Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory using the LIFO inventory costing method but did not compare the cost of its ending inventory to its market value (replacement cost). The preliminary income statement follows: Sales Revenue $152,000

Cost of Goods Sold

Beginning Inventory $18,000

Purchases 97,000

Goods Available for Sale 115,000

Ending Inventory 30,420

Cost of Goods Sold 84,580

Gross Profit 67,420

Operating Expenses 34,000

Income from Operations 33,420

Income Tax Expense (30%) 10,026

Net Income $23,394

Assume that you have been asked to restate the financial statements to incorporate the LCM/NRV rule. You have developed the following data relating to the ending inventory:

Purchase Cost

Item Quantity Per Unit Total Replacement Cost per Unit

A 1,800 $3.60 $6,480 $4.60

B 800 4.00 3,200 2.60

C 4,100 2.60 10,660 1.30

D 1,800 5.60 10,080 3.60

$30,420

Required:

1. Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis.
2. Compare the LCM/NRV effect on each amount that was changed in the preliminary income statement in requirement 1.

REQUIRED 1

SPRINGER ANDERSON GYMNASTICS

Income Statement (LCM/NRV basis)

For the Year Ended December 31

Sales Revenue

Cost of Goods Sold:

Beginning Inventory

Purchases

Goods Available for Sale

Ending Inventory

Cost of Goods Sold

Gross Profit

Operating Expenses

Income from Operations

Income Tax Expense

Net Income

REQUIRED 2

Item Changed LIFO Cost Basis | LCM/NRV Basis | Amount of Increase (Decrease)

Ending Inventory

Cost of Goods Sold

Gross Profit

Income from Operations

Income Tax Expense

Net Income

5. profit maximization and shutting down in the short run suppose that the market for polos is a competitive market. the following graph shows the daily cost curves of a firm operating in this market. 0 2 4 6 8 10 12 14 16 18 20 50 45 40 35 30 25 20 15 10 5 0 price (dollars per polo) quantity (thousands of polos) mc atc avc for each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the previous graph to identify its total variable cost. assume that if the firm is indifferent between producing and shutting down, it will produce. (hint: you can select the purple points [diamond symbols] on the previous graph to see precise information on average variable cost.) price quantity total revenue fixed cost variable cost profit (dollars per polo) (polos) (dollars) (dollars) (dollars) (dollars) 12.50 135,000 27.50 135,000 45.00 135,000 if the firm shuts down, it must incur its fixed costs (fc) in the short run. in this case, the firm's fixed cost is $135,000 per day. in other words, if it shuts down, the firm would suffer losses of $135,000 per day until its fixed costs end (such as the expiration of a building lease). this firm's shutdown price—that is, the price below which it is optimal for the firm to shut down—is per polo.

Amano s preguntes cationing to come fonds and consumer good 8. why did the u. s. government use rationing for some foods and consumer goods during world war ii?

Zachary company produces commercial gardening equipment. since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. the costs and cost drivers associated with the four overhead activity cost pools follow: activities unit level batch level product level facility level cost $ 64,800 $ 27,730 $ 15,000 $ 154,000 cost driver 2,400 labor hrs. 47 setups percentage of use 11,000 units production of 780 sets of cutting shears, one of the company’s 20 products, took 240 labor hours and 7 setups and consumed 15 percent of the product-sustaining activities. required: (a) had the company used labor hours as a company wide allocation base, how much overhead would it have allocated to the cutting shears? (b) how much overhead is allocated to the cutting shears using activity-based costing? (c) compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 780 units are produced. if direct product costs are $150 and the product is priced at 30 percent above cost for what price would the product sell under each allocation system? (d) assuming that activity-based costing provides a more accurate estimate of cost, indicate whether the cutting shears would be over- or underpriced if direct labor hours are used as an allocation base. explain how over-or undercosting can affect vaulker's profitability. (e) comment on the validity of using the allocated facility-level cost in the pricing decision. should other costs be considered in a cost- plus pricing decision? if so, which ones? what costs would you include if you were trying to decide whether to accept a special order?