The management accountant for Tony's Skateboard Company has prepared the following segmented income statement for each of its three product lines.

                                               Jammer         Cruise        Flight       Total

      Sales                                $400,000     $250,000    $350,000 $1,000,000

      Variable expenses             260,000       150,000      190,000   600,000

      Contribution margin          140,000       100,000      160,000   400,000

      Other costs                        20,000       30,000      20,000   70,000

      Segment margin                120,000         70,000      140,000   330,000

      Allocated avoidable costs 30,000       30,000      20,000   80,000

      Segment income                 90,000         40,000      120,000   250,000

      Allocated corporate costs 50,000       50,000      50,000   150,000

      Corporate profit                $40,000     $(10,000)      $70,000 $100,000

Required:

a. Do you recommend dropping the Cruise product line? Why or why not?

b. If the Jammer product line had been discontinued, the short-term effect on corporate profits would be a decrease of what amount?

c. Assume that the Flight product line has been discontinued and long-term capacity has had time to adjust. The projected long-term effect of this action on annual corporate profits would be a decrease of what amount?

d. Assume that an advertising campaign could increase revenues for any of the products by $15,000. To maximize corporate profits, which product line should receive the advertising dollars? Why?

e. How would you change the format of the segment margin statement above to make it more understandable?

5. A cruise company would like to estimate the average beer consumption to plan its beer inventory levels on future​ seven-day cruises.​ (The ship certainly​ doesn't want to run out of beer in the middle of the​ ocean!) The average beer consumption over 12 randomly selected​ seven-day cruises was 81,845 bottles with a sample standard deviation of 4,528. complete parts a and b below.

a. Construct a 90​% confidence interval to estimate the average beer consumption per cruise.

lower limit of ___ bottles to an upper limit of ___ bottles

b. . What assumptions need to be made about this​ population?

6. A national air traffic control system handled an average of 47,574 flights during 28 randomly selected days in a recent year. The standard deviation for this sample is 6,421 flights per day. Complete parts a through c below.

a. Construct a 99​% confidence interval to estimate the average number of flights per day handled by the system.

The 99​% confidence interval to estimate the average number of flights per day handled by the system is from a lower limit of ___ to an upper limit of ___

b. Suppose an airline company claimed that the national air traffic control system handles an average of​ 50,000 flights per day. Do the results from this sample validate the airline​ company's claim?

c. What assumptions need to be made about this​ population?

Part 1 Tax arbitrage

Products, Inc., Singapore (PI Asia) and Products, Inc. US (PI North America) are part of an affiliated group of companies, all of which have common ownership. These affiliates do business in Singapore and the US, respectively, and have regular transactions with each other. On such transaction involves assemblies that PI Asia produces and sells to PI North America. PI Asia purchases materials and labor from unrelated third parties for S$1000, incurs additional expenses of S$1000 and sells the partially completed assemblies that it produces to PI North America. PI North America incurs additional expenses of $500 to finish production and sells the completed product to unrelated customers for $2500.  

The average exchange rate is USDSGD 1.2500. Assume the corporate income tax rate in Singapore is 17%, and in the US, 25% (combined state and federal).

Transfer pricing

1a. What price should PI Asia charge to minimize the total tax liability for the affiliated group of companies?

b. What is the general rule about the transfer price that minimizing taxes when a company from a low tax jurisdiction sells a product to a related company in a high tax jurisdiction?

Imagine that there are only two countries in the world: America and China. Each country produces and consumes two goods – a tradable good (T) and a non-tradable good (NT). The production of these goods involves the use of labour, but no other resources are used in the production process. This is of course a ridiculous assumption, but it is one we will make for the purposes of this assignment. There are perfectly competitive markets for the non-tradable good (NT) in each country, but no trade in this good between the countries. There is a perfectly competitive global market in the traded good (T). Labour is homogeneous within America. An hour of labour produces 10 units of the traded good (T) or 5 units of the non-traded good (NT) in America. Labour costs are 10 dollars (USD) an hour in America. Labour is also homogenous within China. An hour of labour produces 5 units of the traded good (T) or 5 units of the non-traded good (NT) in China. Labour costs are 10 yuan (CNY) an hour in China.

Suppose that over time the productivity per hour of labour in China in the tradable good industry increases to 10 units of T, while the other three productivity figures do not change. What will happen to the real exchange rate? (1 mark)

1. Polo Co. (a C corporation) had $300,000 in operating income and $50,000 in operating expenses during the year. In addition, Polo had a $11,000 LTCG and a ($30,000) STCL. What is Polo’s taxable income?
2. Al is an attorney who operates his law practice as a sole proprietor. During 2019, he received cash of $190,000 for legal services. Of the amount collected, $25,000 was for services rendered back in 2018. At the end of 2019, Al had outstanding accounts receivable of $40,000, all for services rendered in 2019. Included in the accounts receivable was $10,000 that was charged to a client who died in early 2020. During 2020, Al has now learned he has no hope of collecting the balance due from the client’s estate.    Compute Al’s Gross Income for 2019:
3. 1. Using cash basis
   2. Using accrual basis

1. Fun Toys Co. reported a per-share book value of $3.5, earnings per share (EPS)

of $2.3, and dividend per share (DPS) of 0.85 in its balance sheet on

December 31, 2010. In early 2011 analysts made the following forecasts for 2011~2015: EPS growth rate is 4.5%, and DPS growth rate is 2%. The required return for equity is 8.5% percent.

