The document outlines a series of business scenarios requiring financial analysis and variance reporting for various companies, including a gelato shop, a pizzeria, and a pharmaceuticals distributor. It details specific data on revenues, costs, and sales activity, emphasizing the need for calculating variances, managing bottlenecks, and assessing customer profitability. Additionally, it provides cases concerning investments in trading securities and foreign currency transactions, each requiring appropriate accounting entries and performance reports.

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1.
Via Gelato is a popular neighborhood gelato shop. The company
has provided the following data concerning its operations:
While gelato is sold by the cone or cup, the shop measures its
activity in terms of the total number of liters of gelato sold. For
example, wages should be $5,900 plus $1.70 per liter of gelato
sold and the actual wages for June were $15,900. Via Gelato
expected to sell 6,000 liters in June, but actually sold 6,200 liters.

2. Required:
report showing Via Gelato revenue and spending variances for
June
2.
Heritage Watercraft makes reproductions of classic wooden
boats. The bottleneck in the production process is fitting wooden
planks to build up the curved sections of the hull. This process
requires the attention of the shop’s most experienced craftsman.
A total of 3,400 hours is available per year in this bottleneck
operation. Data concerning the company’s four products appear
below:
No fixed costs could be avoided by modifying how many units are
produced of any product or even by dropping any one of the
products.
Required:

3. 1a. Calculate the total hours required in the bottleneck operation
to satisfy demand for all the products.
3.
Milano Pizza is a small neighborhood pizzeria that has a small
area for in-store dining as well as offering take-out and free home
delivery services. The pizzeria’s owner has determined that the
shop has two major cost drivers—the number of pizzas sold and
the number of deliveries made.
Data concerning the pizzeria’s costs appear below:
In November, the pizzeria budgeted for 2,250 pizzas at an average
selling price of $22 per pizza and for 210 deliveries.
Data concerning the pizzeria’s operations in November appear
below:
Required:

4. 1. Complete the flexible budget performance report that shows
both revenue and spending variances and activity variances for
the pizzeria for November.
4.
Jake’s Roof Repair has provided the following data concerning its
costs:
For example, wages and salaries should be $21,400 plus $15.00
per repair hour. The company expected to work 2,700 repair-
hours in May, but actually worked 2,600 repair-hours. The
company expects its sales to be $52.00 per repair-hour.
Required:
Compute the company’s activity variances for May.
5.
Advanced Pharmaceuticals, Inc., is a wholesale distributor of
prescription drugs to independent retail and hospital-based
pharmacies. Management believes that top-notch customer

5. representatives are the key factor in determining whether the
company will be successful in the future. Customer
representatives serve as the company’s liaison with customers—
helping pharmacies monitor their stocks, delivering drugs when
customer stocks run low, and providing up-to-date information
on drugs from many different companies. Customer
representatives must be ultra-reliable and are highly trained.
Good customer representatives are hard to come by and are not
easily replaced.
Customer representatives routinely record the amount of time
they spend serving each pharmacy. This time includes travel time
to and from the company’s central warehouse as well as time
spent replenishing stocks, dealing with complaints, answering
questions about drugs, informing pharmacists of the latest
developments and newest products, reviewing bills, explaining
procedures, and so on. Some pharmacies require more hand-
holding and attention than others and consequently they
consume more of the representatives’ time.
Recently, customer representatives have made more frequent
complaints that it is impossible to do their jobs without working
well beyond normal working hours. This has led to an alarming
increase in the number of customer representatives quitting for
jobs in other organizations. As a consequence, management is
considering dropping some customers to reduce the workload on
customer representatives. Data concerning a representative
sample of the company’s customers appears below:
Customer service costs include all of the costs—other than the
costs of the drugs themselves—that could be avoided by dropping
the customer. These costs include the hourly wages of the

6. customer representatives, their sales commissions, the mileage-
related costs of the customer representatives’ company-provided
vehicles, and so on.
Required:
1. Rank the four customers in terms of their profitability.
Carlsville Company, which began operations in 2015, invests its
idle cash in trading securities. The following transactions are from
its short-term investments in trading securities.
2015
Jan. 20 Purchased 800 shares of Ford Motor Co. at $26 per share
plus a $125 commission.
Feb. 9 Purchased 2,200 shares of Lucent at $44.25 per share plus
a $578 commission.
Oct. 12 Purchased 750 shares of Z-Seven at $7.50 per share plus a
$200 commission.

7. Dec. 31 Fair value of the short-term investments in trading
securities is $130,000
2016
Apr. 15 Sold 800 shares of Ford Motor Co. at $29 per share less a
$285 commission.
July 5 Sold 750 shares of Z-Seven at $10.25 per share less a
$102.50 commission.
July 22 Purchased 1,600 shares of Hunt Corp. at $30 per share
plus a $444 commission.
Aug. 19 Purchased 1,800 shares of Donna Karan at $18.25 per
share plus a $290 commission.
Dec. 31 Fair value of the short-term investments in trading
securities is $160,000.
2017
Feb. 27 Purchased 3,400 shares of HCA at $34 per share plus a
$420 commission.

8. Mar. 3 Sold 1,600 shares of Hunt at $25 per share less a $250
commission.
June 21 Sold 2,200 shares of Lucent at $42 per share less a $420
commission.
June 30 Purchased 1,200 shares of Black & Decker at $47.50 per
share plus a $595 commission.
Nov. 1 Sold 1,800 shares of Donna Karan at $18.25 per share less
a $309 commission.
Dec. 31 Fair value of the short-term investments in trading
securities is $180,000.
Required:
1. Prepare journal entries to record these short-term investment
activities for the years shown. On December 31 of each year,
prepare the adjusting entry to record any necessary fair value
adjustment for the portfolio of trading securities.
7.

9. [The following information applies to the questions displayed
below.]
Doering Company, a U.S. corporation with customers in several
foreign countries, had the following selected transactions for
2015 and 2016.
2015
Apr. 8 Sold merchandise to Salinas & Sons of Mexico for $5,938
cash. The exchange rate for pesos is $0.1043 on this day.
July 21 Sold merchandise on credit to Sumito Corp. in Japan. The
price of 1.5 million yen is to be paid 120 days from the date of
sale. The exchange rate for yen is $0.0094 on this day.
Oct. 14 Sold merchandise for 19,000 pounds to Smithers Ltd. of
Great Britain, payment in full to be received in 90 days. The
exchange rate for pounds is $1.4566 on this day.
Nov. 18 Received Sumito’s payment in yen for its July 21
purchase and immediately exchanged the yen for dollars. The
exchange rate for yen is $0.0092 on this day.
Dec. 20 Sold merchandise for 17,000 ringgits to Hamid Albar of
Malaysia, payment in full to be received in 30 days. On this day,
the exchange rate for ringgits is $0.4501.

10. Dec. 31 Recorded adjusting entries to recognize exchange gains
or losses on Doering’s annual financial statements. Rates for
exchanging foreign currencies on this day follow.
2016
Jan. 12 Received full payment in pounds from Smithers for the
October 14 sale and immediately exchanged the pounds for
dollars. The exchange rate for pounds is $1.4699 on this day.
Jan. 19 Received Hamid Albar’s full payment in ringgits for the
December 20 sale and immediately exchanged the ringgits for
dollars. The exchange rate for ringgits is $0.4420 on this day.