Questions
3.1 With the help of the CAGE framework, discuss the challenges and opportunities that Avon is likely to encounter in entering the Chinese market.
The Newest Avon Lady—Barbie! Selling Tradition "Ding-dong, Avon calling." With that simple advertising message over the past 112 years, Avon Products built a $4 billion worldwide beauty-products business. Founded in 1886, and incorporated as California Perfume Products in 1916, Avon deployed an army of women to sell its products. These "Avon ladies," 40 million of them over the company's history, met with friends and neighbors in their homes, showed products, took and delivered orders, and earned sales commissions. Through direct selling, Avon bypassed the battle for retail space and attention waged by its competitors in department stores, and later in discount drug stores and supermarkets. Direct selling also offered convenience for the customer, coupled with personal beauty-care advice from a friend. Avon's plan worked well. Most members of its up to 500,000-member U.S. salesforce were homemakers who needed extra money but did not want a full-time job outside the home. They developed client lists of friends and neighbors whom they called on from time to time. Customers could also call them between visits. Recruiting salespeople was easy, and a good salesperson could develop a loyal core of customers who made repeat purchases. Avon paid the salespeople a commission based on their sales, and a successful salesperson could earn an attractive income. Times Change However, during the 1970s and 1980s, the environment changed. First, more women found that they needed to work outside the home. As a result, when Avon ladies rang the doorbell, often no one answered. Second, many Avon ladies decided that they needed more than part-time jobs, and Avon's annual salesforce turnover rates soared to more than 200 percent. Third, because of high salesforce turnover, many Avon customers wanting to see a salesperson could not find one. Fourth, more competitors, such as Amway, Mary Kay Cosmetics, and Tupperware, were competing for the pool of people interested in full- or part-time direct selling jobs. Finally, in addition to all those factors, increasing mobility of the U.S. population meant that both customers and salespeople were moving. This made it difficult for salespeople to establish loyal, stable customer bases. A New Strategy To deal with these issues, in 1988 Avon Products tapped James E. Preston to serve as its chair and chief executive. Preston decided that Avon needed to overhaul its marketing strategy. First, he refocused the company on its core business—selling cosmetics, fragrances, and toiletries—and sold unrelated businesses. Next, he drastically cut prices on Avon products. Finally, he tried a new compensation program called "Leadership" that allowed sales representatives to earn up to 21 percent in bonuses based on the sales of new representatives they recruited. Such multilevel selling is common among direct-sales companies. However, by late 1991, Avon killed the program, arguing that it did not fit Avon's culture. Preston believed that Avon had left as many as ten million former or potential customers stranded. These customers wanted to buy Avon products, but salesforce turnover meant that they did not know how to find a salesperson or order products. Fourteen percent of American women accounted for one-third of Avon's sales. Another 62 percent were fringe customers. These customers viewed Avon positively but did not buy regularly. Another 15 percent of American women were potentially receptive to Avon but were not necessarily interested in dealing with a traditional Avon sales representative. Thus, Preston decided to develop another program he called "Avon Select." The program featured a catalog and toll-free telephone number that allowed direct-mail selling. Avon's research revealed that its median customer was 45 years old and had an average household income of under $30,000. The catalog would reach younger, higher-income customers. Preston believed that, with a catalog, the company could cut the median customer age to 38 and increase average household income to more than $30,000. Avon supported the catalog program by kicking off a national advertising campaign that featured the slogan "Avon—The Smartest Shop in Town." To fund the advertising, the company cut sales commissions and incentives and laid off scores of executives. As you might imagine, all these changes created lots of turmoil at Avon including three different heads of the U.S. operation in a short period. However, Preston vowed to keep pursuing changes. To keep customers, "change we did, change we must, and change we will," Preston asserted. To make good on his promise, he launched a $30 million ad campaign in 1994 with the theme, "Just Another Avon Lady." Market research showed that, despite all Avon's changes, consumers still thought of "Ding-dong" and the Avon lady when asked what they associated with the company. Observers wondered if the use of the term lady in the mid 1990s would cause negative reactions among many women. After all, even Avon had avoided using the