Case 1: If the residual earnings are zero after 2015, calculate the value per share at the end of 2010.

Case 2: If the residual earnings are at 2015 level for 2016 and beyond, calculate the continuing value at the end of 2015 and value per share at the end of 2010.

Case 3. If the residual earnings will grow at 4% per year for 2016 and beyond, calculate the continuing value at the end of 2015 and value per share at the end of 2010.

AE = Y

AE = C + I + G

C = a + bYd

Yd = Y - T

A.

Given the values below, is the value of the spending (Keynesian) multiplier?

What is the value of the tax multiplier?

What is the value of the 'balanced budget multiplier'?

Solve for Y*.

a = 300

MPC = .6

I = 350

G = 400

T = 0

B. Given the values below, solve for Y* (equilibrium output).

a = 300

MPC = .6

I = 350

G = 400

T = 250

C. Given the values below, solve for Y* (equilibrium output).

a = 300

MPC = .6

I = 350

G = 400

T = 350 (an increase of 100 from 1B above)

D. Given the values below, solve for Y* (equilibrium output).

a = 300

MPC = .6

I = 350

G = 500 (an increase of 100 from 1B above)

T = 250

E. Given the values below, solve for Y* (equilibrium output).

a = 300

MPC = .6

I = 350

G = 500 (an increase of 100 from 1B above)

T = 350 (an increase of 100 from 1B above)

F. It is more realistic to assume a percentage tax rate (t) , rather than a flat tax. Given the values below, solve for Y*.

a = 300

MPC = .8

I = 200

G = 300

t = 25%

Periwinkle plc manufactures Product X using three different raw materials. The product details are as follows:
i. Selling price per unit £250. Seventy-five percent of sales are collected in the first month and these customers receive a 0.5% discount. The remainder is collected in the following month.
ii. Direct labour per unit 8 hrs
iii. Labour rate 7.50 per hour
iv. Materials requirement per unit:
Material Required Price

A 3  kg $3.50 per kg
B 2 kg $5.00 per kg
C 4 kg $4.50 per kg
v. The company is considering its budgets for next year and has made the following
estimates of sales demand for Product X for July to October:
June 350 units
July 400 units
August 300 units
September 600 units
October 450 units
November 300 units
vi. It is company policy to hold stocks (inventories) of finished goods at the end of each month equal to 50 per cent of the following month’s sales demand.
vii. Raw material stocks (inventories) are expected to be 40% of the following month’s requirements. Material is paid for on a cash basis.
viii. Labour is paid on an hourly rate based on attendance. In addition to the unit direct labour hours shown above.
i$4.50 per kg
v. The company is considering its budgets for next year and has made the following
estimates of sales demand for Product X for July to October:
June 350 units
July 400 units
August 300 units
September 600 units
October 450 units
November 300 units
vi. It is company policy to hold stocks (inventories) of finished goods at the end of each
month equal to 50 per cent of the following month’s sales demand.
vii. Raw material stocks (inventories) are expected to be 40% of the following month’s
requirements. Material is paid for on a cash basis.
viii. Labour is paid on an hourly rate based on attendance. In addition to the unit direct
labour hours shown above.

Overheads for the period are expected to be:
Variable Overheads
Production $40 per unit
Selling and Administration $35 per unit
Fixed Overheads (monthly)

Production overheads $10 000 (including $3000 depreciation)

Selling and Administration $4000 (including $300 depreciation)

x. In September, Periwinkle plans to dispose of machinery. This is expected to realize $15 000. This machinery will be replaced in August with a new piece of

equipment at a cost of $45 000, to be paid in two equal instalments in August and September.

xi. The company will receive a tax refund of $6 000 Equipment.

xii. Periwinkle’s policy is to maintain a minimum cash balance of $10 000. The company can draw down (In multiples of $1 000) on a line of credit at a rate of $15%

per annum. This is repaid when there is surplus cash. Borrowing occurs on the first day of the month, repayments are made on the last day of the month.
Requirements:
a) Prepare the following budgets for the quarter from July to September inclusive:
i. Sales budget
ii. Schedule of cash collections
iii. Production budget in units
iv. Raw material purchases budget in kgs and value
v. Labour requirements budget in hours and value.
vi. Production overhead budget
vii. Selling and Administration Budget
viii. Cash budget

South Hampton University is preparing its budget for the upcoming academic year. This is a specialised private university that charges fees for all degree courses. Currently, 30,000 students are enrolled on campus. However, the university is forecasting a 5 per cent growth in student numbers in the coming year, despite an increase in fees to $3,000 per subject. The following additional information has been gathered from an examination of university records and conversations with university managers:

 South Hampton is planning to award scholarships to 200 students, which will cover their fees.

 The average class has 80 students, and the typical student takes 4 subjects per semester. South Hampton operates 2 semesters per year.

 The average academic staff salary is $120,000 per annum including on-costs.

 South Hampton’s academic staff are evaluated on the basis of teaching, research, administration and professional/community service. Each of the academic staff teaches the equivalent of three subjects during the academic year.

Required:

a) Prepare a revenue budget for the upcoming academic year.

b) Determine the number of staff needed to cover classes.

c) Assume there is a shortage of full-time academic staff. List and explain at least five actions that South Hampton might take to accommodate the growing student numbers. (200 words)