for three firms: Required: Calculate the missing amounts for each firm.
> Thomas estimates that the costs of insurance, license, and depreciation to operate his car total $580 per month and that the gas, oil, and maintenance costs are 40 cents per mile. Thomas also estimates that, on average, he drives his car 1,800 miles per
> A friend has accumulated $10,000 and has decided to invest that hard earned money in the common stock of a publicly owned corporation. What data about that company would you suggest that she be most interested in, and how would you suggest to arrange tho
> During the fiscal year ended September 30, 2023, Worrell Inc. had a 2-for-1 stock split and a 5% stock dividend. In its annual report for 2023, the company reported earnings per share for the year ended September 30, 2022, on a restated basis, of $1.80.
> During the year ended December 31, 2023, Gluco Inc. split its stock on a 3-for-1 basis. In its annual report for 2022, the firm reported net income of $442,890 for 2022, with an average 155,400 shares of common stock outstanding for that year. There was
> For the year ended December 31, 2021, Finco Inc. reported earnings per share of $3.30. During 2022, the company had a 5-for-1 stock split. Calculate the 2021 earnings per share that will be reported in Finco’s 2022 annual report for comparative purposes.
> For several years Orbon Inc. has followed a policy of paying a cash dividend of $0.45 per share and having a 10% stock dividend. In the 2023 annual report, Orbon reported restated earnings per share for 2021 of $2.70. Required: a. Calculate the originall