term in advertising for 20 years. Between 1992 and 1996, Avon's sales and profits rose slowly but steadily, driven primarily by sales in international markets. Then, in late 1997, Avon announced what might be its most radical change yet. It announced that it would soon test the idea of selling its products through retail stores. Although the company had been using retail stores in some foreign markets for years, this approach would be new to the U.S. market. Preston argued that no matter how great Avon's products were, many customers just weren't interested in buying from Avon ladies in a one-on-one situation. To pacify the company's 440,000 U.S. sales reps, Avon said it would consider giving them a share of the new business either through franchising or referrals from the stores. It also announced that it would cut its product line by 30 percent in order to put its marketing resources behind fewer products, pursue the creation of global brands out of several of its skin care and cosmetics products, and standardize its promotion efforts using the same promotions for its products around the world. Global Reach The value of Avon's global reach and it 2.3 million sales representatives worldwide had not gone unnoticed by other firms wanting to crack international markets. Mattel, Inc. announced in 1997 that it would partner with Avon to allow its salespeople to begin selling its Barbie dolls. In a 1996 test, Avon sold $43 million worth of two versions of Barbie, including more than one million of one version in just two weeks. Andrea Jung, Avon's president of global marketing noted that, "Our powerful distribution channel combined with their powerful brand is a huge opportunity." Companies like Mattel are attracted to direct salesforces like Avon's for several reasons. In international markets, the companies do not have to wait for retailers to build stores if they use a direct salesforce. Further, in many developing economies, being a direct sales rep may be the most attractive job for many women, thus making recruitment easy. However, there are problems. Turnover is often high, and many sales representatives are not really committed to the company. Further, many don't have formal business training or basic skills needed to perform their duties. Although Avon and Mattel limited distribution to the U.S. market initially, they planned to have Avon ladies selling Barbies in China as early as spring 1998. Mattel would introduce an "international Barbie," but she did not look Asian. In an earlier test in Japan, Mattel found that Asian girls preferred the standard American Barbie. Avon also planned to introduce a Barbie-branded line of toiletries and fragrances for girls in the U.S. and abroad. However, in early 1998, the Chinese government threw a monkey wrench into Avon's plans. The government announced that it was banning direct sales throughout the country. Government officials were responding to news reports of bogus sales schemes in which salespeople duped unsuspecting customers into spending their savings on over-priced, inferior goods. Further, officials believed that the direct-selling companies used their sales meetings to start secret societies and sell smuggled or fake goods. The ban prompted protests from the affected companies, like Avon, Mary Kay, and Amway, as well as the U.S. government. In addition, thousands of salespeople rioted in several Chinese cities, protesting the loss of their jobs. By mid-June 1998, however, Avon had successfully negotiated with the Chinese government to restart its business. Avon agreed to operate as a wholesaler, selling its products to retail stores and converting its 75 branch centers into retail outlets. The new arrangement meant that Avon's 50,000 sales representatives would lose their jobs. Despite the obstacles, Avon and other companies are committed to opening the Chinese market. China accounted for only about 1.5 percent of Avon's sales in 1998, but the potential was huge. Most Chinese consumers have little money, no credit cards, no telephones, and no direct way to get merchandise. The most common means of distribution are the China Post Office, hand-delivered door drops, and on-street distribution. There are also few customer lists available that direct-marketing firms can use. However, the Chinese population is developing into a discerning group that prefers quality products that meet their needs. Chinese customers believe that aggressive promotions cheapen a product. They like American-made products that companies promote tastefully. They particularly like cosmetics, jewelry, and entertainment products, especially if they are associated with celebrities. Direct marketers are also learning that they should not view China as a single market. The stereotype of 1.3 billion, low-income people living in rural areas is simply not true. China has the largest urban population in the world. By 2000, savvy marketers realized that the true Chinese market is the 400 million consumers living in a set of urban centers along the Chinese coast. Avon has shown its willingness to make changes and face challenges. Taking Barbie to China is just the latest challenge.
