Question 1
8?28 Special order pricing, outsourcing, eliminating operations (LO 2, 3, 5) Whirlwind Industries is a multiproduct company with several manufacturing plants. The Brownwood Plant manufactures and distributes two carpet cleaning products, Household and Commercial, under the Karpet Kleen label. The forecasted operating results for the first six months of 2011 are presented in the following statement. Karpet Kleen?Brownwood Plant Forecasted Result of Operations For the six months ended June 30, 2012 (in thousands) Household Commercial Total Units 100 100 200 Sales revenue $2,000 $3,000 $5,000 Cost of goods sold 1,600 1,900 3,500 Gross profit $ 400 $1,100 $1,500 Selling & administrative expenses Variable $ 400 $ 700 $1,100 Fixed1 240 360 600 Total selling & administrative expenses $ 640 $1,060 $1,700 Income (loss) before taxes $(240) $ ?40 $(200) The product costs per unit are as follows: Household Commercial Direct materials $ 7 $ 8 Direct labor 4 4 Variable manufacturing overhead 1 2 Fixed manufacturing overhead 4 5 Total product cost $16 $19 Each product is manufactured on a separate production line. Normal manufacturing capacity is 200,000 cases of each product per year. However, the plant is capable of producing 250,000 cases of the Household product and 350,000 cases of the Commercial product per year. Capacity levels assume an even flow of production throughout the year, so that the maximum capacity for the second half of the year is 125,000 cases of Household and 175,000 of Commercial cases. The following schedule reflects the top management's consensus regarding the price/volume alternatives for Karpet Kleen products in the second six months of 2012. These are essentially the same alternatives management faced during the first six months of the year. Household Commercial Alternative Prices (per Unit) Unit Sales Volume Alternative Prices (per Unit) Unit Sales Volume $18 120,000 $25 175,000 20 100,000 27 140,000 21 90,000 30 100,000 22 80,000 32 55,000 23 50,000 35 35,000 Top management believes the company's loss for the first six months of the year reflects a tight profit margin caused by intense competition. Management also believes that many companies will be forced out of this market by the next year and that long?term profits should improve. Other Information ? Fixed manufacturing overhead per unit is based on normal manufacturing capacity. ? Depreciation constitutes 50% of the fixed manufacturing overhead cost of each product and is unavoidable. ? The remaining fixed manufacturing overhead expenses arise from factory personnel assigned to particular products. ? Variable selling and administrative expenses are $4 and $7 per unit, respectively, for the Household and Commercial products. Required a. What unit selling price should Whirlwind Industries assign to each of the Karpet Kleen products to maximize net income for the second six months of 2012? Support your answers with calculations. b. Based on the unit prices you have chosen in part ( a), what is the company's expected income before taxes for the second six months of the year? Support your answer with an income statement prepared in the contribution margin format. Show the contribution margin and the segment margin for each product. c. Based on the unit prices you have chosen in part (a), should the Household product be dropped for the last six months of the year? Support your answer. d. Management has received a special order from CleanMe Corporation for 80,000 cases o f the Commercial product at a price of $20 per case. No sales commission would need to be paid (sales commissions are normally $3.20 per case). Should they accept this order? Support your answer with calculations and comment on the qualitative considerations. e. MakeIt Corporation has offered to make Karpet Kleen's Household product for $13 per case. Karpet Kleen would still sell the product to its customers. The company could use its idle resources to make a new Extra Strength product. Management believes the company could sell 45,000 cases of this new product for $40 per case; variable selling and administrative expenses would be $7 per case. They expect that introducing this product will reduce current unit sales of the Commercial product by 10%. What is the maximum variable cost per unit of the Extra Strength product that would make this proposition worthwhile? Support your answer with calculations and comment on the qualitative considerations. f. Without considering your answers to previous questions, assume that the optimum price/volume alternatives for the last six months of the year were a selling price of $23 and a volume of 50,000 cases for the Household product, and a selling price of $35 and volume of 35,000 cases for the Commercial product. What was the company's expected income before taxes? Prepare an income statement in contribution margin format. g. Without considering your answers to previous questions, assume that the optimum price/volume alternatives for the last six months of the year were a selling price of $23 and a volume of 50,000 cases for the Household product, and a selling price of $35 and volume of 35,000 cases for the Commercial product. Should Whirlwind Industries consider closing down its operations until 2012 to minimize its losses? Support your answer with appropriate calculations and discuss the qualitative factors that should be considered.
