Question 1
PROBLEM 1-1. Budgets in Managerial Accounting Santiago's Salsa is in the process of preparing a production cost budget for May. Actual costs in April were: Santiago's Salsa Production Costs April 2008 Production 20,000 Jars of Salsa Ingredient cost (variable) $16,000 Labor cost (variable) 9,000 Rent (fixed) 4,000 Depreciation (fixed) 6,000 Other (fixed) 1,000 Total $36,000 Required a. Using this information, prepare a budget for May. Assume that production will increase to 22,000 jars of salsa, reflecting an anticipated sales increase related to a new marketing campaign. b. Does the budget suggest that additional workers are needed? Suppose the wage rate is $20 per hour. How many additional labor hours are needed in May? What would happen if management did not anticipate the need for additional labor in May? c. Calculate the actual cost per unit in April and the budgeted cost per unit in May. Explain why the cost per unit is expected to decrease.,PROBLEM 1-3. Budgets in Managerial Accounting Matthew Gabon, the sales manager of Office Furniture Solutions, prepared the following budget for 2008: Sales Department Budgeted Costs, 2008 (Assuming Sales of $12,000,000) Salaries (fixed) $500,000 Commissions (variable) 180,000 Advertising (fixed) 100,000 Charge for office space (fixed) 2,000 Office supplies & forms (variable) 2,400 Total $784,400 After he submitted his budget, the president of Office Furniture Solutions reviewed it and recommended that advertising be increased to $120,000. Further, she wanted Matthew to assume a sales level of $13,000,000. This level of sales is to be achieved without adding to the sales force. Matthew's sales group occupies approximately 250 square feet of office space out of total administrative office space of 20,000 square feet. The $2,000 space charge in Matthew's budget is his share (allocated based on relative square feet) of the company's total cost of rent, utilities, and janitorial costs for the administrative office building. Required Prepare a revised budget consistent with the president's recommendation.
Question 2
PR 13-A dividens on perferred and common stock obj.3 1.common dividens in 2007 is $8000 Bridger Bike Corp. manufactures mountain bikes and distributes them through retail outlets in Montana, Idaho,Oregon,and Washington. Bridger Bike Corp. has declared the following annual divideneds over a six-year period ending December 31 of each year:2005,$5000;2006,$18000;2007,$45000;2008,45000;2009,$60000; and 2010,67000.During the entire period , the outstanding stock of the company was composed of $10000 shares of 2% cumulative perferred stock,$100 par, and $25000 shares of common stock, $1 par. Instructions: 1. Determine the total dividends and the per-share dividends declared on each of the six years. There were no dividends in arrears on January 1, 2005. Summerize the data in tabular form, using the followingcolumn headings: year totaldividends perferreddividends commondividends _-------------------------------------------------------- total per share total pershare 2005 $5000 2006 $18000 2007 $45000 2008 $45000 2009 $60000 2010 $67000 2.Determine the average annual dividends per share for each class of stock for the six-year period. 3.Assuming a market price of $125 for the perferred stock and $8 for for the common stock,calculate the average annual percentage return on inital shareholders' investment, based on the average annual dividend per share (a) for preferrred stock and (b) for common stock. PR-13-2A Stock transaction for corporate expansion obj.3 Sheldon Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of sheldon Optics on October 31 of the current year as follows: perferred 2% stock,$80 par (50000 shares authorized,25000 shares issued)........... $2,000,000 Paid-in capital in excess of par- perferred stock......75,000 common stock, $100 par (500,000 shares authorized, 50,000 shares issued.........5,000,000 paid-in capital in excess of par-common stock....600,000 retained earnings........................... 16,750,000 At the annual stockholders meeting on december 7 the board od directors presented a plan for modernizing and expanding plant operations at a cost of approximately $5,300,000. The plan provided (a) that the corporation borrow $2,000,000, (b) that 15,000 shares of the unissued perferred stock be issued through an underwriter, and (c) that a building, valued at $1,850,000, and the land on which it is located, valued at $162,500 shares of common stock. The plan was approved by the stockholders and accomplished by the following transactions: Jan. 10.Borrowed $2,000,000 from Whitefish National Bank, giving a 7% mortgage note. 21.Issued 15,000 shares of perferred stock, recieving $84.50 per share in cash. 31. Issued 17,500 shares of common stock in exchange for land and a building, according to the plan. No other instructions occured during January. Instructions Journalize the entries to record the foregoing transactions.
Question 3
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 46,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $11 $506,000 Direct labor 7 322,000 Variable manufacturing overhead 2 92,000 Fixed manufacturing overhead 8 368,000 Variable selling expense 4 184,000 Fixed selling expense 3 138,000 Total cost $35 $1,610,000 The Rets normally sell for $70 each. Fixed manufacturing overhead is constant at $368,000 per year within the range of 25,000 through 46,000 Rets per year. 11.value: 1 points Requirement 1: Assume that due to a recession, Polaski Company expects to sell only 25,000 Rets through regular channels next year. A large retail chain has offered to purchase 4,800 Rets if Polaski is willing to accept a 11% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain's name on the 4,800 units. This machine would cost $9,600. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Calculate the net increase/decrease in profits next year if this special order is accepted. (Omit the "$" sign in your response.) Net in profits $ check my workeBook Linkreferences 12.value: 1 points Requirement 2: Assume again that Polaski Company expects to sell only 25,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 4,800 Rets. The Army would pay a fixed fee of $1.72 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. If Polaski Company accepts the order, by how much will profits increase or decrease for the year? (Omit the "$" sign in your response.) Net in profits $ check my workeBook Linkreferences 13.value: 1 points Requirement 3: Assume the same situation as that described in Requirement (2) above, except that the company expects to sell 46,000 Rets through regular channels next year. Thus, accepting the U.S. Army's order would require giving up regular sales of 4,800 Rets. If the Army's order is accepted, by how much will profits increase or decrease from what they would be if the 4,800 Rets were sold through regular channels? (Input the amount as positive value. Omit the "$" sign in your response.) Net in profits if the Army's order is accepted $ check my workeBook Linkreferences ?2012 The McGraw-Hill Companies. All rights reserved.
