10. You friend Kei is thinking of opening an art studio. They estimate it will cost $60,000 a year to rent a space downtown. Additionally, they estimate they will spend $80,000 in merchandise each year. Currently, they are earning $40,000 a year working at a museum. (3 pts.)
a. If Kei thinks they will earn $200,000 a year in revenue, should they open the art studio? Briefly explain your answer.
b. If Kei thinks they will earn $120,000 a year in revenue, should they open the art studio? Briefly explain your answer.
c. If Kei thinks they will earn $160,000 a year in revenue, should they open the art studio? Briefly explain your answer.
In: Economics
The Red Hen company is launching its new food for sale in supermarkets throughout Michigan. The sales department is convinced that its spicy chicken soup will be a great success. The marketing department is considering an intensive advertising campaign. The advertising campaign will cost $2,000,000 and if successful produce $9,600,000 in added revenue. If the campaign is less successful (25% chance), the added revenue is estimated at only $3,600,000. If no advertising is used, the revenue is estimated at $7,000,000 with probability 0.7 if customers are receptive and $3,000,000 with probability 0.3 if they are not.
Question 1. Write an equation to calculate the expected value for each decision as a function of the probability that the major advertising campaign will be effective (p)?
In: Operations Management
| Crocs, Inc. sells Croslite footbeds to its wholly-owned subsidiaries, Ocean Minded, Inc. and Bite, Inc., for use in manufacturing their footwear. The following intercompany information is available for 2019: | ||||
| Ocean Minded | Bite | |||
| Merchandise in beginning inventory purchased from Crocs | $920,000 | $575,000 | ||
| Merchandise in ending inventory purchased from Crocs | 1,035,000 | 805,000 | ||
| Total sales revenue recorded by Crocs | 34,500,000 | 28,750,000 | ||
|
Crocs sells the footbeds to its subsidiaries at a markup of 15% on cost. |
||||
| Related to the above information, calculate the following balances, reported in the trial balances of Crocs and its subsidiaries at the end of 2019: | ||||
|
(1) Sales revenue and cost of goods sold, reported on Crocs’ books |
||||
|
(2) Cost of goods sold, reported on the books of Ocean Minded and Bite. |
||||
|
Enter answers in thousands ($34,500,000 equals $34,500 in thousands). |
||||
| (in thousands) | ||||
|
Sales revenue reported on Croc's books |
? | |||
|
Cost of goods sold reported on Croc's books |
? | |||
|
Cost of goods sold reported on Ocean Minded's books |
? | |||
|
Cost of goods sold reported on Bite's books |
? | |||
|
Calculate the consolidated balances for inventory and cost of goods sold. |
||||
|
Enter answers in thousands ($28,750,000 equals $28,750 in thousands). |
||||
| (in thousands) | ||||
|
Consolidated inventory |
? | |||
|
Consolidated cost of goods sold |
? | |||
| Prepare the eliminating entries (I) required to consolidate the accounts of Crocs with those of Ocean Minded and Bite at the end of 2019. | ||||
|
Enter answers in thousands ($920,000 equals $920 in thousands). |
||||
| Ref. | Description | Debit | Credit | |
| (I-1) |
Investment in Ocean Minded |
? | ? | |
|
Cost of goods OR Inventory OR Investment in BITE OR Sales Revenue |
? | ? | ||
|
Cost of goods OR Inventory OR Investment in BITE OR Sales Revenue |
? | ? | ||
| To recognize confirmed downstream profit in beginning inventories. | ||||
| (I-2) |
Cost of goods OR Inventory OR Investment in BITE OR Sales Revenue |
? | ? | |
|
Cost of goods OR Inventory OR Investment in BITE OR Sales Revenue |
? | ? | ||
|
To eliminate gross intercompany sales and purchases. |
||||
| (I-3) |
Cost of goods OR Inventory OR Investment in BITE OR Sales Revenue |
? | ? | |
|
Cost of goods OR Inventory OR Investment in BITE OR Sales Revenue |
? | ? | ||
|
To eliminate unconfirmed profit in ending inventories. |
||||
| Assume Ocean Minded reports net income of $2,000,000 and Bite reports net income of $2,500,000. There are no revaluation write-offs in 2019 or any other intercompany transactions. Calculate equity in net income of Ocean Minded and equity in net income of Bite, as reported by Crocs on its own books, using the complete equity method. | ||||
|
Enter answers in thousands ($34,500,000 equals $34,500 in thousands). |
||||
| (in thousands) | ||||
|
Equity in net income of Ocean Minded |
? | |||
|
Equity in net income of Bite |
? | |||
In: Accounting
Three-level Revenue Forecast
Three eye-ear-nose-and-throat physicians decide to hire an experienced audiologist in order to add a new service line to their practice. They ask the practice manager to prepare a three level colume forecast as a first step in their decision making.
