Consolidated Industries is studying the addition of a new valve to its product line. The valve would be used by manufacturers of irrigation equipment. The company anticipates starting with a relatively low sales volume and then boosting demand over the next several years. A new salesperson must be hired because Consolidated’s current sales force is working at capacity. Two compensation plans are under consideration:

Plan A: An annual salary of $22,000 plus a 10% commission based on gross dollar sales.

Plan B: An annual salary of $66,000 and no commission.

Consolidated Industries will purchase the valve for $50 and sell it for $80. Anticipated demand during the first year is 6,000 units. (In the following requirements, ignore income taxes.)

1. Compute the break-even point in units for Plan A and Plan B.

3-a. Compute the operating leverage factor of both plans at the anticipated demand of 6,000 units. (Round your answers to 2 decimal places.)

4. Assume that a general economic downturn occurred during year 2, with product demand falling from 6,000 to 5,000 units. Determine the percentage decrease in company net income if Consolidated had adopted Plan A.

Plan A Profitability decrease by ________%

5. Assume that a general economic downturn occurred during year 2, with product demand falling from 6,000 to 5,000 units. Determine the percentage decrease in company net income if Consolidated had adopted Plan B. (Round your answer to 1 decimal place.)

Plan B profitability decrease by _______%

Do a case study of Northeastern Airlines.

Northeastern Airlines is a regional airline serving nine cities in the New England states as well as cities in New York, New Jersey, and Pennsylvania. While nonstop flights are available for some of the routes, connecting flights are often necessary. Northeastern Airlines Service Area The network shows the cities served and profit in U.S. dollars per passenger along each of these routes. The routes from ?Boston-to-Providence and from Providence-to-Boston make only $ 9 per passenger profit after all expenses. To service these cities, Northeastern operates a fleet of sixteen 122-passenger Embraer E-195 jets. These jets, which were first introduced by Embraer in late 2004, have helped Northeastern Airlines remain profitable for a number of years. However, in recent years, the profit margins have been falling, and Northeastern is facing the prospect of downsizing their operations. Management at Northeastern Airlines has considered several options to reduce cost and increase profitability. Due to Federal Aviation Administration regulations, the company must continue to serve each of the nine cities. How they serve these cities, however, is up to the management at Northeastern. One suggestion has been made to provide fewer direct flights, which would mean that a city served by Northeastern might only have direct flights to one other city. The company plans to hire a marketing analytics consultant to determine how demand would be impacted by longer flights with more connections, and to forecast the demand along each of the routes based on a modified flight operations map. Before hiring the consultant, the company would like to first determine the most profitable (on a profit per passenger basis) way to continue serving all of the cities.

Read the following case study, then answer the questions that follow.

Gayle is an aged care support worker. She is working with Leila, an older person, who needs to exercise to build muscle mass and bone density to decrease the likelihood of falling and associated health risks as a result of falls. The district nurse and Leila support this strategy. Leila’s family is also involved in her case, and they disagree and are openly hostile towards Gayle and others in the group.

Gayle speaks with her supervisor, who asks Gayle how she has handled the family. Gayle responds, ‘I keep telling them about the benefits of exercise but they won’t listen.’

Her supervisor asks, ‘Gayle, have you tried asking them what their concerns are?’ Gayle admits that she has not. Gayle speaks with the family members. ‘I’d really like to find a strategy that we are all comfortable with. What are your main concerns?’

The family tells Gayle that they are most worried that Leila will hurt herself. Gayle acknowledges the family members’ concerns. She then discusses the physical impacts of falling. She explains in plain language how strong muscles can help a person stay upright and can help them stabilize more effectively. Leila’s son says, ‘So that’s why you want mother to exercise?’

As a group, they then develop an exercise program to help Leila gain strength.

Question

1. Explain how Gayle encouraged the family members to collaborate?
2. Who should you involve in assessing the outcomes of a risk minimization strategy?
3. What methods would you use to encourage the involvement of the older person, their carer, and others involved in the care plan?

1)        Sales Budget and Expected Cash Collections

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):

The selling price of the company’s product is $18.00 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $70,200.

Required:

1. Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.
2. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.

