There seems to be peace in Colombia. What is the future of tourism in Colombia? Compare figures between 2000 and 2020. What are future challenges?

1. General Electric - 2000: Quality of Earnings, the impact of earnings management and methods such as channel stuffing on an entity’s financial statements.

Synopsis

Camilla has just recently inherited her grandfather’s Ferrari factory. She has no accounting background, and at the young age of only 24 ½ , she has requested your expert help in creating a budget for next year (2018). The following information was obtained through an interview with her and her top management.

-Sales

Expected Sales (units): Management expect to sell 100 cars the first quarter with a 10% increase  each succeeding quarter.

Expected Sales price = $325,000

-Production

Since Ferrari cars are generally pre-ordered, each quarter the company manufactures the number of cars expected to be sold in the following quarter. Ferrari does not maintain any inventory. Production for the fourth quarter will be equal to expected sales in the first quarter 2019 or 140 units.

-Materials

Ferrari maintains an ending inventory of raw materials equal to 10% of the next quarter’s production requirements.

The manufacture of each car requires 2000 pounds of raw materials, and the expected cost per pound is $50/pound.

Assume that the desired ending direct materials amount is 28,000 pounds for the fourth quarter of 2018.

-Labor

Direct labor hours are determined from the production budget. At Ferrari, much is done by robots, however the final touches require twenty hours of direct labor to produce each car. The anticipated hourly wage rate is $25.

-Manufacturing overhead

Ferrari expects variable costs to fluctuate with production volume on the basis of the following rates per direct labor hour:

indirect materials                      $2,500

indirect labor                            $1,000

utilities                                     $500

maintenance                             $250.

-Ferrari expects Fixed Manufacturing Costs to be as follows (quarterly):

Supervisory salaries                   $50,000

Depreciation                             $21,250

Property taxes                          $40,000

Maintenance                            $15,000

Selling and Administrative

Variable expense rates per unit of sales are sales commissions $5,000 and freight-out $2,500.

Ferrari’s fixed selling and administrative costs are as follows (quarterly):

Camilla’s Salary and Bonus        $2,500,000

Advertising                               $1,000,000

Sales salaries                            $500,000

Office salaries                           $600,000

Depreciation                             $1,000,000

Property Taxes and Insurance    $1,500,000

-Other

Interest Expense for 2018          $100,000

Taxes are computed at 40% of pretax income

Question: Complete the 2018 budget as requested. You must create the following budgets:

Sales Budget – Quarterly

Production Budget – Quarterly

Materials Budget – Quarterly

Labor Budget – Quarterly

Manufacturing Overhead Budget – Quarterly

Administrative and Selling Budget – Quarterly

Income Statement – Annual

A leading manufacturing company has 2 main product lines, Traditional and Modern with unit sales prices for $340 and $440 respectively. Manufacturing overhead are applied as $544.025 per direct labor hour.

Material, Labors and overhead are expected to increase by 10% each in 2019

Unit sales prices for both products are expected to increase by $10 each in 2019

Percentage of overhead remains the same in 2019.

The cost drivers units are staying the same in 2019.

There are two clients with special orders for Traditional. The two clients ordered the same number of units.

You tracked their COGS by their extra number of specifications per month in 2018.

Calculate the fixed cost and variable cost components of COGS for the two clients using the lease squares regression method. Show your work and write out the regression model equations for each client.

Discuss the two clients COGS in terms of fixed cost and variable cost according to special specifications.

Suppose you are advising an industry association on the predicted effects of a price change on quantity demanded and total expenditure on their product. The current price is $1.00 per unit, and quantity demanded is 2,500 units per day. Based on extensive empirical studies, you know that price elasticity of demand for the product is -0.5. If the price increases to $2.00 per unit:

5.1 What is the predicted percentage change in quantity demanded?

5.2 Will total expenditure increase or decrease?

a) Set out and explain three cash flow based valuation techniques for determining the intrinsic value of a company’s equity.

b) Set out and explain two abnormal income based valuation techniques for determining the intrinsic value of a company’s equity.

c) Provide a balanced discussion of the theoretical merits and weaknesses of each of the two types of model described in parts (a) and (b).

d) Provide a summary of the empirical evidence relating to the performance of each type of model.

What are confounding variables, and what effect do they have on assessing cause-and-effect relationships?

When would you prefer median to mean as a measure of central tendency?

Why don’t we just sum the deviations from the mean to measure dispersion of a variable?

When is it legitimate to use the empirical rule?

How would you go about identifying outliers in your data?What would you do if you found an outlier?