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ACC 206 Week 1 Assignment Chapter One Problems
ACC 206 Week 1 DQ1 Cash Flows Information
ACC 206 Week 1 DQ2 Apple's Cash Flow
ACC 206 Week 2 Assignment Chapter Two and Three Problems
ACC 206 Week 2 DQ1 Stock Features
ACC 206 Week 2 DQ2 Role of Management Accounting
ACC 206 Week 2 Journal Institute of Management Accounting
ACC 206 Week 3 Assignment Chapter Four and Five Problems
ACC 206 Week 3 DQ1 Issues in Costing
ACC 206 Week 3 DQ2 CVP and the Airline Industry
ACC 206 Week 3 Journal Hershey Company
ACC 206 Week 4 Assignment Chapter Six and Seven Problems

ACC 206 Week 4 DQ1 Issues in Standard Costs and Budgeting
ACC 206 Week 4 DQ2 Flexible Budgets
ACC 206 Week 5 Assignment Chapter Eight Problems
ACC 206 Week 5 Assignment Final Papers
ACC 206 Week 5 DQ1 Long-term Decision Making
ACC 206 Week 5 DQ2 Responsibilities in Management Accounting
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ACC 206 Week 1 Assignment Chapter One
Problems
Answer the following questions:
Why are noncash transactions, such as the exchange of common stock a
building, included on a statement of cash flows? How are these noncash
transactions disclosed?

Chapter 1 Exercise 1:
1. Classification of activities
Classify each of the following transactions as arising from an operating
(O), investing (I), financing (F), or noncash investing/financing (N)
activity.
a. ________ Received $80,000 from the sale of land.
b. ________ Received $3,200 from cash sales.
c. ________ Paid a $5,000 dividend.
d. ________ Purchased $8,800 of merchandise for cash.
e. ________ Received $100,000 from the issuance of common stock.
f. ________ Paid $1,200 of interest on a note payable.
g. ________ Acquired a new laser printer by paying $650.
h. ________ Acquired a $400,000 building by signing a $400,000
mortgage note.
4. Overview of direct and indirect methods

Evaluate the comments that follow as being True or False. If the
comment is false, briefly explain why.
a. Both the direct and indirect methods will produce the same cash
flow from operating activities.
b. Depreciation expense is added back to net income when the
indirect method is used.
c. One of the advantages of using the direct method rather than the
indirect method is that larger cash flows from financing activities will be
reported.
d. The cash paid to suppliers is normally disclosed on the statement
of cash flows when the indirect method of statement preparation is
employed.
e. The dollar change in the Merchandise Inventory account appears
on the statement of cash flows only when the direct method of statement
preparation is used.
6. Equipment transaction and cash flow reporting
New equipment purchased during 20x4 totaled $280,000. The 20x4
income statement disclosed equipment depreciation expense of $41,000
and a $9,000 loss on the sale of equipment.

a. Determine the cost and accumulated depreciation of the equipment
sold during 20X4.
b. Determine the selling price of the equipment sold.
c. Show how the sale of equipment would appear on a statement of
cash flows prepared by using the indirect method.
Chapter 1 Problem 3:
3. Cash flow information: Direct and indirect methods
The comparative year-end balance sheets of Sign Graphics, Inc.,
revealed the following activity in the company's current accounts:
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ACC 206 Week 1 DQ 2 Apple's Cash Flow
Go to http://finance.yahoo.com.

Enter in “AAPL” and click on the “get quote” button, and it will bring
up information on Apple. On the left hand side you’ll see a section on
Financials. Within that section, click on the cash flow. Review the cash
flow statement for Apple. How would you summarize Apple’s cash flow
position and what does this statement tell you about where the money is
coming from and where it’s going? What would you suggest Apple’s do
to improve its cash position and why?
Guided Response:
Analyze several of your peers’ postings. Do you agree with the posting?
Let at least two of your peers know what you would add.
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ACC 206 Week 1 DQ1 Cash Flows Information
What information does the cash flow statement provide that you cannot
see in the other financial statements (income statement, balance sheet,
owner’s equity)? What elements of the cash flow statement do you think
are most important for company management to monitor and why? Is
this different for investors?

