P 6-19 J.A. Appliance Company has supplied you with the following data regarding work- ing capital...

P 6-19 J.A. Appliance Company has supplied you with the following data regarding work- ing capital and sales for the

years 2011 2010, 2009.

Working capital $270,000 $ 260,000 $ 240,000

Sales $650,000 $600,000 $ 500,000

The industry average for the ratio of sales to working capital. 4.10 times 4.05times 4.00times

Required a. Compute the sales to working capital ratio for each year.

b. Comment on the sales to working capital ratio for J.A. Appliance in relation to the industry average and what this may indicate.

Expert Solution

Sales to working capital Ratio = Sales / Working Capital

a)

Sales to working capital Ratio 2011= 650000 / 270000 = 2.41
Sales to working capital Ratio 2010= 600000 / 260000 = 2.31
Sales to working capital Ratio 2009= 500000 / 240000 = 2.08

b)
Sales to working capital Ratio indicates how efficient any firm in generating more sales by inducing more working capital in the firm or it can also be said how efficiently firm utilised the working capital to generates sales. Thus higher the ratio less working capital is required to generate given amount of sales.
Looking at the industry ratios, it can be clearly stated that J.A. Appliance Company not at all efficient in managing their Account receivables, Account payables and Inventory (Working Capital). Their Sales to working capital is almost 60% of industry average.
Though it is improving year by year from 2.08 (in 2009) to 2.41 (in 2011) but it is still lower than industry (4.10 in 2011)

ekkarill92 answered 1 year ago

1. A company that makes organic fertilizer has supplied the following data: Bags produced and sold...

1. A company that makes organic fertilizer has supplied the following data: Bags produced and sold 240,000 Sales revenue $1,896,000 Variable manufacturing expense $804,000 Fixed manufacturing expense $520,000 Variable selling and administrative expense $180,000 Fixed selling and administrative expense $270,000 Net operating income $122,000 The company's margin of safety in units is closest to: Select one: a. 140,000 units b. 202,238 units c. 125,714 units d. 32,105 units 2. Davey Corporation is preparing its Manufacturing Overhead Budget for the fourth...

The COVID-19 pandemic has forced people to work from home. The following are age data from...

The COVID-19 pandemic has forced people to work from home. The following are age data from a sample of people who work from home: 18 54 20 46 25 48 53 27 26 37 40 36 42 25 27 33 28 40 45 25 a. Calculate the average, median, quartile 1 and quartile 3 b. Calculate range, interquartile range, variance, standard deviation, and coefficient of variation. c. Draw a box plot, give a conclusion Note: no handwritten answer would be...

The company you work for, Capital Capacitors, makes a specialized capacitor. Data from six different production...

The company you work for, Capital Capacitors, makes a specialized capacitor. Data from six different production months has been collected: January: 58,000 produced February: 71,000 produced March: 72,000 produced April: 50,000 produced May: 54,000 produced June: 63,000 produced The cost to produce one of these capacitors has been estimated to be $1.20. 1. What are the upper and lower bounds of a 95% confidence interval on the mean number of capacitors produced per month? 2. At an interest rate of...

Inception Company produces gadgets for the coveted small appliance market. The following data reflect activity for...

Inception Company produces gadgets for the coveted small appliance market. The following data reflect activity for the year 2014: Inception Co. uses a normal-costing system and allocates overhead to work in process at a rate of 2.90 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials. Requirements 1. Prepare journal entries to record the transactions for 2014 including an entry to close out over- or underallocated overhead to cost of goods...

Donation Company produces gadgets for the coveted small appliance market. The following data reflect activity for...

Donation Company produces gadgets for the coveted small appliance market. The following data reflect activity for the year 2014: LOADING...(Click the icon to view the data.) Donation Co. uses a normal-costing system and allocates overhead to work in process at a rate of $2.80 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials. Costs incurred: Purchases of direct materials (net) on credit $124,000 Direct manufacturing labor cost 83,000 Indirect labor 54,100...

A cement manufacturer has supplied the following data: Tons of cement produced and sold 220000 Sales...

A cement manufacturer has supplied the following data: Tons of cement produced and sold 220000 Sales revenue $924000 Variable manufacturing expense $297000 Fixed manufacturing expense $285498 Variable selling and administrative expense $165000 Fixed selling and administrative expense $81917 If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would operating income be closest to

A cement manufacturer has supplied the following data: Tons of cement produced and sold 262,000 Sales...

A cement manufacturer has supplied the following data: Tons of cement produced and sold 262,000 Sales revenue $ 1,179,000 Variable manufacturing expense $ 431,000 Fixed manufacturing expense $ 228,000 Variable selling and administrative expense $ 93,000 Fixed selling and administrative expense $ 218,000 Net operating income $ 209,000 What is the company's unit contribution margin? (Round your intermediate calculations to 2 decimal places.) Multiple Choice $2.00 per unit $0.52 per unit $4.50 per unit $2.50 per unit

(TCO C) A tile manufacturer has supplied the following data. Tons of cement produced and sold...

(TCO C) A tile manufacturer has supplied the following data. Tons of cement produced and sold 220,000 Sales revenue $924,000 Variable manufacturing expense $297,000 Fixed manufacturing expense $280,000 Variable selling and admin expense $165,000 Fixed selling and admin expense $82,000 Net operating income $100,000 Required: Calculate the company's unit contribution margin. Calculate the company's contribution margin ratio. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?

A cement manufacturer has supplied the following data: Tons of cement produced and sold 275,000 Sales...

A cement manufacturer has supplied the following data: Tons of cement produced and sold 275,000 Sales revenue $ 979,000 Variable manufacturing expense $ 232,000 Fixed manufacturing expense $ 313,000 Variable selling and administrative expense $ 110,650 Fixed selling and administrative expense $ 93,000 Net operating income $ 230,350 The company's contribution margin ratio is closest to: Multiple Choice 44.3% 65.0% 68.0% 23.5%

A manufacturer of tiling grout has supplied the following data: Kilograms produced and sold................... 300,000 Sales...

A manufacturer of tiling grout has supplied the following data: Kilograms produced and sold................... 300,000 Sales revenue............................................. 1,960,000 Variable manufacturing expense.......................960,000 Fixed manufacturing expense..........................266,000 Variable selling and admin expense................360,000 Fixed selling and admin expense.....................232,000 Net operating income.......................................132,000 Required: Calculate the: The company's break-even in unit sales The company's contribution margin ratio The company's degree of operating leverage

Question