Chapter 22: 18DQ (page 1013)
Explain the difference between value-added time and non-value-added time.
Time spent by a business entity for which a customer is willing to pay consideration is known as value-added time, but thetime for which the customer is not willing to pay is known as non-value-added time.
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Compute the times interest earned for Park Company, which reports income before interest expense and income tacxes of \(1,885,000 and interest expense of \)145,000. Interpret its times interest earned (assume that its competitors average a times interest earned of 4.0).
A machine costing \(257,500 with a four-year life and an estimated \)20,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 475,000 units of product during its life. It actually produces the following units: 220,000 in 1st year, 124,600 in 2nd year, 121,800 in 3rd year, 15,200 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)
Required
Prepare a table with the following column headings and compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method
Year | Straight line | Units of production | Double declining balance |
Oakwood Company produces maple bookcases. The following information is available for the production of a recent order of 500 bookcases.
Process time | 6.0 days | Move time | 3.2 days |
Inspection time | 0.8 days | Wait time | 5.0 days |
1. Compute the company’s manufacturing cycle time.
2. Compute the company’s manufacturing cycle efficiency. Interpret your answer.
3. Management believes it can reduce move time by 1.2 days and wait time by 2.8 days by adopting lean manufacturing techniques. Compute the company’s manufacturing cycle efficiency assuming the company’s predictions are correct.
The following information is available for Zetrov Company: a. The cash budget for March shows an ending bank loan of \(10,000 and an ending cash balance of \)50,000. b. The sales budget for March indicates sales of \(140,000. Accounts receivable are expected to be 70% of the current-month sales. c. The merchandise purchases budget indicates that \)89,000 in merchandise will be purchased on account in March. Purchases on account are paid 100% in the month following the purchase. Ending inventory for March is predicted to be 600 units at a cost of \(35 each. d. The budgeted income statement for March shows net income of \)48,000. Depreciation expense of \(1,000 and \)26,000 in income tax expense were used in computing net income for March. Accrued taxes will be paid in April. e. The balance sheet for February shows equipment of \(84,000 with accumulated depreciation of \)46,000, common stock of \(25,000, and ending retained earnings of \)8,000. There are no changes budgeted in the Equipment or Common Stock accounts. Prepare a budgeted balance sheet at the end of March.
Refer to the information in QS 22-10. Assume a target income of 12% of average invested assets. Compute residual income for each division.
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