Guided Response:
Review your peers’ postings. Respond to at least two of classmates,
letting them know whether you agree with the use of the cash flow
statement and why. Additionally, share elements of the cash flow
statement that you see as being the greatest interest to investors (as
opposed to internal management) and why.
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ACC 206 Week 2 Assignment Chapter Two and
Three Problems
Please complete the following 7 exercises below in either Excel or a
word document (but must be single document). You must show your
work where appropriate (leaving the calculations within Excel cells is
acceptable). Save the document, and submit it in the appropriate week
using the Assignment Submission button.

Chapter 2 Exercise 1
1. Issuance of stock
Prepare journal entries to record the issuance of 100,000 shares of
common stock at $20 per share for each of the following independent
cases:
a. Jackson Corporation has common stock with a par value of $1 per
share.
b. Royal Corporation has no-par common with a stated value of $5
per share.
c. French Corporation has no-par common; no stated value has been
assigned
3. Analysis of stockholders' equity
Star Corporation issued both common and preferred stock during 20X6.
The stockholders' equity sections of the company's balance sheets at the
end of 20X6 and 20X5 follow.
20X6
20X5
Preferred stock, $100 par value, 10%

$580,000
$500,000
Common stock, $10 par value
2,350,000
1,750,000
Paid-in capital in excess of par value
Preferred
24,000
—
Common
4,620,000
3,600,000

Retained earnings
8,470,000
6,920,000
Total stockholders' equity
$16,044,000
$12,770,000
a. Compute the number of preferred shares that were issued during
20X6.
b. Calculate the average issue price of the common stock sold in
20X6.
c. By what amount did the company's paid-in capital increase during
20X6?
d. Did Star's total legal capital increase or decrease during 20X6? By
what amount?
Chapter 2 Problem 1
1. Bond computations: Straight-line amortization

Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1.
The bonds pay interest on March 1 and September 1 and mature in 10
years. Assume the independent cases that follow.
—The bonds are issued at 100.
Southlake uses the straight-line method of amortization.
Instructions:
Complete the following table:
Case A
Case B
Case C
Cash inflow on the issuance date
_______

_______
_______
Total cash outflow through maturity
_______
_______
_______
Total borrowing cost over the life of the bond issue
_______
_______
_______
Interest expense for the year ended December 31, 20X1

_______
_______
_______
Amortization for the year ended December 31, 20X1
_______
_______
_______
Unamortized premium as of December 31, 20X1
_______
_______
_______
Unamortized discount as of December 31, 20X1

_______
_______
_______
Bond carrying value as of December 31, 20X1
_______
_______
_______
1. Product costs and period costs
The costs that follow were extracted from the accounting records of
several different manufacturers:
1. Weekly wages of an equipment maintenance worker
2. Marketing costs of a soft drink bottler

3. Cost of sheet metal in a Honda automobile
4. Cost of president's subscription to Fortune magazine
5. Monthly operating costs of pollution control equipment used in a
steel mill
6. Weekly wages of a seamstress employed by a jeans maker
7. Cost of compact discs (CDs) for newly recorded releases of Rush,
Billy Joel, and Bryan Adams
a. Determine which of these costs are product costs and which are
period costs.
b. For the product costs only, determine those that are easily traced to
the finished product and those that are not.
2. Definitions of manufacturing concepts
Interstate Manufacturing produces brass fasteners and incurred the
following costs for the year just ended:
Materials and supplies used
Brass $75,000
Repair parts 16,000
Machine lubricants 9,000

Wages and salaries Machine operators 128,000
Production supervisors 64,000
Maintenance personnel 41,000
Other factory overhead Variable 35,000
Fixed 46,000
Sales commissions 20,000
Compute:
a. Total direct materials consumed
b. Total direct labor
c. Total prime cost
d. Total conversion cost
5. Schedule of cost of goods manufactured, income statement
The following information was taken from the ledger of Jefferson
Industries, Inc.:

Direct labor
$85,000
Administrative expenses
$59,000
Selling expenses
34,000
Work in. process
Sales
300,000
Jan. 1
29,000
Finished goods
Dec. 31

21,000
Jan. 1
115,000
Direct material purchases
88,000
Dec. 31
131,000
Depreciation: factory
18,000
Raw (direct) materials on hand
Indirect materials used
10,000
Jan. 1

31,000
Indirect labor
24,000
Dec. 31
40,000
Factory taxes
8,000
Factory utilities
11,000
Prepare the following:
a. A schedule of cost of goods manufactured for the year ended
December 31.
b. An income statement for the year ended December 31.

