JTL Corporation

1. This is a problem for a fictional company, JTL Corporation. It applies principles from various chapters in the textbook.

2. Completing this exercise will fulfill the requirements of the "Term Paper/Project" for ACC 3020. It is worth 200 points.

3. The project is due no later than 6:00 pm on July 27. Late submission will receive a 10% scoring reduction. Submissions after 6:00 pm on July 29 will NOT be graded.

4. Your particular assignment will be based on the first letter of your last name with the following ranges: A-H, J-P, R-S and T-Z.

5. Your work must be completed and submitted on Excel.

6. You may work with other students but you must submit your own work individually. Consider visiting the Accounting Tutorial Lab for additional help.

7. Your submission must be made by uploading your work through Blackboard. Any other type of submission, including direct email to me or hand delivery of a hardcopy will receive a 20% scoring reduction. It is your responsibility to learn how to perform this task in BB. I suggest you do that before the last moments.

8. One final comment....This is a progressive problem - some of the chapters may have already been covered in class, others will be covered soon. I strongly suggest you start working on it NOW and work on it piece by piece. Don't try to finish it all in one weekend.
Assignment Last Name A-H

JTL MANUFACTURING Problem

JTL MANUFACTURING Corporation is a private corporation formed for the purpose of providing the products and the services needed to irrigate farms, parks, commercial projects, and private homes. It has a centrally located factory in a U.S. city that manufactures the products it markets to retail outlets across the nation. It also maintains a division that provides installation and warranty servicing in six metropolitan areas.

The mission of JTL MANUFACTURING is to manufacture quality parts that can be used for effective irrigation projects that also conserve water. By that effort, the company hopes to satisfy its customers, provide rapid and responsible service, and serve the community and the employees who represent them in each community.

The company has been growing rapidly, so management is considering new ideas to help the company continue its growth and maintain the high quality of its products.

JTL MANUFACTURING was founded by Thomas Watkins who is the company president and chief executive officer (CEO). Working with him from the company's inception was Will's brother, Thomas, whose sprinkler designs and ideas about the installation of proper systems have been a major basis of the company's success. Thomas is the vice president who oversees all aspects of design and production in the company.

The factory itself is managed by Jenna Parsons who hires his line managers to supervise the factory employees. The factory makes all of the parts for the irrigation systems. The purchasing department is managed by Hector Hines.

The installation and training division is overseen by vice president Mason Spolski, who supervises the managers of the six local installation operations. Each of these local managers hires his or her own local service people. These service employees are trained by the home office under Mason Spolski's direction because of the uniqueness of the company's products.

There is a small Human Resources department under the direction of Sergey Singh, a vice president who handles the employee paperwork, though hiring is actually performed by the separate departments. Gene Totter is the vice president who heads the sales and marketing area; he oversees 10 well-trained salespeople.

The accounting and finance division of the company is headed by Keilly O'Toole, who is the chief financial officer (CFO) and a company vice president; he is a member of the Institute of Management Accountants and holds a certificate in management accounting. He has a small staff of Certified Public Accountants, including a controller and a treasurer, and a staff of accounting input operators who maintain the financial records.

A partial list of JTL MANUFACTURING accounts and their balances for the month of November 2012 follows.
•Accounts Receivable $ 275,000
•Advertising Expenses 54,000
•Cash 260,000
•Depreciation-Factory Equipment 16,800
•Depreciation-Office Equipment 2,400
•Direct Labor 42,000
•Factory Supplies Used 16,800
•Factory Utilities 10,200
•Finished Goods Inventory, November 30 68,800
•Finished Goods Inventory, October 31 72,550
•Indirect Labor 48,000
•Office Supplies Expense 1,600
•Other Administrative Expenses 72,000
•Prepaid Expenses 41,250
•Raw Materials Inventory, November 30 52,700
•Raw Materials Inventory, October 31 38,000
•Raw Materials Purchases 184,500
•Rent-Factory Equipment 47,000
•Repairs-Factory Equipment 4,500
•Salaries 325,000
•Sales 1,350,000
•Sales Commissions 40,500
•Work In Process Inventory October 31 -52,700
•Work In Process Inventory, November 30- 42,000

Instructions
(a)A list of accounts and their values are given above. From this information, prepare a cost of goods manufactured schedule, an income statement, and the current assets section of the balance sheet for JTL MANUFACTURING Corporation for the month of November 2012.