Questions:
3.1 With the help of the CAGE framework, discuss the challenges and opportunities that Avon is likely to encounter in entering the Chinese market. [15]
3.2 With the help of Porter’s Five Forces framework, analyse the chances of Avon’s succeeding in going global/ international market and provide recommendations to the company executives. [15]
In: Operations Management
Gupta Travel is a charter airline service for corporate clients traveling between Atlanta and Boston. The...
Gupta Travel is a charter airline service for corporate clients traveling between Atlanta and Boston. The company leases one jet aircraft and flies an average of 150 one-way trips per year. Gupta’s marketing strategy is to sell a more enjoyable travel experience than its rivals in the commercial airline industry. Gupta arranges ground transportation in Atlanta and Boston for its clients, offers a more spacious cabin with larger seats and more legroom, and serves gourmet meals on its flights. Gupta does not sell its services to individuals; rather its services are marketed directly to corporate clients. Therefore, when Gupta books a flight for a client, it is not merely selling a few seats on its aircraft. Rather, the corporate client is booking the use of the aircraft for its travel needs. Gupta uses a network of commissioned travel agents to sell its services. These agents are not employees of Gupta, and the agents receive a 20 percent commission (no fixed salary) on each flight sold on Gupta Travel.
Gupta Travel Income Statement
For the Year Ending 12/31/2016
Sales Revenue (150 one-way flights _ $40,000 per flight) $6,000,000
Commissions Expense (20 percent of Sales Revenue) $1,200,000
Annual Lease Expense—Airplane $1,100,000
Annual Fee for Airport Ground Crew Services $800,000
Flight Crew Expense (150 one-way flights _ $1,500 per flight)$225,000
Fuel Expense (150 one-way flights _ $1,000 per flight) $150,000
Food Expense (150 one-way flights _ $800 per flight) $120,000
Ground Transportation Expense (150 one-way flights _ $200 per flight) $30,000
Other Fixed General and Administrative Expenses $200,000
Fixed Interest Expense $220,000
(1) Prepare the contribution margin income statement(ignore income tax)
(2) What is Gupta's current break even point in flights?
(3) At the end of 2016, Gupta’s management learned that its commissioned travel agents are demanding an increase in their commission rate to 30 percent per flight for the upcoming year. As a result, Gupta’s president has decided to investigate the possibility of hiring an in-house sales staff to replace the commissioned travel agents. Gupta’s accounting department compiled the following information to be used to evaluate the cost of establishing an in-house sales department.
The accounting department estimates that Gupta would need to hire four (4) salespeople at an average payroll cost of $80,000 per employee to cover the workload of the current travel agents. Also, in order to hire highly qualified individuals for these positions, the compensation package must include commissions. To be competitive with the industry-standard commission rate, Gupta must offer a 15 percent commission on each flight sold in addition to the salary. The cost of the in house sales department will also include travel costs and support staff. Travel and entertainment expense is expected to total $500,000 (fixed) for the year, and the annual cost of support staff positions will be fixed at $120,000. Gupta currently relies on the travel agents to sell its services. If Gupta were to replace its commissioned travel agents with an in-house sales department, then it would have to bear more of the cost of advertising its services. In order to maintain the company’s image and manage the transition from established travel agents to an inhouse sales staff, the accounting department recommends spending $500,000 (fixed) annually on advertising.
(4)Use the December 31, 2016 Income Statement (with 150 flights sold) to estimate Gupta’s breakeven point in units (flights) if the company hires its own sales force and increases its advertising costs. Based on your answer, what amount of sales revenue would the company generate at this breakeven point?
(5) Assume that Gupta decides not to hire its own sales force, but instead consents to give its current commissioned travel agents the raise they are demanding. How many flights must the company sell (with the new commission rate) to generate the same net income that was reported in 2016?
