Cost allocation downward demand spiral Deli One operates a chain of 10 hospitals in the Los Angeles area. Its central food-catering facility, Deliman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,460,000 meals a year. In 2009, based on estimates from each hospital controller, Deliman budgeted for 1,022,000 meals a year. Budgeted fixed costs in 2009 were $1,533,000. Each hospital was charged $6.00 per meal—$4.50 variable costs plus $1 .50 allocated budgeted fixed cost. Recently, the hospitals have been complaining about the quality of Deliman’s meals and their rising costs. In mid-2009, Deli One’s president announces that all Deli One hospitals and support facilities will be run as profit centers. Hospitals will be free to purchase quality-certified services from outside the system. Ron Smith, Deliman’s controller, is preparing the 2010 budget. He hears that three hospitals have decided to use outside suppliers for their meals; this will reduce the 2010 estimated demand to 876,000 meals. No change in variable cost per meal or total fixed costs is expected in 2010.
1. How did Smith calculate the budgeted fixed cost per meal of$1.50 in 2009?
2. Using the same approach to calculating budgeted fixed cost per meal and pricing as in 2009, how much would hospitals be charged for each Deliman meal in 2010? What would their reaction be?
3. Suggest an alternative cost-based price per meal that Smith might propose and that might be more acceptable to the hospitals. What can Deliman and Smith do to make this price profitable in the long run?
In: Statistics and Probability
QUESTION 14
Please use the following question to answer questions 14-20:
On January 1, 2010, P Company purchased an 80% interest in S Company for $900,000. At that time, S Company had capital stock of $600,000 and retained earnings of $100,000. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows:
|
Fair Value in Excess of Book Value |
|||
|
Equipment |
$ 180,000 |
||
|
Land |
20,000 |
||
|
Inventory |
20,000 |
||
The book values of all other assets and liabilities of S Company were equal to their fair values on January 1, 2010. The equipment had a remaining life of five years. The inventory was sold in 2010.
S Company’s net income and dividends declared in 2010 Net Income of $120,000; Dividends Declared of $30,000
14. Prepare JE at date of purchase
QUESTION 15
15. Prepare W/P at date of purchase to eliminate the equity of S and investment of P (see above question)
QUESTION 16
16. Prepare W/P to allocate the differences (see above question)
QUESTION 17
17. Prepare J/E under cost method for NI and Dividends (see above question)
QUESTION 18
18. Prepare W/P entries to eliminate Dividends and convert cost to equity (see above question)
QUESTION 19
19. Prepare W/P entry to eliminate the equity of S and investment of P at 12/31 (see above question)
QUESTION 20
20. Prepare W/P to allocate differences (all inventory has been sold), and the extra depreciation entry (see above question)
In: Accounting
In a test of the effectiveness of garlic for lowering cholesterol, 49 subjects were treated with garlic in a processed tablet form. Cholesterol levels were measured before and after the treatment. The changes (beforeminusafter) in their levels of LDL cholesterol (in mg/dL) have a mean of 2.7 and a standard deviation of 16.8. Construct a 99% confidence interval estimate of the mean net change in LDL cholesterol after the garlic treatment. What does the confidence interval suggest about the effectiveness of garlic in reducing LDL cholesterol?
In: Statistics and Probability
Calculate the pH for each of the following cases in the titration of 50.0 mL of 0.150 M CH3COOH(aq) with 0.150 M KOH(aq). The ionization constant for HClO is Ka = 1.8 x 10-5. Just give the number to 2 decimal places.
A) Before addition of any KOH: pH =
B) After addition of 25 mL of KOH: pH =
C) After addition of 50 mL of KOH: pH =
D) After addition of 60 mL of KOH: pH
In: Chemistry
Calculate the pH during the titration of 10.00 mL of 0.400 M
hypochlorous acid with 0.500 M NaOH. First what is the initial pH
(before any NaOH is added)?
The Ka for HOCl is 3.0 x 10-8 M.
What is the pH after 6.20 mL of NaOH are added?
What is the pH after 9.40 mL of NaOH are added?
What is the pH when half the acid has been neutralized?
What is the pH after 18.90 mL of NaOH are added?
In: Chemistry
A 900-kg car traveling east at 20.0 m/s collides with a 750-kg car traveling north at 15.o m/s. The cars stick together. Assume that any otherunbalanced forces are negligible. (Draw Diagrams)
(a) What is the speed of the wreckage just after the collision?
(b) In what directions does the wreckage move just after the collision?
(c) What is the total Kinetick Energy before the collision?
(d) What is the total Kinetic Energy after?
In: Physics
A 900-kg car traveling east at 20.0 m/s collides with a 750-kg car traveling north at 15.0 m/s. The cars stick together. Assume that any other unbalanced forces are negligible. (Draw Diagrams)
(a) What is the speed of the wreckage just after the collision?
(b) In what direction does the wreckage move just after the collision?
(c) What is the total Kinetic Energy before the collision?
(d) What is the total Kinetic Energy after?
In: Physics
In a test of the effectiveness of garlic for lowering cholesterol,
45
subjects were treated with garlic in a processed tablet form. Cholesterol levels were measured before and after the treatment. The changes
(beforeminus−after)
in their levels of LDL cholesterol (in mg/dL) have a mean of
5.2
and a standard deviation of
15.8.
Construct a 95%
confidence interval estimate of the mean net change in LDL cholesterol after the garlic treatment. What does the confidence interval suggest about the effectiveness of garlic in reducing LDL cholesterol?
In: Math
In a test of the effectiveness of garlic for lowering cholesterol, 45 subjects were treated with garlic in a processed tablet form. Cholesterol levels were measured before and after the treatment. The changes (beforeminusafter) in their levels of LDL cholesterol (in mg/dL) have a mean of 3.2 and a standard deviation of 17.3. Construct a 90% confidence interval estimate of the mean net change in LDL cholesterol after the garlic treatment. What does the confidence interval suggest about the effectiveness of garlic in reducing LDL cholesterol?
In: Math
24. Stock Value and Leverage. Green Manufacturing, Inc.,plans to announce that it will issue $1.6 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with an annual coupon rate of 6 percent. The company is currently an all-equity firm worth $7.7 million with 260,000 shares of common stock outstanding. After the sale of the bonds, the company will maintain the new capital structure indefinitely. The company currently generates annual pretax earnings of $1.86 million. This level of earnings is expected to remain constant in perpetuity. The corporate tax rate is 40 percent.
a. Whatis the expected return on equity before the announcement of the debt issue?
b. Construct the market value balance sheet before the announcement of the debt issue. What is the price per share of the firm's equity?
c. Construct the market value balance sheet immediately after the announcement of the debt issue.
d. What is the stock price per share immediately after the repurchase announcement?
e. How many shares will the company repurchase as a result of the debt issue? How many shares of common stock will remain after the repurchase?
f. Construct the market value balance sheet after the restructuring.
g. What is the required return on the company's equity after the restructuring?
In: Finance