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Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $35 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally:

Required: 1. Assuming that the company has no alternative use for the facilities that are now being used to produce the carburetors, should the outside supplier’s offer be accepted? Show all computations. 2. Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150,000 per year. Should Troy Engines, Ltd., accept the offer to buy the carburetors for $35 per unit? Show all computations.

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Per 15,000 Units Unit per Year Direct materials. Direct Labor.. Variable manufacturing overhead. Fixed manufacturing overhead, traceable.. Fixed manufacturing overhead, allocated.. $14 $210,000 10 150,000 45,000 90,000 3 6* 9 135,000 Total cost.. $42 $630,000 *One-third supervisory salaries; two-thirds Depreciation of special equipment (no resale value).

Managerial Accounting Definitions

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Managerial Accounting Definitions

Troy entered into a three-year lease of a luxury automobile on January 1, 2017, for use 80% in business and 20% for personal use. The FMV of the automobile at the inception of the lease was $40,500, and Troy made 12 monthly lease payments of $600 in 2017 and 2018. a. Before considering the effects of any lease inclusions amounts, what amount of lease payments are deductible in 2017 and 2018? b. What portion, if any, of the “inclusion amount” must reduce Troy’s lease deduction in 2017 and 2018? c. How would your answers to Parts a and b change if the FMV of the auto was $15,000 and the monthly lease payments are $200?

Troy has a credit card that charges 18% on outstanding balances and on cash advances. The closing date on the credit card is the first of each month. Last month Troy left a balance on his credit card of $200. This month Troy took out a cash advance of $150 and made $325 in purchases. Troy made a payment of $220. What will the total of Troy’s new balance be on his next credit card statement, taking into account finance charges?

Personal Finance Definitions

Acceleration ClauseBear MarketBiweekly MortgageBodily Injury LiabilityBond FundsBlue Chip Stocks

Personal Finance Definitions

Troy has the following gains and losses from sales of capital assets during the current year. What is the effect of the capital Asset transactions on his taxable income? Explain, and show any calculations. Short-term Capital Gain…………………$ 7,800 Short-term capital loss…………………….9,000 Long-term capital gain…………………….5,400 Long-term capital loss………………………2,100

Troy just returned from a business trip for health-care administrators in Orlando. Kristen, a relatively new employee who reports to him, also attended the conference. They both work for Gateway Hospital, a for-profit hospital in the St. Louis area. The Orlando conference included training in the newest reporting requirements in the health-care industry, networking with other hospital administrators, reports on upcoming legislation in health care, and the current status of regulations related to the Affordable Care Act. The conference was in late March and coincided with Troy’s kids’ spring break, so the entire family traveled to Orlando to check out Walt Disney World and SeaWorld. The hospital’s expense reimbursement policy is very clear on the need for receipts for all reimbursements. Meals are covered for those not provided as part of the conference registration fee, but only within a preset range. Troy has never had a problem following those guidelines. However, the trip to Orlando was more expensive than Troy expected. He did not attend all sessions of the conference, to enjoy time with his family. Upon their return to St. Louis, Troy’s wife suggested that Troy submit three meals and one extra night at the hotel as business expenses, even though they were personal expenses. Her rationale was that the hospital policies would not totally cover the business costs of the trip. Troy often has to travel and misses family time that cannot be recovered or replaced. Troy also knows that his boss has a reputation of signing forms without reading or careful examination. He realizes the amount involved is not material and probably won’t be detected. Kristen is approached by Joyce, the head of the accounting department, about Troy’s expenses, which seem high and not quite right. Kristen is asked about the extra night because she did not ask for reimbursement for that time. Kristen knows it can be easily explained by saying Troy had to stay an extra day for additional meetings, a common occurrence for administrators, although that was not the case. She also knows that the hospital has poor controls and a culture of “not rocking the boat,” and that other employees have routinely inflated expense reports in the past. Assume you, as Kristen, have decided the best approach, at least in the short run, is to put off responding to Joyce so that you can discuss the matter with Troy. Answer the following questions. 1. What are the main arguments you feel Troy will make and reasons and rationalizations you need to address? 2. What is at stake for the key parties in this situation? 3. What levers can you use to influence how Troy reacts to your position in this matter? 4. What is your most powerful and persuasive response to the reasons and rationalizations you need to address? To whom should the argument be made? When and in what context?

General Accounting Definitions

Accelerated depreciationAverage CostBenefit Cost RatioBottleneckBudget VarianceCost Allocation

General Accounting Definitions

Troy owns 600 of the 1,000 outstanding shares of Oiler Corporation. His adjusted basis in the Oiler stock at the beginning of the current year is $88,000. Oiler Corporation is organized as an S corporation and reports the following results for the current year: Operating Income before special items……………….$ 58,000 Charitable contributions…………………………………………8,000 Nondeductible expenses……………………………………….9,000 Cash dividends paid…………………………………………….22,000 a. What is Troy's adjusted basis in the Oiler Corporation stock at the end of the current year? b. What is the amount of Troy's gain or loss if he sells the 600 shares for $100,000 to an unrelated person at the beginning of next year?

Troy Tools manufactures over one hundred different hand tools used by mechanics, carpenters, and plumbers. Troy’s cost accounting system has always been very simple. The costs allocated to inventory have included only materials, Direct Labor, and factory overhead. Other overhead costs such as costs of the personnel department, purchasing, payroll, and computer services have never been treated as manufacturing overhead even though many of the activities of the departments relate to the manufacturing operations. You are preparing Troy’s tax return for the first time and determine that the company is not following the uniform capitalization rules prescribed in the tax law. You have explained to the company’s president that there is a problem, and she is reluctant to change accounting methods. She says allocating these costs to the many products the company makes will be a time-consuming and expensive process. She feels that the cost of determining the additional amounts to include in inventory under the uniform capitalization rules will probably be more than the additional tax that the company will pay. What is the appropriate way to handle this situation?

Troy’s 2015 tax return is audited. The auditor determines that Troy inadvertently understated his ending inventory in calculating his business income. The error creates an additional tax liability of $5,000. The IRS charges interest on the additional tax liability of $600. Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify.

Troy’s financial records for the year reflect the following: Interest income from bank savings account………………………………. $ 900 Taxable Annuity receipts……………………………………………………………. 1,800 Safe deposit box rental (to hold annuity documents) ………………………125 Investment interest expense………………………………………………………. 3,200 Calculate Troy’s net investment income and his current investment interest deduction. Assume that Troy does not itemize his personal deductions. How is any potential excess investment interest deduction treated?

Truck drivers working for Juhn and Sons (see Problems 12-19 and 12-20) are paid a salary of $20 per hour on average. Fruit loaders receive about $12 per hour. Truck drivers waiting in the queue or at the loading gate are drawing a salary but are productively idle and unable to generate revenue during that time. What would be the hourly cost savings to the firm associated with employing two loaders instead of one? Problem 12-20: Juhn believes that adding a second fruit loader will substantially improve the firm’s efficiency. He estimates that a two-person crew, still acting like a single-server system, at the loading gate will double the loading rate from 4 trucks per hour to 8 trucks per hour. Analyze the effect on the queue of such a change and compare the results with those found in Problem 12-19. Problem 12-19: Juhn and Sons Wholesale Fruit Distributors employs one worker whose job is to load fruit on outgoing company trucks. Trucks arrive at the loading gate at an average of 24 per day, or 3 per hour, according to a Poisson distribution. The worker loads them at a rate of 4 per hour, following approximately the exponential distribution in service times. Determine the operating characteristics of this loading gate problem. What is the probability that there will be more than three trucks either being loaded or waiting? Discuss the results of your queuing model computation.