JTL MANUFACTURING
JTL MANUFACTURING Corporation is continuing its budget preparations. JTL MANUFACTURING had the following static budget and overhead costs for March 2014.

JTL MANUFACTURING CORPORATION
Manufacturing Overhead Budget Manufacturing Overhead Costs (Actual) (Static) For the Month of March 2014For the Month of March 2014
•Budgeted production in units 117,500
•Production in units 118,500

Budgeted costs

Costs

•Indirect materials $ 5,875
•Indirect materials $ 5,910
•Indirect labor 14,100
•Indirect labor 14,195
•Utilities 11,750
•Utilities 11,880
•Maintenance 8,225
•Maintenance 8,275
•Salaries 42,000
•Salaries 42,000
•Depreciation 16,800
•Depreciation 16,800
•Property taxes 3,000
•Property taxes 3,000
•Insurance 1,200
•Insurance 1,200
•Janitorial 1,500
• Janitorial 1,500
•Total budgeted costs $104,450
•Total costs $104,760
JTL MANUFACTURING produced 118,500 units in March rather than the budgeted number of units.

Instructions

(a)Prepare a flexible overhead budget based on the following amounts produced.
(1)115,500 units
(2)116,500 units
(3)117,500 units

(b)Prepare a flexible budget report showing the differences (favorable and unfavorable) in manufacturing overhead costs for the month of March.

JTL MANUFACTURING
JTL MANUFACTURING Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not "ideal" at this point, but the management is working toward that as a goal. At present, the company uses the following standards.
Materials
Item

Per unit

Cost
Metal Plastic Rubber

1 lb.
12 oz.
4 oz.

63¢ per lb.
$1.00 per lb.
88¢ per lb.
Direct Labor
Item

Per unit

Cost
Labor

15 min.

$8.00 per hr.

Predetermined overhead rate based on direct labor hours = $4.28

The January figures for purchasing, production, and labor are:
•The company purchased 229,000 pounds of raw materials in January at a cost of 78¢ a pound.
•Production used 229,000 pounds of raw materials to make 115,500 units in January.
•Direct labor spent 18 minutes on each product at a cost of $7.80 per hour.
•Overhead costs for January totaled $54,673 variable and $73,800 fixed.

Instructions
Answer the following questions about standard costs.
(a)What is the materials price variance?

(b)What is the materials quantity variance?

(c)What is the total materials variance?

(d)What is the labor price variance?

(e)What is the labor quantity variance?

(f)What is the total labor variance?

(g)Evaluate the variances for this company for January. What do these variances suggest to management?

JTL MANUFACTURING
JTL MANUFACTURING puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% based on the rate of return it must pay its owners and creditors. Using that rate, JTL MANUFACTURING then uses different methods to determine the best decisions for making capital outlays.

In 2014 JTL MANUFACTURING is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.

The following information is available to use in deciding whether to purchase the new backhoes.

Old Backhoes

New Backhoes
Purchase cost when new
$90,000

$200,000
Salvage value now $42,000

Investment in major overhaul needed in next year $55,000

Salvage value in 8 years
$15,000

$90,000
Remaining life
8 years

8 years
Net cash flow generated each year
$30,425

$43,900
Instructions
(a)Evaluate in the following ways whether to purchase the new equipment or overhaul the old equipment. (Hint: For the old machine, the initial investment is the cost of the overhaul. For the new machine, subtract the salvage value of the old machine to determine the initial cost of the investment.)

(1)Using the net present value method for buying new or keeping the old.

(2)Using the payback method for each choice. (Hint: For the old machine, evaluate the payback of an overhaul.)

(3)Comparing the profitability index for each choice.

(4)Comparing the internal rate of return for each choice to the required 8% discount rate.

(b)Are there any intangible benefits or negatives that would influence this decision?

(c)What decision would you make and why?