Author Question: Apple Company purchased 6,000 in equipment, paying 2,000 in cash and placing the remainder on ... (Read 633 times)

Bob-Dole · **on:** Jul 6, 2018

Apple Company purchased 6,000 in equipment, paying 2,000 in cash and placing the remainder on account. The accountant would record the following journal entry:
a. Cash 8,000
Equipment 8,000
b. Equipment 6,000
Cash 6,000
c. Equipment 8,000
Accounts Payable 8,000
d. Equipment Expense 8,000
Accounts Payable 6,000
Cash 2,000
e. Equipment 6,000
Accounts Payable 4,000
Cash 2,000

Question 2

Responsibility and controllability.

Consider each of the following independent situations for Tropical Hot Tubs. Tropical manufactures and sells hot tubs. The company also contracts to service both its own and other brands of hot tubs. Tropical has a manufacturing plant, a supply warehouse that supplies both the manufacturing plant and the service technicians (who often need parts to repair hot tubs), and 10 service vans. The service technicians drive to customer sites to service the hot tubs. Tropical owns the vans, pays for the gas, and supplies hot tub parts, but the technicians own their own tools.

1. In the manufacturing plant, the production manager is not happy with the motors that the purchasing manager has been purchasing. In May, the production manager stops requesting motors from the supply warehouse and starts purchasing them directly from a different motor manufacturer. Actual materials costs in May are higher than budgeted.
2. Overhead costs in the manufacturing plant for June are much higher than budgeted. Investigation reveals a utility rate hike in effect that was not figured into the budget.
3. Gasoline costs for each van are budgeted based on the service area of the van and the amount of driving expected for the month. The driver of van 3 routinely has monthly gasoline costs exceeding the budget for van 3. After investigating, the service manager finds that the driver has been driving the van for personal use.
4. Cascades Resort and Spa, one of Tropical's hot tub service customers, calls the service people only for emergencies and not for routine maintenance. Thus, the materials and labor costs for these service calls exceeds the monthly budgeted costs for a contract customer.
5. Tropical's service technicians are paid an hourly wage, with overtime pay if they exceed 40 hours per week, excluding driving time. Fred Friendly, one of the technicians, frequently exceeds 40 hours per week. Service customers are happy with Fred's work, but the service manager talks to him constantly about working more quickly. Fred's overtime causes the actual costs of service to exceed the budget almost every month.
6. The cost of gasoline has increased by 50 this year, which caused the actual gasoline costs to greatly exceed the budgeted costs for the service vans.

Required:
For each situation described, determine where (that is, with whom) (a) responsibility and (b) controllability lie. Suggest ways to solve the problem or to improve the situation.

mcinincha279 · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

e

Answer to Question 2

1. (a) Production manager
(b) Purchasing Manager
The purchasing manager has control of the cost to the extent that he/she is doing the purchasing and can seek or contract for the best price. The production manager should work with the purchasing manager. They can, together, possibly find a combination of better motor and better price for the motor than the production manager has found.

2. (a) Production Manager
(b) External Forces
In the case of the utility rate hike, the production manager would be responsible for the costs, but they are hard to control. The rates are fixed by the utility company, and there is usually no choice of which utility company is used. The production manager can try to reduce waste (turn off lights when not in use, turn of machines when not running, don't leave water running, etc.) but other than conservation measures, the manager has no say in the utility rates. The manager might consider purchasing more energy-efficient machines.

3. (a) Van 3 driver
(b) Service manager
The driver of each van has the responsibility to stay within budget for the costs of the service vehicle. The service manager should set policies to which the drivers must adhere, including not using the van for personal use. The service manager could install GPS in the vans to make sure they are where they are supposed to be, and can also fire the driver of Van 3 for misusing company property. (Using the van for personal driving affects the tax deductibility of the van for the firm as well).

4. (a) Tropical's service manager
(b) Cascades manager
Because Cascades has a maintenance contract with Tropical, both the hotel manager and Tropical's service manager should work together to make sure routine maintenance is scheduled for the hotel's hot tubs. This will decrease the number and cost of the repair emergencies. The manager should also consider the average cost of these service calls over the months where there were no calls.

5. (a) Service manager
(b) This depends
The answer to this question really depends on why Fred Friendly works so slowly. If it is because Fred is chatting with the customers (which may be why they like him), then the service manager should tell him to only bill for actual time worked. If it is because Fred works intentionally slowly to get the overtime, then the service manager should consider disciplining him unless he is too valuable in other ways. If it is because he does not have adequate training, then HR should be involved, and the service manager should work with Fred to get him more training and with HR to make sure future hires are adequately trained.
6. (a) Service manager
(b) External forces

Like the cost of utilities, the cost of gasoline is determined externally. However, unlike the case of utilities, it is possible that the service manager can contract with a gasoline company to buy gas at a fixed price over a period of time. The advantage for Tropical is that the price is set, and the advantage for the gasoline company is that they are certain to have a long-term customer even if the price is lower than for a random customer.