2)        Prepare a Flexible Budget

Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s static budget for May appears below:

During May, the company’s actual activity was 105 diving-hours.

Required:

Prepare a flexible budget for May.

3)        Prepare a Flexible Budget Performance Report

Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:

The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.

Required:

1. Prepare a flexible budget performance report for July that includes flexible-budget variances and sales-volume variances.
2. Which of the variances should be of concern to management? Explain.

1. Compared to First World countries, developing countries would have _____.

a higher life expectancy

higher productivity rates

lower education levels

lower birthrates

a higher rate of private investment

2. In many less-developed countries, per capita GDP falls even though real GDP rises, because:

output grows at a slower rate than the population.

the GDP measures in developing countries are always inaccurate.

consumption spending exceeds investment spending.

these countries face an acute trade deficit.

prices increase faster than an increase in actual output level.

3. What is the main reason for the failure of import-substitution strategies to generate rapid economic growth?

Deteriorating terms of trade

Scarce natural resources

Inefficient allocation of resources

Lack of self-interested behavior by entrepreneurs

Insufficient subsidies to domestic producers

1)

Setting goals is one of the steps of the financial planning process. Provide some examples of financial goals that may be important for a family.

Select one goal that is important to you and briefly discusses how this goal will influence your future financial planning.

2)

Describe some common money management mistakes that can cause long-term financial concerns.         

Discuss how a budget might be changed if a household faced a decline in income. What spending areas might be reduced first?   

Review your own personal spending over the past few months. Identify sources of “money leaks”. (A “money leak” can be defined as an “unbudgeted” expenditure - to include going beyond the budget set for the item) .

Did the extent and/or category of the money leak surprise you? What might you do to control future money leaks?

1. Match each of the following scenarios with the accounting principle or accounting assumption that it best illustrates.

2. Thomas Company has decided to purchase a company vehicle. The accountant was given all of the purchase details. Which should be used to record the vehicle in the accounting records?

The average selling price of similar vehicles in the area.

The manufacturer’s suggested retail price (MSRP).

The price negotiated with the dealer.

The amount of the loan with the bank.

Cornerstone Exercise 8.11 (Algorithmic)
Cash Receipts Budget and Accounts Receivable Aging Schedule

Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the following sales:

In Shalimar’s experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are $5,710,000 and for the fourth quarter of the current year are $7,170,000.

Required:

1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each quarter of next year.

21. One of the reasons that channels of distribution often pose longevity problems is __________.

22. No matter which level of distribution is examined, there is a clear correlation between the middleman's ___________ and sales volume produced.

23. Technically, e-commerce is a form of which of the following forms of selling?

24. Which of the following countries is NOT considered as a BEM (big emerging market)?

25. Which of the following explains why most of the companies with Indian operations are saying that they are not leaving, but planning on expanding their Indian operations?

26. C. K. Prahalad and associates introduced the concept of a global market, not necessarily defined by national borders but rather by the pockets of poverty across countries, and consisting of 4 billion people across the globe with annual incomes of less than $1,200. These consumers, concentrated in the LDCs and LLDCs, are referred to as _____ markets.

27. Which of the following represents the misconception that leads international markets to ignore the bottom-of-the-pyramid markets?

28. Assuming that the international marketer has produced the right product, initiated the proper channel of distribution, and promoted goods and services correctly, the effort can fail badly if the international marketer fails to: (pick the best answer)

29. Traditionally, the decision of which pricing policy firms should follow depends on all of the following EXCEPT:

30. The distribution process includes all of the following EXCEPT:

Consider the following statements regarding how government spending responds to changes in aggregate income, wealth, and interest rates.

A. Government spending responds directly to changes in aggregate income, wealth, and interest rates. Changes in aggregate income, wealth, and interest rates automatically cause government spending to change.

B. Government spending does not respond directly or indirectly to changes in aggregate income, wealth, or interest rates. Changes in aggregate income, wealth, and interest rates do not have any effect on government spending.

C. Government spending responds indirectly to changes in aggregate income, wealth, or interest rates. During a recession, aggregate income and wealth will fall and the government may decide to increase government spending to stimulate output and jobs in the economy.

Which of the statements are true?

Statement C

Statement A

Statement B