Profit Center Responsibility Reporting for a Service Company

Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31:

The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the railroad cars inventories. It makes sure the right freight cars are at the right place at the right time. The Treasurer’s Department conducts a variety of services for the company as a whole. The following additional information has been gathered:

Required:

1. Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations.

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2. What is the profit margin of each division? Round to one decimal place.

Identify the most successful region according to the profit margin.
West

3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions?

The method used to evaluate the performance of the divisions should be reevaluated.

A better divisional performance measure would be the rate of return on investment (income from operations divided by divisional assets).

A better divisional performance measure would be the residual income (income from operations less a minimal return on divisional assets).

None of these choices would be included.

All of these choices (a, b & c) would be included.

e

Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2020, for $345,900 in cash. The book value of Kinman's net assets on that date was $675,000, although one of the company's buildings, with a $63,600 carrying amount, was actually worth $125,850. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $127,500.

Kinman sold inventory with an original cost of $69,300 to Harper during 2020 at a price of $99,000. Harper still held $19,800 (transfer price) of this amount in inventory as of December 31, 2020. These goods are to be sold to outside parties during 2021.

Kinman reported a $55,000 net loss and a $21,000 other comprehensive loss for 2020. The company still manages to declare and pay a $7,000 cash dividend during the year.

During 2021, Kinman reported a $45,800 net income and declared and paid a cash dividend of $9,000. It made additional inventory sales of $84,000 to Harper during the period. The original cost of the merchandise was $52,500. All but 30 percent of this inventory had been resold to outside parties by the end of the 2021 fiscal year.

Prepare all journal entries for Harper for 2020 and 2021 in connection with this investment. Assume that the equity method is applied. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

• 1

  Record the initial investment.

• 2

  Record the dividend declaration.

• 3

  Record the receipt of dividend.

• 4

  Record the accrual of income and OCI from equity investee.

• 5

  Record the amortization relating to acquisition of Kinman.

• 6

  Record the deferred unrealized gross profit on intra-entity sale.

• 7

  Record the dividend declaration.

• 8

  Record the receipt of dividend.

• 9

  Record the 40% accrual of income as earned by equity investee.

• 10

  Record the amortization relating to acquisition of Kinman.

• 11

  Record the recognized income deferred from 2020.

• 12

  Record the deferred unrealized gross profit on intra-entity sale.

Portions of the financial statements for Parnell Company are provided below.

Required:
1. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method. (Enter your answers in thousands (i.e., 10,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

The following information applies to the questions displayed below.]

Portions of the financial statements for Parnell Company are provided below.

Required:
1. Prepare the cash flows from operating activities section of the statement of cash flows for Parnell Company using the direct method. (Enter your answers in thousands (i.e., 10,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)

We all currently or in the future will participate or be impacted by the stockmarket with our retirement, the companies we work for or frequent with our purchases or those companies that bring us the latest technology to help us live a more comfortable life. Since I have been watching the stockmarket over 40 years ago, I've seen companies sadly leave but others have also arrived. Some of the largest companies in the US that no one would have ever thought would no longer exist or much smaller than it once was is an indication of how the returns of a company can impact its sustainability. If the company whether stocks or bonds cannot provide the returns investors require, the company will lose needed capital to help it sustain itself.

Comments?

A large University system, which currently uses a standard grading system of A, B, C, D or F for their students, is analyzing the possibility of changing to a plus-minus grading policy. In addition to the computer system, which stores and manages all the student records, the faculty and the students would also be affected by this possible change. One of the concerns that students have, is that changing this policy might lower the overall GPA (grade point average) of the students. One statement from students makes the conjecture that only 20% of all the students in the system are supportive of the proposed change.

A)You draw a random sample of 260 students from this university system. Assuming that the student conjecture is true, would you expect to see 80 students supportive of the change? Explain.

B)Suppose in your random sample of 260 students from this university system, 80 students are supportive of the change. Based on the data do you think that the student’s conjecture that 20% of all the students in the system are supportive of the proposed change could be correct?

It is not uncommon to see that alumni often give back to their schools. The question is, what factors influence their gratitude and goodwill and play an important role in them deciding how much to contribute? A sample of some top universities has been analyzed to determine if there is a relationship between the Alumni Giving rate (percentage of alumni who give) and factors like Graduation rate (percentage), % of class Under 20, and Student / Faculty ratio. Run a regression model to determine the relationship.  Answer the following questions based on the Excel table.    