(6) Management must choose between: (a) hiring its own sales force and (b) compensating its current network of travel agents with a higher commission rate. (i ) What is the profit formula for alternative (a), hiring an in-house sales force? (ii ) What is the profit formula for alternative (b), increasing the commission rate of the current travel agents? (iii ) At what level of sales volume (in flights) would management be indifferent between these two alternatives? (Indifference means the sales volume [units] that would produce the same profit between the alternatives.)
Help with problems 1-6. Thanks
In: Accounting
In a perfectly competitive firm and a perfectly price discriminating monopolistic face the same demand and...
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In a perfectly competitive firm and a perfectly price discriminating monopolistic face the same demand and cost curves, then a.the competitive firm will attain resource-allocative efficiency but the monopolist will not b.the competitive firm will attain resource allocative efficiency but the monopolist may or may not depending upon the demand for its product c.the competitive firm will not attain resource allocative efficiency but the monopolist will d.noth the competitive firm and the monopolist will attain resource allocative efficiency e.neither the competitive firm, not the monopolist will attain resource allocative efficiency
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In general electric, gas, and water companies are examples of ____ monopolies a.unregulated b.patent c.natural d.government
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At the quantity where a single price monopolist maximizes profit, price will be a.equal to marginal-cost b.equal to marginal revenue c.greater than marginal cost d.less than marginal cost e.less than marginal revenue
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Which of the following is true of price and marginal revenue for the first unit of output sold by a monopolist? A.price is greater than marginal revenue b.price is less than marginal revenue c.price is equal to marginal revenue d.a or b depending on whether it is a single price or a price discriminating monopolist
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A single price monopolist a.must lower price on all previous units to sell an additional unit of output b.is a price taker c.finds that its marginal revenue and price are the same for the first unit of the good it sells d.necessarilt faces a perfectly inelastic demand curve e.a and c
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One thing a monopoly firm has to do that a perfectly competitive firm does not have to do is a.search for its profit-maximizing price b.advertise c.minimize its losses d.produce the quantity of output at which P=MC e. Produce a high-quality product
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Which of the following statements is true a.the motivation for the rent-seeking is not the same as the motivation for profit-seeking b.economic rent is a payment in excess of opportunity cost c.the deadweight loss triangle is not considered the graphic representation of one of the costs of monopoly, instead, it is one of the costs of not having a monopoly d.rent seeking is almost always an irrational activity as far as the rent-seekers are concerned e.a and d
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The ______ Acts, passed by the British Parliament in the 1760s imposed taxes on a variety of products imported into the American colonies. a.smooth Hawley tariff b.tea c.townsend d.british east India
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In a monopolistic competitive market which of the following factors probably does not give rise to product differentiation? A.packing of the product b.brand names c.loyalty of customers to a particular producer d.quality difference e.the small number of sellers
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Which of the following industries is the best real-world example of monopolistic competition? A.soft drinks b.electricity generation c.automobiles d.computer software
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The monopolistic competitive firm faces a ____ demand curve. A.horizontal b.vertical c.downward sloping d.upward sloping
In: Economics
Requirement 1: Dinham Kennel uses tenant-days as its measure of activity; an animal housed in the...
