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ACCOUNTING
Animal Gear Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for the month of April is given in the following tables: Animal Gear uses an activity-based costing system and classifies overhead into three activity pools: Setup, Processing, and Inspection. Activity rates for these activities are $105 per setup-hour,$10 per machine-hour, and $15 per inspection-hour, respectively. Other information follows: Nonmanufacturing fixed costs for March equal$32,000, half of which are salaries. Salaries are expected to increase 5% in April. The only variable nonmanufacturing cost is sales commission, equal to 1% of sales revenue. Prepare the following for April: 1. Revenues budget 2. Production budget in units 3. Direct material usage budget and direct material purchases budget 4. Direct manufacturing labor cost budget 5. Manufacturing overhead cost budgets for each of the three activities 6. Budgeted unit cost of ending finished goods inventory and ending inventories budget 7. Cost of goods sold budget 8. Nonmanufacturing costs budget 9. Budgeted income statement (ignore income taxes) 10. How does preparing the budget help Animal Gear’s management team better manage the company? $$ \begin{matrix} \text{Input Prices}\\ \text{Direct materials}\\ \text{Plastic} & \text{\$ 5 per pound}\\ \text{Metal} & \text{\$ per pound}\\ \text{Direct manufacturing labor} & \text{\$ 10 per direct manufacturing labor-hour}\\ \text{Input Quantities per Unit of Output}\\ \text{ } & \text{Cat-allac} & \text{Dog-eriffic}\\ \text{Direct materials}\\ \text{Plastic} & \text{4 pounds} & \text{6 pounds}\\ \text{Metal } & \text{0.5 pounds} & \text{1 pound}\\ \text{Direct Manufacturing labor-hour} & \text{3 hours} & \text{5 hours}\\ \text{Inventory information, Direct Materials}\\ \text{ } & \text{Plastic} & \text{Metal}\\ \text{Beginning inventory} & \text{290 pounds} & \text{70 pounds}\\ \text{Target ending inventory} & \text{410 pounds} & \text{65 pounds}\\ \text{Cost of beginning inventory} & \text{\$ 1.102} & \text{\$ 217}\\ \end{matrix} $$ Animal Gear accounts for direct materials using a FIFO cost flow assumption. $$ \begin{matrix} \text{Sales and Inventory information, Finished Goods}\\ \text{ } & \text{Cat-allac} & \text{Dog-eriffic}\\ \text{Expected sales in units} & \text{530} & \text{225}\\ \text{Selling price} & \text{\$ 205} & \text{\$ 310}\\ \text{Target ending inventory in units} & \text{30} & \text{10}\\ \text{Beginning inventory in units} & \text{10} & \text{25}\\ \text{Beginning inventory in dollars} & \text{\$ 1.000} & \text{\$ 4.650}\\ \end{matrix} $$ Animal Gear uses a FIFO cost flow assumption for finished goods inventory. $$ \begin{matrix} \text{Cost-Driver Information}\\ \text{ } & \text{Cat-allac} & \text{Dog-eriffic}\\ \text{Number of units per batch } & \text{25} & \text{9}\\ \text{Setup time per batch} & \text{1.50 hours} & \text{1.75 hours}\\ \text{Inspection time per batch} & \text{0.5 hour} & \text{0.7 hour}\\ \end{matrix} $$
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ACCOUNTING
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ACCOUNTING
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ACCOUNTING
Humanity International sells medical and food supplies to those in need in underdeveloped countries. Customers in these countries are often very poor and must purchase items on account. At the end of 2018, total accounts receivable equal $1,300,000. The company understands that it's dealing with high credit risk clients. These countries are often in the middle of a financial crisis, civil war, severe drought, or some other difficult circumstance. Because of this, Humanity International typically estimates the percentage of uncollectible accounts to be 35% (=$455,000). Actual write-offs in 2019 total only $300,000, which means that the company significantly overestimated uncollectible accounts in 2018. It appears that efforts by the International Monetary Fund (IMF) and the United Nations (UN), and a mild winter mixed with adequate spring rains, have provided for more stable economic conditions than were expected, helping customers to pay on their accounts. 1. Record the adjustment for uncollectible accounts at the end of 2018, assuming there is no balance in Allowance for Uncollectible Accounts at the end of 2018 before any adjustment. 2. By the end of 2019, Humanity International has the benefit of hindsight to know that estimates of uncollectible accounts in 2018 were too high. How did this overestimation affect the reported amounts of total assets and expenses at the end of 2018? Ignore tax effects. 3. Should Humanity International prepare new financial statements for 2018 to show the correct amount of uncollectible accounts? Explain.
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