Chapter 3 Problem 3
3. Manufacturing statements and cost behavior
Tampa Foundry began operations during the current year, manufacturing
various products for industrial use. One such product is light-gauge
aluminum, which the company sells for $36 per roll. Cost information
for the year just ended follows.
Per Unit
Variable Cost
Fixed Cost
Direct materials
$4.50
$ —
Direct labor
6.5
—
Factory overhead

9
50,000
Selling
—
70,000
Administrative
—
135,000
Production and sales totaled 20,000 rolls and 17,000 rolls, respectively
There is no work in process. Tampa carries its finished goods inventory
at the average unit cost of production.
Instructions:
a. Determine the cost of the finished goods inventory of light-gauge
aluminum.

b. Prepare an income statement for the current year ended December
31
c. On the basis of the information presented:
1. Does it appear that the company pays commissions to its sales
staff? Explain.
2. What is the likely effect on the $4.50 unit cost of direct materials if
next year's production increases? Why?
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ACC 206 Week 2 DQ1 Stock Features
1. What is callable preferred stock? Why do corporations issue such
stock? Given the different features that are associated with stock
(callable, cumulative, preferred, etc.), what type of stock would you
want to buy personally and why?

Guided Response:
Review your peers’ posts. Respond to at least two of your classmates,
letting them know if you agree with their type of desired stock and
whether your answer would change (and why) based on:
a. Different economic conditions
b. State of the company (if the company is in a growth phase versus a
mature state).
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ACC 206 Week 2 DQ2 Role of Management
Accounting
Review the roles of management accounting within a company. What is
the most important role of management accounting? How is that
different than financial accounting?
Guided Response:

Review your peer's responses. Respond to at least two of your peers,
adding at least two additional areas that management accountants focus
on that the author didn't include
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ACC 206 Week 2 Journal Institute of Management
Accounting
While there are many instances of overlap between financial accounting
and management accounting, each group’s primary focus is different.
Review the Institute of Management Accounting’s (IMA) website,
specifically the “About IMA” and the “Resources and Publications”
sections of the website. Are you surprised by the topics that management
accountants are focusing on? Why or why not? What interests you more,
financial accounting or management accounting?
Carefully review the Grading Rubric for the criteria that will be used to
evaluate your journal entry.
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ACC 206 Week 3 Assignment Chapter Four and
Five Problems
3. Cost flows and overhead application
Cleveland Metals uses a job cost system and applies factory overhead to
production at a predetermined rate of 180% of direct labor cost. Data
pertaining to recent operations follow.
the current year. The Work in Process account contained a $24,600
balance on this date.

January.
incurred during January amounted to $89,200 and $114,500,
respectively.
was job no. 638, with costs of $15,000 for direct materials and $20,000
for direct labor.
a. Compute the total cost of the work in process inventory on January
31.
b. Compute the cost of jobs completed during January, and present
the proper journal entry to reflect job completion.
7. Overhead application: Working backward
The Towson Manufacturing Corporation applies overhead on the basis
of machine hours. The following divisional information is presented for
your review:
Division A

Division B
Actual machine hours
22,500
?
Estimated machine hours
20,000
?
Overhead application rate
$4.50
$5.00
Actual overhead
$110,000
?

Estimated overhead
?
$90,000
Applied overhead
?
$86,000
Over- (under-) applied overhead
?
$6,500
Find the unknowns for each of the divisions.
Chapter 4 Problem 2
2. Computations using a job order system

General Corporation employs a job order cost system. On May 1 the
following balances were extracted from the general ledger;
Work in process $ 35,200
Finished goods 86,900
Cost of goods sold 128,700
Work in Process consisted of two jobs, no. 101 ($20,400) and no. 103
($14,800). During May, direct materials requisitioned from the
storeroom amounted to $96,500, and direct labor incurred totaled
$114,500. These figures are subdivided as follows:
Direct Materials
Direct Labor
Job No.
Amount
Job No.
Amount

101
$5,000
101
$7,800
115
19,500
103
20,800
116
36,200
115
42,000
Other

35,800
116
18,000
$96,500
Other
25,900
$114,500
Job no. 115 was the only job in process at the end of the month. Job no.
101 and three "other" jobs were sold during May at a profit of 20% of
cost. The "other" jobs contained material and labor charges of $21,000
and $17,400, respectively.
General applies overhead daily at the rate of 150% of direct labor cost as
labor summaries are posted to job orders. The firm's fiscal year ends on
May 31.