Requirement 1:
Dinham Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During March, the kennel budgeted for 4,100 tenant-days, but its actual level of activity was 4,130 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:
Data used in budgeting:
| Fixed element per month | Variable element per tenant-day | ||||
| Revenue | - | $ | 35.00 | ||
| Wages and salaries | $ | 3,000 | $ | 8.00 | |
| Food and supplies | 2,000 | 14.50 | |||
| Facility expenses | 8,500 | 3.50 | |||
| Administrative expenses | 7,000 | 0.50 | |||
| Total expenses | $ | 20,500 | $ | 26.50 | |
Actual results for March:
| Revenue | $ | 133,251 | |
| Wages and salaries | $ | 28,600 | |
| Food and supplies | $ | 62,225 | |
| Facility expenses | $ | 22,550 | |
| Administrative expenses | $ | 7,100 | |
The revenue variance for March would be closest to:
Requirement 2:
Dinham Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During March, the kennel budgeted for 3,100 tenant-days, but its actual level of activity was 3,120 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:
Data used in budgeting:
| Fixed element per month | Variable element per tenant-day | ||||
| Revenue | - | $ | 34.00 | ||
| Wages and salaries | $ | 2,000 | $ | 7.00 | |
| Food and supplies | 1,000 | 13.50 | |||
| Facility expenses | 7,500 | 2.50 | |||
| Administrative expenses | 6,000 | 0.10 | |||
| Total expenses | $ | 16,500 | $ | 23.10 | |
Actual results for March:
| Revenue | $ | 104,372 | |
| Wages and salaries | $ | 28,500 | |
| Food and supplies | $ | 44,025 | |
| Facility expenses | $ | 14,900 | |
| Administrative expenses | $ | 7,090 | |
The spending variance for food and supplies in March would be closest to:
Requirement 3:
Dinham Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During March, the kennel budgeted for 4,400 tenant-days, but its actual level of activity was 4,450 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for March:
Data used in budgeting:
| Fixed element per month | Variable element per tenant-day | ||||
| Revenue | - | $ | 35.30 | ||
| Wages and salaries | $ | 3,300 | $ | 8.30 | |
| Food and supplies | 2,300 | 14.80 | |||
| Facility expenses | 8,800 | 3.80 | |||
| Administrative expenses | 7,300 | 0.20 | |||
| Total expenses | $ | 21,700 | $ | 27.10 | |
Actual results for March:
| Revenue | $ | 138,230 | |
| Wages and salaries | $ | 28,630 | |
| Food and supplies | $ | 69,105 | |
| Facility expenses | $ | 25,115 | |
| Administrative expenses | $ | 7,103 | |
The spending variance for facility expenses in March would be closest to:
In: Accounting
Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers.
Citation Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10–20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale.
During 2021, Citation began construction of an office building for Altamont Corporation. The total contract price is $20 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows:
Also during 2021, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $600,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2021 and paid for in full for $600,000 each by the buyers. The completed homes cost $450,000 each to construct. The construction costs incurred during 2021 for the nine uncompleted homes totaled $2,700,000.
Required:
1. Briefly explain the difference between recognizing revenue over time and upon project completion when accounting for long-term construction contracts.
2. Answer the following questions assuming that Citation concludes it does not qualify for revenue recognition over time for its office building contracts:
a. How much revenue related to this contract will Citation report in its 2021 and 2022 income statements?
b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2021 and 2022?
c. What will Citation report in its December 31, 2021, balance sheet related to this contract? (Ignore cash.)
3. Answer requirements 2a through 2c assuming that Citation recognizes revenue over time according to percentage of completion for its office building contracts.
4. Assume the same information for 2021 and 2022, but that as of year-end 2022 the estimated cost to complete the office building is $9,000,000. Citation recognizes revenue over time according to percentage of completion for its office building contracts.
a. How much revenue related to this contract will Citation report in the 2022 income statement?
b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2022?
c. What will Citation report in its 2022 balance sheet
related to this contract? (Ignore cash.)
5. When should Citation recognize revenue for the sale of its single-family homes?
6. What will Citation report in its 2021 income statement and 2021 balance sheet related to the single-family home business (ignore cash in the balance sheet)?
In: Accounting
Problem 1 Tallahassee Clinic projected the following budget information for 2018: Total FFS Visit Volume 90,000...
Problem 1
Tallahassee Clinic projected the following budget information for 2018:
|
Total FFS Visit Volume |
90,000 visits |
|
Payer Mix: |
|
|
Blue Cross |
40% |
|
Celtic Insurance Company |
60% |
|
Reimbursement Rates: |
|
|
Blue Cross |
$25 per visit |
|
Celtic Insurance Company |
$20 per visit |
|
Variable Costs – Resource Inputs: |
|
|
Labor |
48,000 total hours |
|
Supplies |
100,000 total units |
|
Variable Costs – Input Prices: |
|
|
Labor |
$25 per hour |
|
Supplies |
$1.50 per unit |
|
Fixed Costs (overhead, plant, and equipment) |
$500,000 |
Construct Tallahassee Clinic’s static operating budget for 2018. (See Exhibit 8.3, page 283. Note that there are four components that need to be included: Volume Assumptions, Revenue Assumptions, Cost Assumptions, and the Pro Forma Profit and Loss or P&L projected Statement.)