School   State     Graduation Rate   % of Classes Under 20   Student / Faculty Ratio   Alumni Giving Rate
Boston College   MA   85   39   13   25%
Brandeis University    MA   79   68   8   33%
Brown University   RI   93   60   8   40%
California Institute of Technology   CA   85   65   3   46%
Carnegie Mellon University   PA   75   67   10   28%
Case Western Reserve University   OH   72   52   8   31%
College of William and Mary   VA   89   45   12   27%
Columbia University   NY   90   69   7   31%
Cornell University   NY   91   72   13   35%
Dartmouth College   NH   94   61   10   53%
Duke University   NC   92   68   8   45%
Emory University   GA   84   65   7   37%
Georgetown University   DC   91   54   10   29%
Harvard University   MA   97   73   8   46%
John Hopkins University   MD   89   64   9   27%
Lehigh University   PA   81   55   11   40%
Massachusetts Inst. of Technology   MA   92   65   6   44%
New York University   NY   72   63   13   13%
Northwestern University   IL   90   66   8   30%
Pennsylvania State University   PA   80   32   19   21%
Princeton University   NJ   95   68   5   67%
Rice University   TX   92   62   8   40%
Stanford University   CA   92   69   7   34%
Tufts University   MA   87   67   9   29%
Tulane University   LA   72   56   12   17%
U. of California-Berleley   CA   83   58   17   18%
U. of California-Davis   CA   74   32   19   7%
U. of California-Irvine   CA   74   42   20   9%
U. of California-Los Angeles   CA   78   41   18   13%
U. of California-San Diego   CA   80   48   19   8%
U. of California-Santa Barbara   CA   70   45   20   12%
U. of Chicago   IL   84   65   4   36%
U. of Florida   FL   67   31   23   19%
U. of Illinois-Urbana Champaign   IL   77   29   15   23%
U. of Michigan-Ann Arbor   MI   83   51   15   13%
U. of North Carolina-Chapel Hill   NC   82   40   16   26%
U. of Notre Dame   IN   94   53   13   49%
U. of Pennsylvania   PA   90   65   7   41%
U. of Rochester   NY   76   63   10   23%
U. of Southern California   CA   70   53   13   22%
U. of Texas-Austin   TX   66   39   21   13%
U. of Virginia   VA   92   44   13   28%
U. of Washington   WA   70   37   12   12%
U. of Wisconsin-Madison   WI   73   37   13   13%
Vanderbuilt University   TN   82   68   9   31%
Wake Forest University   NC   82   59   11   38%
Washington University - St. Louis   MO   86   73   7   33%
Yale University   CT   94   77   7   50%
1.  Do you think this model is good?  That is, do you see an evidence of relationship? Pick the right option.  
2. What proportion of the variation in Alumni giving is explained by the three variables?
3. Suggest 2 variables (reasons) not in the table that can also be affecting the alumni giving rate.   
3. The coefficient for student / faculty ratio is negative in Excel output.  Give a reason as to why this is the case.  
5.  Find the alumni giving rate for Carnegie-Mellon from the table.  Compare this to your results in Q4.  What is the residual (error)?  

Applehead Technology is a company that purchases a device called the EyePod from a supplier and then sells the devices to retail customers. If the company makes no changes in its operations, the company expects the following for the coming year.

# of units sold                                                              30,000

Price                                                                           $300 per unit

Cost of merchandise                                                 $100 per unit                       

Rent and Salaries for the year                                 $1,300,000

The company is holding a meeting to discuss ways to increase its profit – that is the company’s goal. At that meeting, Maria Garcia, the marketing manager, says “If we make the changes I suggest, I think we can attract more customers and increase our share of the market. Currently, our customers pay for shipping. Market research says customers hate shipping charges, so rather than having customers pay it, we should pay it. Shipping would cost us $3 per unit. Market research also shows that our prices are not competitive. So, we should lower our price to $270. If we take these actions, I estimate we will increase the number of units sold to 32,000.”

1. On the spreadsheet provided labeled “For Problem 3a”, prepare the contribution margin income statements to analyze each of the 2 possibilities for the coming year, namely
   1. Applehead makes no changes
   2.    Applehead adopts Garcia’s proposal

Answer the following questions on the separate answer sheet labeled “For Problem 3b, c, d, e”:

2. Mr. Big, the CEO of the company says to Maria “Clearly your suggestion is a good one. Based on your estimates, we will see an additional 2,000 units. Let’ do it!” How would you answer Mr. Big?
3. Assume Maria’s suggestions are NOT implemented. What is the breakeven point for Applehead? (Can be in $ or in units – your choice.) Show all work.
4. Calculate Applehead’s margin of safety. You can measure it in units or dollars or as a % of sales (your choice, but you only need to compute one of those). In making your margin of safety computation, assume Maria’s suggestions are NOT implemented and that the company sells the 30,000 units. Show all work.
5. Explain briefly what margin of safety tells the company – what is the meaning of the number you computed?

A sample of nine public universities and nine private universities was taken. The total cost for the year (including room and board) and the median SAT score (maximum total is 2400) at each school were recorded. It was felt that schools with higher median SAT scores would have a better reputation and would charge more tuition as a result of that. The data are in the following table. Run the regression one time without dummy variable and one time with dummy variable

a)         Write the predicted regression equation and highlight it for both models

b)         High light the r2 and explain it for both models

c)         Highlight Significance F and explain it for both models

d)         Highlight the p-value and discuss if independent variable is significant or not for both models

e)         Discuss the sign of the co-efficient for both models

f)          Are private schools more expensive than public schools when SAT scores are taken into consideration?

g)         Discuss how accurate you believe these results are using information related to the regression models. ( not for this session).

Hint: Dummy variable gets the value of 0 for public universities and1 for private universities.

please show screenshots and what formulas used in excel/the labels thank you

Hi, could you please assist with this question?

You are an investment banking consultant advising a mining company. The CEO of the company tells you that she believes that capital structure does not have an impact on firm value. On what basis might they make this comment? State whether you agree or not with this position and explain why. Does the nature of this firm’s business risk change your answer? Fully explain your reasoning.

Thanks kindly