Instructions:
a. Compute the total overhead applied to production during May.
b. Compute the cost of the ending work in process inventory.
c. Compute the cost of jobs completed during May.
d. Compute the cost of goods sold for the year ended May 31.
1. High-low method
The following cost data pertain to 20X6 operations of Heritage Products:
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Shipping costs

$58,200
$58,620
$60,125
$59,400
Orders shipped
120
140
175
150
The company uses the high-low method to analyze costs.
a. Determine the variable cost per order shipped.
b. Determine the fixed shipping costs per quarter.

c. If present cost behavior patterns continue, determine total shipping
costs for 20X7 if activity amounts to 570 orders.
The treasurer anticipates the following costs for the event, which will be
held at the Regency Hotel:
Room rental $300
Dinner cost (per person) 25
Chartered buses 500
Favors and souvenirs (per person) 5
Band 900
Each person would pay $40 to attend; 200 attendees are expected.
a. Will the event be profitable for the sorority? Show computations.
b. How many people must attend for the sorority to break even?
c. Suppose the sorority encouraged its members to drive to the hotel
and did not charter the buses. Further, a planned menu change will
reduce the cost per meal by $2. If each member will still be charged $40,
compute the contribution margin per person.
3. Break-even and other CVP relationships

Cedars Hospital has average revenue of $180 per patient day. Variable
costs are $45 per patient day; fixed costs total $4,320,000 per year.
a. How many patient days does the hospital need to break even?
b. What level of revenue is needed to earn a target income of
$540,000?
c. If variable costs drop to $36 per patient day, what increase in fixed
costs can be tolerated without changing the break-even point as
determined in part (a)?
Chapter 5 Problem 6
6. Direct and absorption costing
The information that follows pertains to Consumer Products for the year
ended December 31, 20X6.
Inventory, 1/1/X6
24,000 units
Units manufactured
80,000
Units sold

82,000
Inventory, 12/31/X6
? units
Manufacturing costs:
Direct materials
$3 per unit
Direct labor
$5 per unit
Variable factory overhead
$9 per unit
Fixed factory overhead
$280,000
Selling & administrative expenses:
Variable

$2 per unit
Fixed
$136,000
The unit selling price is $26. Assume that costs have been stable in
recent years.
Instructions:
a. Compute the number of units in the ending inventory.
b. Calculate the cost of a unit assuming use of:
1. Direct costing.
2. Absorption costing.
c. Prepare an income statement for the year ended December 31,
20X6, by using direct costing.
d. Prepare an income statement for the year ended December 31,
20X6, by using absorption costing.
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ACC 206 Week 3 DQ 2 CVP and the Airline
Industry
We’ve all experienced (or heard about) the challenges that the airlines
have been facing. Read the Zacks Investment Research article, “Airline
Industry Stock Outlook – August 2012” Identify three factors that are
affecting airline company’s ability to break even. For each of your
factors, discuss how these have an impact on the breakeven (contribution
margin, fixed costs, variable costs, a combination, etc.), and what
happens if these factors increase or decrease.
Guided Response:
Review your peers’ posts and respond to at least two of your peers. In
each response, add two factors that your classmate hasn’t included and
explain how your additional factors influence the break-even point.
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ACC 206 Week 3 DQ1 Issues in Costing

Describe three issues/problems that a company could encounter when
trying to determine the actual cost of a good or service to be used in the
cost of goods sold. For each of your issues, provide an example of a
company or industry where these issues could be present.
Guided Response:
Review your peers’ posts and respond to at least two of your classmates.
Describe how job order costing or activity-based costing could resolve
the issues your classmates mentioned in their posts.
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ACC 206 Week 3 Journal Hershey Company