Assumptions: for the base level (most likely) revenue forecast, assume $200 per procedure time 4 procedures per day times 5 days equals 20 procedures per week times 50 weeks per year equals 1,000 potential procedures per year
For the best case revenue forecast, assume an increase in volume of one procedure per day average, for an annual increase of 250 procedures (5 days per week times 50 weeks equals 250). The best case is if the practice gains a particular care contract.
For the worst case revenue forecast, assume a decrease in volume of 2 procedures per day average, for an annual decrease of 500 proocedures. The worst case is if the practice loses a major payer.
Create the required table in an Excel document and submit the assignment via the link provided below.
The idea of this assignment is that since we cannot tell the future we often make assumptions of what is likely to happen. When we make assumptions, we tend to have a realistic idea of what could happen, a sense of a 'worse case' scenario, and a sense of a 'best case' scenario. Looking at these three options helps us anticipate future need and plan accordingly.
To complete this assignment, you must calculate the revenue
forecasts at each level (and show your work), but you do
notneed to create the line chart shown in Figure 17-5 (p.
209). In other words, just show your calculations -- do
not worryabout creating a
chart/graph.
Assignment Exercise 17-2 already provides you with the facts that
you need. You are given the 'base level' forecast (which would be
the same as the 'basic forecast' line in Fig. 17-5). From that you
can use addition and subtraction to calculate the 'high forecast'
(or 'best case') and 'low forecast' (or 'worst case') revenue
amounts.
You might find it helpful to use this format:
Best: best volume per year x rate per procedure = best revenue per year
Base: base volume per year x rate per procedure = base revenue per year
Worse: worse volume per year x rate per procedure = worse revenue per year
In: Accounting
Lavage Rapide is a Canadian company that owns and operates a large automatic carwash facility near Montreal. The following table provides data concerning the company’s costs:
| Fixed Cost per Month |
Cost per Car Washed |
||||
| Cleaning supplies | $ | 0.70 | |||
| Electricity | $ | 1,200 | $ | 0.09 | |
| Maintenance | $ | 0.25 | |||
| Wages and salaries | $ | 4,800 | $ | 0.20 | |
| Depreciation | $ | 8,000 | |||
| Rent | $ | 2,100 | |||
| Administrative expenses | $ | 1,600 | $ | 0.03 | |
For example, electricity costs are $1,200 per month plus $0.09 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.20 per car washed.
The actual operating results for August appear below.
| Lavage Rapide Income Statement For the Month Ended August 31 |
||
| Actual cars washed | 8,500 | |
| Revenue | $ | 54,180 |
| Expenses: | ||
| Cleaning supplies | 6,380 | |
| Electricity | 1,926 | |
| Maintenance | 2,340 | |
| Wages and salaries | 6,840 | |
| Depreciation | 8,000 | |
| Rent | 2,300 | |
| Administrative expenses | 1,752 | |
| Total expense | 29,538 | |
| Net operating income | $ | 24,642 |
Required:
Complete the flexible budget performance report that shows the company’s activity variances and revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Complete the flexible budget performance report that shows the company’s activity variances and revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Complete the flexible budget performance report that shows the company’s activity variances and revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Complete the flexible budget performance report that shows the company’s activity variances and revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Complete the flexible budget performance report that shows the company’s activity variances and revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
| Revenue | Revenue and spending variances | Revenue and Spending Variances | Activity Variances | Activity Variances |
| Expenses : | ||||
| Cleaning Supplies | No need to fill | No need to fill | No need to fill | No need to fill |
| Electricity | ||||
| Maintenance | ||||