Question 2
Sara Lehn, chief financial officer of Merit Enterprise Corp., was reviewing her presentation one last time before her upcoming meeting with the board of directors. Merit's business had been brisk for the last two years, and the company's CEO was pushing for a dramatic expansion of Merit's production capacity. Executing the CEO's plans would require $4 billion in capital in addition to $2 billion in excess cash that the firm had built up. Sara's immediate task was to brief the board on options for raising the needed $4 billion. Unlike most companies its size, Merit had maintained its status as a private company, financing its growth by reinvesting profits and, when necessary, borrowing from banks. Whether Merit could follow that same strategy to raise the $4 billion necessary to expand at the pace envisioned by the firm's CEO was uncertain, though it seemed unlikely to Sara. She had identified two options for the board to consider: Option 1: Merit could approach JPMorgan Chase, a bank that had served Merit well for many years with seasonal credit lines as well as medium-term loans. Lehn believed that JPMorgan was unlikely to make a $4 billion loan to Merit on its own, but it could probably gather a group of banks together to make a loan of this magnitude. However, the banks would undoubtedly demand that Merit limit further borrowing and provide JPMorgan with periodic financial disclosures so that they could monitor Merit's financial condition as it expanded its operations. Option 2: Merit could convert to public ownership, issuing stock to the public in the primary market. With Merit's excellent financial performance in recent years, Sara thought that its stock could command a high price in the market and that many investors would want to participate in any stock offering that Merit conducted. Becoming a public company would also allow Merit, for the first time, to offer employees compensation in the form of stock or stock options, thereby creating stronger incentives for employees to help the firm succeed. On the other hand, Sara knew that public companies faced extensive disclosure requirements and other regulations that Merit had never had to confront as a private firm. Furthermore, with stock trading in the secondary market, who knew what kind of individuals or institutions might wind up holding a large chunk of Merit stock? TO DO a. Discuss the pros and cons of option 1, and prioritize your thoughts. What are the most positive aspects of this option, and what are the biggest drawbacks? b. Do the same for option 2. c. Which option do you think Sara should recommend to the board and why?
Question 3
1. Below is the requirement please read it carefully so that I get an excellent work, Thanks, 1. i have a proposal for PHD program , and i already submitted it to my university then when it is approved I can apply for the program. In Business Adminstartion. The title of the proposal is : The Relationship Between The Human Resource Strategy and The Employees Performance In an Organization in private sector In Jordan. I will upload it here . please notice that there are some requirements written by the supervisor on the side of each page for more additions and modifications. (Chapters 1-2-3) Kindly notice that chapter 1 and 3 have been modified but please recheck for perfect changes. Chapter 2 is the one which needs improvements and additions according to the feedback written on each point . It will be very clear on each page. it is very important for me to get a very professional person to help me as my application will be based on the approval of the proposal in September 2014. So please let me get a perfect work as required from my supervisor. please be informed that due date is very important as there is no time after that because i have to apply in September. Thanks for your understanding.
Question 4
General Instructions For this assignment, you will be reading portions of the 2011 Comprehensive Annual Financial Report (CAFR) issued by Broward County. You will be asked selected questions from the CAFR and provide interpretation/comment. Specific Requirements 1) From the Statement of Net Assets and related information, please answer the following questions: (30 points) a. What assets are included in Governmental Activities- Not-depreciable Capital Assets? Provide a breakdown by type of asset and amount. b. What is the largest asset included in the Business-type Activities Depreciable Capital Assets? Identify the particular asset and the amount included for that asset. c. What percentage of Governmental Activities Net Assets are unrestricted? What percentage of Business Activities Net Assets are unrestricted? What can you learn from these percentages? d. From the Management, Discussion and Analysis, pick 3 accounts that from the Statement of Net Assets that have changed significantly from 2010 to 2011. Identify the changes, significance (% change, etc.), and discuss contributing factors identified in the report. Hint: use MD&A plus notes. e. Explain what is and why there is separate reporting for the component unit. 2. From the Statement of Activities, please answer the following questions: (20 points) a. Based on Net Expense, which three Governmental Activities had the highest net expense? Identify the activities and the amounts. b. Which Business-type Activities had Net Expense (i.e., Expenses higher than Program Revenues)? Identify the activities and the amounts. c. What were the five largest General Revenues? Identify the revenue items and the amounts. d. What was the amount of the Change in Net Assets for Governmental Activities? e. From the Management, Discussion and Analysis, pick 3 accounts that from the Statement of Activities that have changed significantly from 2010 to 2011. Identify the changes, significance (% change, etc.), and discuss contributing factors identified in the report. Hint: use MD&A plus notes. 3. Review the information reported in the Governmental Funds Balance Sheet and answer the following questions: (10 points) a. What are the names of the major government funds? b. What is accounted for in each of the major governmental funds c. Identify the purposes for which the General Fund fund balance is reserved and the amounts that are reserved for each purpose. 4. Review the information reported in the Reconciliation schedule and answer the following questions: (10 points) a. What is being reconciled in this schedule and why is this reconciliation needed? Hint: to answer this question adequately, you need to discuss how the Governmental Funds Balance Sheet differs from the Statement of Net Assets. b. In your own words, explain the two largest reconciling items (differences) on the Reconciliation. 5) Describe the nature and impact of the prior period adjustment? (10 points) 6) Review the information reported in the Governmental Funds Statement of Revenue, Expenditures, and Changes in Fund Balances , and answer the following questions: (10 points) a. What are the three largest sources of revenues in the General Fund, and how much was reported for each source? b. How much did the County expend during the year ended September 30, 2011 for Debt Service? What was the breakdown for these expenditures (e.g., how much for principal)? 7. Revenue the comparison of budgeted and actual revenue, expenditures, and changes in fund balance for the General Fund, and answer the following questions: (10 points) a. Was actual revenue higher or lower than budgeted? What were the two largest variances (positive or negative), and what was the amount of each variance? b. Were actual expenditures higher or lower than budgeted? What were the two largest variances (positive or negative), and what were the amounts of the variances?,maybe you can just do it up to 6-7 pages. this will be due on tomorrow night. I hope you can help me out on this. Thanks!