Go the Hershey website to learn how to make Hershey chocolate.
Review the process and take a look at some of the videos. Pay particular
attention to the process steps of milling and pressing, mixing the
ingredients, and refining.
In at least one paragraph, describe the costing system that you would
recommend Hershey use to account for its cost of goods sold and why.
Include a few product costs you think would be traceable, which costs
should be allocated, and how Hershey should account and apply the
manufacturing overhead costs.
evaluate your journal entry.
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ACC 206 Week 4 Assignment Chapter Six and
Seven Problems

2. Schedule of cash collections
Sugarland Company sells a single product and anticipates opening a new
facility in Charlotte on May 1 of the current year. Expected sales during
the first three months of activity are: May, $60,000; June, $80,000; and
July, $85,000. Thirty percent of all sales are for cash; the remaining 70%
are on account. Credit sales have the following collection pattern:
4. Production and cash-outlay computations
RPR, Inc., anticipates that 120,000 units of product K will be sold
during May. Each unit of product K requires four units of raw material
A. Actual inventories as of May 1 and budgeted inventories as of May
31 follow.
5. Abbreviated cash budget; financing emphasis
An abbreviated cash budget for Big Chuck Enterprises follows.

Chapter 6 Problem 3
3. Comprehensive budgeting
The balance sheet of Watson Company as of December 31, 20X1,
follows.
3. Variances for direct materials and direct labor
Banner Company manufactures flags of various countries. Each flag has
a standard of eight square feet of fabric and three hours of direct labor
time. Information about recent production activity follows.
5. Overhead variances
Nova Manufacturing applies factory overhead to products on the basis of
direct labor hours. At the beginning of the current year, the company's
accountant made the following estimates for the forthcoming period:
· Estimated variable overhead: $500,000
· Estimated fixed overhead: $400,000
· Estimated direct labor hours: 40,000

It is now 12 months later. Actual total overhead incurred in the
manufacture of 7,900 units amounted to $895,100.Actual labor hours
totaled 39,800. Assuming a direct labor standard of five hours per
finished unit, calculate the following:
a. Variable overhead efficiency variance
b. Fixed overhead volume variance
c. Overhead spending variance
Chapter 7 Problem 1
1. P26-A1 Basic flexible budgeting (L.O. 2)
Centron, Inc., has the following budgeted production costs:
Direct materials
$0.40 per unit
Direct labor
1.80 per unit
2.20 per unit

Supervision
$24,000
Maintenance
18,000
Other
12,000
The company normally manufactures between 20,000 and 25,000 units
each quarter. Should output exceed 25,000 units, maintenance and other
fixed costs are expected to increase by $6,000 and $4,500, respectively.
During the recent quarter ended March 31, Centron produced 25,500
units and incurred the following costs:
Direct Materials
$10,710
Direct Labor

47,175
51,940
Supervision
24,500
Maintenance
23,700
Other
16,800
Total production costs
$174,825

Instructions:
a. Prepare a flexible budget for 20,000, 22,500, and 25,000 units of
activity.
b. Was Centron's experience in the quarter cited better or worse than
anticipated? Prepare an appropriate performance report and explain your
answer.
c. Explain the benefit of using flexible budgets (as opposed to static
budgets) in the measurement of performance.
Chapter 7 Problem 5
5. P26-B3 Straightforward variance analysis (L.O. 5)
Arrow Enterprises uses a standard costing system. The standard cost
sheet for product no. 549 follows.
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ACC 206 Week 4 DQ 2 Flexible Budgets

Flexible budgets provide different information than static budgets.
Discuss some of these differences. Is a flexible budget always better?
Are there times when you’d recommend using a static budget over a
flexible budget?
Guided Response:
Discuss whether you agree or disagree with the uses of a flexible budget
and why.
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ACC 206 Week 4 DQ1 Issues in Standard Costs
and Budgeting
Review the Standard costs: wake up and smell the coffee.article. When
evaluating performance, many organizations compare current results
with the actual results of previous accounting periods. Is an organization
that follows this approach likely to encounter any problems? Explain.