| Wages and Salaries | ||||
| Depreciation | ||||
| Rent | ||||
| Administrative Expenses | ||||
| Total Expenses | ||||
| Net Operating Income | ||||
In: Accounting
|
Walmart Income Statement For the year ended January 31, 2018 |
Walmart Income Statement For the year ended January 31, 2017 |
||||
|
Details |
2018 |
Details |
2017 |
||
|
$ |
$ |
||||
|
Total Revenue |
$500,343,000 |
Total Revenue |
$485,873,000 |
||
|
Cost of Revenue |
$373,396,000 |
Cost of Revenue |
$361,256,000 |
||
|
Gross Profit |
$126,947,000 |
Gross Profit |
$124,617,000 |
||
|
Sales, General and Admin. |
$106,510,000 |
Sales, General and Admin. |
$101,853,000 |
||
|
Operating Income |
$20,437,000 |
Operating Income |
$22,764,000 |
||
|
Add’l income/expense items |
($2,984,000) |
Add’l income/expense items |
$100,000 |
||
|
Earnings Before Interest and Tax |
$17,453,000 |
Earnings Before Interest and Tax |
$22,864,000 |
||
|
Interest Expense |
$2,330,000 |
Interest Expense |
$2,367,000 |
||
|
Earnings Before Tax |
$15,123,000 |
Earnings Before Tax |
$20,497,000 |
||
|
Income Tax |
$4,600,000 |
Income Tax |
$6,204,000 |
||
|
Minority Interest |
($661,000) |
Minority Interest |
($650,000) |
||
|
Net Income-Cont. Operations |
$9,862,000 |
Net Income-Cont. Operations |
$13,643,000 |
||
|
Net Income- |
$9,862,000 |
Net Income- |
$13,643,000 |
||
|
Net Income-Applicable to Common Shareholders |
$9,862,000 |
Net Income-Applicable to Common Shareholders |
$13,643,000 |
|
Target Income Statement For the year ended February 23, 2018 |
Target Income Statement For the year ended January 28, 2017 |
||||
|
Details |
2018 |
Details |
2017 |
||
|
$ |
$ |
||||
|
Total Revenue |
$71,879,000 |
Total Revenue |
$69,495,000 |
||
|
Cost of Revenue |
$51,125,000 |
Cost of Revenue |
$49,145,000 |
||
|
Gross Profit |
$20,754,000 |
Gross Profit |
$20,350,000 |
||
|
Sales, General and Admin. |
$14,248,000 |
Sales, General and Admin. |
$13,356,000 |
||
|
Other Operating Items |
$2,194,000 |
Other Operating Items |
$2,025,000 |
||
|
Operating Income |
$4,312,000 |
Operating Income |
$4,969,000 |
||
|
Add’l income/expense items |
0 |
Add’l income/expense items |
0 |
||
|
Earnings Before Interest and Tax |
$4,312,000 |
Earnings Before Interest and Tax |
$4,969,000 |
||
|
Interest Expense |
$666,000 |
Interest Expense |
$1,004,000 |
||
|
Earnings Before Tax |
$3,646,000 |
Earnings Before Tax |
$3,965,000 |
||
|
Income Tax |
$718,000 |
Income Tax |
$1,296,000 |
||
|
Minority Interest |
0 |
Minority Interest |
0 |
||
|
Net Income-Cont. Operations |
$2,928,000 |
Net Income-Cont. Operations |
$2,669,000 |
||
|
Net Income |
$2,934,000 |
Net Income |
$2,737,000 |
||
|
Net Income-Applicable to Common Shareholders |
$2,934,000 |
Net Income- |
$2,737,000 |
1. Revenue recognition: On the income statement we must assess it on a quantitative and qualitive basis.
a) Use horizontal analysis to identify any time trends.
b) Compare the horizontal analysis of the two companies, what are the differences if any?
c) Consider the current economic environment and the companies’ competitive landscape. Given that they operate in the same industry, do they have similar revenues?
In: Accounting
Why does a shift in perceived demand cause a shift in marginal revenue for monopolistic competitive firms?
In: Economics
On a balance sheet, how would I find the revenue? Earnings? and Earnings per share?
Also, how would i find the average growth rate of each?
In: Finance
Costume jewelry is produced in a monopolistically competitive market. A profit-maximizing producer finds that marginal revenue = marginal cost = $4.50 when output is 700 rings. An economist studying this information can conclude that:
|
a.the producer is charging a price of $4.50. |
||
|
b.economic profit is $3,150. |
||
|
c.the producer charges a price greater than $4.50. |
||
|
d.new firms will want to enter. |
||
|
e.this producer should produce more than 700 rings |
In: Economics
Profit Analysis
The same multimedia company now estimates their cost and revenue functions to be:
C(x) = 11.2x + 48,000 and
R(x) = 18.26x.
Find the profit of manufacturing and selling 9,633 units. (Round to two decimal places).
In: Finance