Business Finance Homework Help

Imagine you are the new CFO for a furniture manufacturer named American Furniture Company (AFC) that has only been in business for a few years. The company manufactures three products: wooden chairs, tables and dressers. AFC started off as a ‘Mom & Pop’ shop but has grown rapidly. AFC uses one assembly line to build all three products, and each product is hand-assembled before going through an automated painting process. You have been tasked with modernizing the company’s accounting methods towards their future goals.

The four different parts of this assignment should be submitted together. While outside sources are NOT required for this assignment, formatting and citations for all parts of this assignment should be done in APA format. For more information on APA format, please see the section on APA Formatting below.

Part #1

Justify to the CEO what type of costing method (job-order, process costing, variable costing and/or activity-based costing) you would recommend AFC use. Assume that all of the items produced are sold. Use the following accounting data in your analysis.

Production & Cost Description	Production & Cost Amounts
Annual Production	5000 chairs/10 batches; 4000 tables/20 batches; 3000 dressers/20 batches
Raw materials in board feet (BF) per unit	1 chair = 10 BF; 1 table = 15 BF; 1 dresser = 20 BF
Raw materials price per unit	$2 per BF
Assembly labor time (hours per unit)	1 chair = 5 hours; 1 table = 7 hours; 1 dresser = 10 hours
Labor pay rate	$15 per hour
Assembly department overhead per direct labor hour	$5
Painting process machine hours (MH)	1 chair = 0.5 MH; 1 table = 1.5 MH; 1 dresser = 2 MH
Painting department overhead per MH	$20
Changeover cost per batch	chair = $100; table = $150; dresser = $200
Sales price	1 chair = $180; 1 table = $270; 1 dresser = $360
Fixed Cost	$50,000
Variable SG&A	$5 per unit
Fixed SG&A	$25,000

Within your analysis, make sure to include the following:

• Briefly discuss the advantages and disadvantages of the four costing methods.
• Narrow the choice down to two cost methods you would most recommend and provide your justification.
• Demonstrate how each of the two costing methods you chose would allocate overhead and administrative costs by calculating product costs using each method.
• Provide an income statement for each of the two methods.
• Recommend one of the two final costing methods, providing justification for your final costing method selection.

Your justification should be between 1,000 to 1,500 words in length.

Part #2

Determine what inventory cost flow assumption (weighted average, FIFO and/or LIFO) would be best suited for valuing inventory near the current replacement cost. You will make your analysis based on the following inventory transactions involving chairs only. Remember that the sales price of chairs is $180 per unit according to the table in Part 1.

Transaction	Goods	Price
1/1 Beginning Inventory	120 chairs	$120/unit
1/15 Transferred into finished goods	140 chairs	$130/unit
3/15 Sold	110 chairs	$180/unit
4/15 Transferred into finished goods	100 chairs	$140/unit
6/15 Sold	90 chairs	$180/unit
7/15 Transferred into finished goods	130 chairs	$150/unit
9/15 Sold	120 chairs	$180/unit
10/15 Transferred into finished goods	140 chairs	$160/unit
12/15 Sold	110 chairs	$180/unit

Within your analysis, make sure to include the following:

• Briefly discuss the advantages and disadvantages of each inventory costing assumption.
• Calculate the cost of goods sold and ending inventory for each cost flow assumption.
• Demonstrate which of these should be used to net the highest income during inflationary periods.
• Provide justification on what inventory costing assumption you choose.
• Record journal entries for each purchase and sales transaction listed.

Your justification should be between 500 to 750 words in length.

Part #3

You will need to submit a budget report to the CEO, including an explanation of the utility of master budgets. You will also submit a variance report that shows how the company is performing versus budgeted amounts. Use the following data.

Amount of Goods Sold Per Quarter:

	Q1	Q2	Q3	Q4
Chairs sold per quarter	1150	1200	1250	1400
Tables sold per quarter	900	950	1000	1150
Dressers sold per quarter	650	700	750	900

Target Sales Goal Per Quarter:

Goods	Quantity
Chairs	1300
Tables	1100
Dressers	800

Q1 beginning inventory:

Goods	Quantity
Chairs	120
Tables	90
Dressers	70

Assume that the material and labor costs from Part 1 are standards. Compare those standard costs to the actual amounts listed below. These are the actual amounts used for the entire fiscal year:

Actual amount of wood purchased and used	46,120 bd. ft.
Actual cost of wood purchased and used	$80,028
Actual amount of direct labor hours	17,900
Actual cost of direct labor	$275,550

Within your analysis, make sure to include the following:

• Create variance reports for Q1, Q2, Q3, and Q4 against the Quarterly Budget.
• Generate a quarterly budget for the upcoming year that includes sales, production, materials and labor budgets. Assume a 10% increase in sales.
• Explain how a master budget can be a useful tool in aligning a company’s operations to its long-term goals.
• Discuss how a variance report can be used to direct management toward production issues.

Your explanations of master budgets and variance reports should be 500 to 750 words in length.

Part #4

Use the following data to generate a quote model for future business. This can be accomplished by performing a high-low or regression analysis to generate an equation relating direct labor hours to product cost:

Year	Quarter	Direct labor hrs.	Manufacturing cost
2014	Q1	2,512	$224,950
2014	Q2	2,432	$214,100
2014	Q3	2,645	$226,840
2014	Q4	2,723	$228,760
2015	Q1	2,355	$211,950

Within your analysis, make sure to include the following:

• Explain how jobs can be estimated by using a quote model based on previous data.
• Discuss the different methods of cost estimation.
• Prepare a bid for a job that would require 2,700 direct labor hours.

Your justification should be between 350 to 500 words in length