Guided Response:
Describe how job order costing, process costing, or activity based
costing could resolve or exacerbate the issues your classmates discussed
in their initial posts.
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ACC 206 Week 5 Assignment Chapter Eight
Problems
1. Basic present value calculations

Calculate the present value of the following cash flows, rounding to the
nearest dollar:
a. A single cash inflow of $12,000 in five years, discounted at a 12%
rate of return.
b. An annual receipt of $16,000 over the next 12 years, discounted at
a 12% rate of return.
c. A single receipt of $15,000 at the end of Year 1 followed by a
single receipt of $10,000 at the end of Year 3. The company has a 10%
rate of return.
d. An annual receipt of $8,000 for three years followed by a single
receipt of $10,000 at the end of Year 4. The company has a 12% rate of
return.
4. Cash flow calculationsand net present value
On January 2, 20X1, Bruce Greene invested $10,000 in the stock market
and purchased 500 shares of Heartland Development, Inc. Heartland
paid cash dividends of $2.60 per share in 20X1 and 20X2; the dividend
was raised to $3.10 per share in 20X3. On December 31, 20X3, Greene
sold his holdings and generated proceeds of $13,000. Greene uses the
net-present- value method and desires a 16% return on investments.
a. Prepare a chronological list of the investment's cash flows. Note:
Greene is entitled to the 20X3 dividend.

b. Compute the investment's net present value, rounding calculations
to the nearest dollar.
c. Given the results of part (b), should Greene have acquired the
Heartland stock? Briefly explain.
Chapter 8 exercise 5:
5. Straightforwardnet present value and internal rate of return
The City of Bedford is studying a 600-acre site on Route 356 for a new
landfill. The startup cost has been calculated as follows:
Purchase cost: $450 per acre
Site preparation: $175,000
The site can be used for 20 years before it reaches capacity. Bedford,
which shares a facility in Bath Township with other municipalities,
estimates that the new location will save $40,000 in annual operating
costs.
a. Should the landfill be acquired if Bedford desires an 8% return on
its investment? Use the net-present-value method to determine your
answer.
1. Straightforward net-present-value and payback computations

STL Entertainment is considering the acquisition of a sight-seeing boat
for summer tours along the Mississippi River. The following
information is available:
Cost of boat
$500,000
Service life
10 summer seasons
Disposal value at the end of 10 seasons
$100,000
Capacity per trip
300 passengers
Fixed operating costs per season (including straight-line depreciation)
$160,000
Variable operating costs per trip

$1,000
Ticket price
$5 per passenger
All operating costs, except depreciation, require cash outlays. On the
basis of similar operations in other parts of the country, management
anticipates that each trip will be sold out and that 120,000 passengers
will be carried each season. Ignore income taxes.
Instructions:
By using the net-present-value method, determine whether STL
Entertainment should acquire the boat. Assume a 14% desired return on
all investments,- round calculations to the nearest dollar.
4. Equipment replacement decision
Columbia Enterprises is studying the replacement of some equipment
that originally cost $74,000. The equipment is expected to provide six
more years of service if $8,700 of major repairs are performed in two
years. Annual cash operating costs total $27,200. Columbia can sell the
equipment now for $36,000;the estimated residual value in six years is
$5,000.

New equipment is available that will reduce annual cash operating costs
to $21,000. The equipment costs $103,000, has a service life of six
years, and has an estimated residual value of $13,000. Company sales
will total $430,000 per year with either the existing or the new
equipment. Columbia has a minimum desired return of 12% and
depreciates all equipment by the straight-line method.
Instructions:
a. By using the net-present-value method, determine whether
Columbia should keep its present equipment or acquire the new
equipment. Round all calculations to the nearest dollar, and ignore
income taxes.
b. Columbia's management feels that the time value of money should
be considered in all long-term decisions. Briefly discuss the rationale
that underlies management's belief.
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ACC 206 Week 5 Assignment Final Paper

Focus of the Final Paper
You’ve just been hired onto ABC Company as the corporate controller.
ABC Company is a manufacturing firm that specializes in making cedar
roofing and siding shingles. The company currently has annual sales of
around $1.2 million, a 25% increase from the previous year. The
company has an aggressive growth target of reaching $3 million annual
sales within the next 3 years. The CEO has been trying to find additional
products that can leverage the current ABC employee skillset as well as
the manufacturing facilities.
As the controller of ABC Company, the CEO has come to you with a
new opportunity that he’s been working on. The CEO would like to use
the some of the shingle scrap materials to build cedar dollhouses. While
this new product line would add additional raw materials and be more
time-intensive to manufacture than the cedar shingles, this new product
line will be able to leverage ABC’s existing manufacturing facilities as
well as the current staff. Although this product line will require added
expenses, it will provide additional revenue and gross profit to help
reach the growth targets. The CEO is relying on you to help decide how
this project can be afforded Provide details about the estimated product
costs, what is needed to break even on the project, and what level of
return this product is expected to provide.
In order to help out the CEO, you need to prepare a six- to eight-page
report that will contain the following information (including exhibits,
but excluding your references and title page). Refer to the accompanying
Excel spreadsheet (available through your online course) for some
specific cost and profit information to complete the calculations.
Final Paper Spreadsheet