Question 4
(3-1) Greene Sisters has a DSO of 20 days. The company?s average daily sales are $20,000. What is the level of its account receivable? Assume there are 365 days in a year. (3-2) Vigo Vacations has an equity multiplier of 2.5. The company?s assets are finance with some combination of long-term debt and common equity. What?s the company?s debt ratio? (3-3) Winston Washer?s stock price is $75 per share. Winston has $10 billion in total assets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt and $6 billion in common equity. It has 800 million shares of common stock outstanding. What is Winston?s market/book ratio? (3-4) A company has an ESP of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio? (3-5) Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2.0. Its sales are $100 million and it has total assets of $50 million. What is its ROE? (3-6) Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the total assets turnover? What is the firm?s equity multiplier? (3-7) Ace Industries has current assets equal to $3 million. The company?s current ratio is 1.5, and its quick ratio is 1.0. What is the firm?s level of current liabilities? What is the firm?s level of inventories?
Question 5
SIGNAL-TEK CORPORATION Background Signal-Tek Corporation was founded in 1963. Following a series of new product developments, mergers, and acquisitions, the company evolved into an $82.5 million corporation with wholly owned subsidiaries operating in Colorado, Indiana, England, and Germany. The Denver division generates approximately $30 million in revenues, primarily from signal generators. These general-purpose test and measurement instrumentation products are used in a variety of industrial, laboratory, and defense applications. The Denver division had enjoyed several years of market leadership in these products based on innovative design, low cost, and high product quality. However, in recent years, Signal- Tek?s product brand recognition has begun to slip due to its inability to meet competition. Based on timelier introduction of newer, low-cost products, two larger instrument manufacturers have been taking some of the division?s market share. Signal-Tek has been unable to respond quickly enough to these competitive pressures and, as a result, has had to reduce its work force by almost 15 percent recently It has become clear that the division must regain its market position by refocusing on its goals of timely introduction of low-cost, solid-performance, high-reliability instruments. The Opportunity In late July 2002, the U.S. Army released a request for sealed bid quotes on a new low-cost signal generator that would eventually replace several thousand pieces of test equipment that the Army had in the field. The company with the lowest unit cost for the instrument would get the award. The division estimated that the design and testing requirements alone would cost between $1 and $1.2 million and, based on the Army?s request, had to be completed within one year after the release of the contract. The initial award included a first-year commitment of 900 units with a second- and third-year requirement of an additional 900 units each year. These additional requirements were to be awarded at a future date. Since the request also included an option to double the requirements in each of years two and three, the contract could be worth 4,500 units over the next three years with the potential of even more as the Army eventually replaced its entire field stock. In reviewing this request, the Denver division saw its opportunity to develop the most utility/cost-efficient signal generator that had been built to date. However, given the potential volume of product that was at stake, Signal-Tek also recognized that competition for the contract could be very heavy. Marketing inquiries confirmed that the two competitors that had recently been taking market share, plus one foreign competitor, were planning to bid the contract. The division felt that the price of the unit would have to be under $1,900 in order to have a real chance at winning the award. The bids were to be opened by the Army on August 25, 2002. Thus, the division had only enough time to make cost estimates based on current materials and labor standards used in similar products, rather than on a detailed analysis of the new product design. Typically, the cost of the division?s products was 50 percent materials and 50 percent labor and overhead. Costs, when compared with the estimated required selling price, left a very low margin on the product. However, the decision was made to proceed with the bid with the expectation that somehow it would be possible to reduce the unit cost during the design and development stages. The price for the first 3,600 units was established at $1,799 each, with a reduction in price made available for units in excess of 3,600. The Supply Management Environment The supply department at the Denver division consisted of a supply manager named Barry Etcher and a staff of five buyers?two senior buyers and three junior buyers. Although this staff had experience in buying electronic components, neither Barry nor any of his buyers had any formal engineering background. Therefore, the engineering staff rarely worked with the supply management group during the design and prototype stages of new products. Typically, the supply management group would become involved at the point just prior to the new product being turned over to manufacturing for preproduction runs. By this time the design had been fairly well completed, frequently requiring parts that were not currently used by the division. In addition, the engineers had already spent a considerable amount of time talking with suppliers about new products that were being developed by these potential suppliers and how these items might enhance the new design. After the Army reviewed the bids, Signal-Tek was awarded the contract. The division?s management now had to focus on the issues of limited design time and the necessary cost reduction programs. 1. How can early supply management involvement assist in low-cost and timely new product development? 2. How does supply management?s involvement enhance an early supplier involvement program? What are the potential benefits? 3. How can the division increase cooperation/communication between the engineering and supply departments? 4. How will standardization improve the new product development process? 5. How does more effective supply management involvement change engineering?s role? 6. What can the division do to help expand supply management?s contribution? Dana Collins and Christine Childers developed this case under the direction of Professor David N. Burt.