Question 5
Assignment: You are interested in proposing a new venture to the management of your company. Pertinent financial information is given below.
Balance Sheet Data Cash 3,000,000 Accounts Payable and Accruals 14,000,000 Accounts Receivable 24,000,000 Notes Payable 41,000,000 Inventories 45,000,000 Long-Term Debt 50,000,000 Preferred Stock 20,000,000 Net Fixed Assets 128,000,000 Common Equity 75,000,000 Total Assets 200,000,000 Total Liabilities & Owners’ Equity 200,000,000
Last year’s sales were $210,000,000. The company has 60,000 bonds with a 30-year life outstanding, with 15 years until maturity. The bonds carry a 9 percent semi-annual coupon, and are currently selling for $870.73. You also have 100,000 shares of perpetual preferred stock outstanding, which pays a dividend of $7.80 per share. The current market price is $94.00. The company has 10 million shares of common stock outstanding with a current price of $15.00 per share. The stock exhibits a constant growth rate of 8 percent. The last dividend (D0) was $.90.
Your firm does not use notes payable for long-term financing. The firm’s target capital structure is 25% debt, 5% preferred stock, and 70% common equity. The firm does not plan to issue new common stock. Your firm’s federal + state marginal tax rate is 38%. The firm has the following investment opportunities currently available in addition to the venture that you are proposing:
Project Cost IRR A 17,000,000 21% B 21,000,000 19% C 16,000,000 15% D 28,000,000 11% E 25,000,000 8%
All projects, including Project I, are assumed to be of average risk. Your venture would consist of a new product introduction (You should label your venture as Project I, for “introduction”). You estimate that your product will have a six-year life span, and the equipment used to manufacture the project falls into the MACRS 5-year class. The resulting MACRS depreciation percentages for years 1 through 6, respectively, are 20%, 32%, 19%, 12%, 11%, and 6%. Your venture would require a capital investment of $17,000,000 in equipment, plus $1,000,000 in installation costs. The venture would also result in an increase in accounts receivable and inventories of $3,000,000. At the end of the six-year life span of the venture, you estimate that the equipment could be sold at a $5,000,000 salvage value. Your venture would incur fixed costs of $1,000,000 per year, while the variable costs of the venture would equal 30 percent of revenues. You are projecting that revenues generated by the project would equal $6,000,000 in year 1, $14,000,000 in year 2, $15,000,000 in year 3, $16,000,000 in year 4, $11,000,000 in year 5, and $8,000,000 in year 6.
The following list of steps provides a structure that you should use in analyzing your new venture. Note: Carry all final calculations to two decimal places. 1. Find the costs of the individual capital components (15 points): a. long-term debt
b. preferred stock c. retained earnings (use DCF approach) 2. Determine the weighted average cost of capital. (5 points) 3. Compute the Year 0 investment for Project I. (5 points) 4. Compute the annual operating cash flows for years 1-6 of the project. (20 points) 5. Compute the non-operating (terminal) cash flow at the end of year 6. (10 points) 6. Draw a timeline that summarizes all of the cash flows for your venture. (5 points) 7. Compute the IRR, payback, discounted payback, and NPV for Project I. (20 points) 8. Prepare a report for the firm’s CEO indicating which projects should be accepted and why. (20 points) 9. Conclude the project with your reflections on what you have learned from this course and how it has affected your view of your own job and career.