I. An overall risk profile of the company based on current economic and
industry issues that it may be facing.
II. Current company cash flow
a. You need to complete a cash flow statement for the company using
the direct method.
b. Once you’ve completed the cash flow statement, answer the following
questions:
i. What does this statement of cash flow tell you about the sources and
uses of the company?
ii. Is there anything ABC Company can do to improve the cash flow?
iii. Can this project be financed with current cash flow from the
company? Why or why not?
iv. If the company needs additional financing beyond what ABC
Company can provide internally (either now or sometime throughout the
life of the project), how would you suggest the company obtain the
additional financing, equity or corporate debt, and why?
III. Product cost: ABC Company believes that it has an additional 5,000
machine hours available in the current facility before it would need to
expand. ABC Company uses machine hours to allocate the fixed factory
overhead, and units sold to allocate the fixed sales expenses. ABC
Company expects that it will take twice as long to produce the expansion
product as it currently takes to produce its existing product.
a. What is the product cost for the expansion product?
b. By adding this new expansion product, it helps to absorb the fixed
factory and sales expenses. How much cheaper does this expansion
make the existing product?
c. Assuming ABC Company wants a 40% gross margin for the new
product, what selling price should it set for the expansion product?

d. Assuming the same sales mix of these two products, what are the
contribution margins and break-even points by product?
IV. Potential investments to accelerate profit: ABC company has the
option to purchase additional equipment that will cost about $42,000,
and this new equipment will produce the following savings in factory
overhead costs over the next five years:
Year 1, $15,000
Year 2, $13,000
Year 3, $10,000
Year 4, $10,000
Year 5, $6,000
ABC Company uses the net-present-value method to analyze
investments and desires a minimum rate of return of 12% on the
equipment.
a. What is the net present value of the proposed investment ignore
income taxes and depreciation?
b. Assuming a 5-year straight-line depreciation, how will this impact the
factory’s fixed costs for each of the 5 years (and the implied product
costs)? What about cash flow?
c. Considering the cash flow impact of the equipment as well as the
time-value of money, would you recommend that ABC Company
purchases the equipment? Why or why not?
V. Conclusion:
a. What are the major risk factors that you see in this project?
b. As the controller and a management accountant, what is your
responsibility to this project?
c. What do you recommend the CEO do?

Writing the Final Paper
1. Must be six to eight double-spaced pages in length, and formatted
according to APA style as outlined in the Ashford Writing Center.
2. Must include a title page with the following:
a. Title of paper
b. Student’s name
c. Course name and number
d. Instructor’s name
e. Date submitted
3. Must begin with an introductory paragraph that has a succinct thesis
statement.
4. Must address the topic of the paper with critical thought.
5. Must end with a conclusion that reaffirms your thesis.
6. Must document all sources in APA style, as outlined in the Ashford
Writing Center.
7. Must include a separate reference page, formatted according to APA
style as outlined in the Ashford Writing Center.
evaluate your assignment.c
**************************************************
ACC 206 Week 5 DQ 1 Long-term Decision
Making

List a few of the issues and considerations businesses should have when
it comes to the selection of long-term investments and how those issues
impact the various financial statements.
Guided Response:
Review your peer’s posts. Respond to at least two of your peers
describing how these issues can be overcome by the tools discussed in
this chapter and why (i.e., looking at IRR, NPV, cash flow).
**************************************************
ACC 206 Week 5 DQ 2 Responsibilities in
Management Accounting

Review the rights and responsibilities of Certified Management
Accountants:
What are some of the ethical responsibilities and obligations that
management accountants have within an organization? Provide some
examples. Are these responsibilities different than the obligations for
financial accountants?
Guided Response:
Review your peer’s posts. Respond to at least two of your peers
outlining the responsibilities that you feel are the most important to
management accountants.
**************************************************

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