Revenue Assumptions
Blue Cross Reimbursement 900,000 (90,000 x 0.4 x 25)
Celtic Insurance Co Reimbursement 1,080,000 (90,000 x 0.6 x 20)
Total Revenue $1,980,000
Cost Assumptions
Variable Expenses
Labor 1,200,000 (48,000 x 25)
Supplies 150,000 (100,000 x 1.5)
Total Variable Expense 1,350,000
Fixed Costs 500,000
Pro Forma Profit and Loss (P&L) Statement:
Revenue:
FFS 1,980,000
Costs:
Variable Costs 1,350,000
Contribution Margin 630,000
Fixed Costs 500,000
Projected Profit 130,000
Problem 2
Refer to Problem 1 above. Tallahassee Clinic’s actual results for 2018 are shown in the table below:
|
Total FFS Visit Volume |
100,000 visits |
|
Payer Mix: |
|
|
Blue Cross |
40% |
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Celtic Insurance Company |
60% |
|
Reimbursement Rates: |
|
|
Blue Cross |
$28 per visit |
|
Celtic Insurance Company |
$18 per visit |
|
Variable Costs – Resource Inputs: |
|
|
Labor |
50,000 total hours |
|
Supplies |
150,000 total units |
|
Variable Costs – Input Prices: |
|
|
Labor |
$28 per hour |
|
Supplies |
$1.50 per unit |
|
Fixed Costs (overhead, plant, and equipment) |
$500,000 |
a. Construct Tallahassee Clinic’s flexible budget for 2018 and actual operating results for 2018. (Hint: place the three budgets side by side. See Exhibits 8.4 and 8.5).
b. What is the profit variance?
c. Wat is the revenue variance?
d. What is the cost variance?
e. Focus on the revenue side. What is the volume variance?
f. Focus on the revenue side. What is the price variance?
g. Focus on the cost side. What is the volume variance?
h. Focus on the cost side. What is the management variance?
I NEED PROBLEM 2 ANSWERED......SENT PROBLEM 1 FOR REFERENCE, IT ALREADY HAS THE ANSWERS. THANK YOU
In: Finance
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a...
On February 1, 2021, Arrow Construction Company entered into a
three-year construction contract to build a bridge for a price of
$8,000,000. During 2021, costs of $2,000,000 were incurred with
estimated costs of $4,000,000 yet to be incurred. Billings of
$2,500,000 were sent, and cash collected was $2,250,000.
In 2022, costs incurred were $2,500,000 with remaining costs
estimated to be $3,600,000. 2022 billings were $2,750,000, and
$2,475,000 cash was collected. The project was completed in 2023
after additional costs of $3,800,000 were incurred. The company’s
fiscal year-end is December 31. Arrow recognizes revenue over time
according to percentage of completion.
Required:
1. Compute the amount of revenue and gross profit
or loss to be recognized in 2021, 2022, and 2023 using the
percentage of completion method.
2a. Prepare journal entries for 2021 to record the
transactions described (credit "various accounts" for construction
costs incurred).
2b. Prepare journal entries for 2022 to record the
transactions described (credit "various accounts" for construction
costs incurred).
3a. Prepare a partial balance sheet to show the
presentation of the project as of December 31, 2021.
3b. Prepare a partial balance sheet to show the
presentation of the project as of December 31, 2022.
Compute the amount of revenue and gross profit or loss to be recognized in 2021, 2022, and 2023 using the percentage of completion method. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign. Round your final answers to the nearest whole dollar.)
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Prepare journal entries for 2021 to record the transactions described (credit "various accounts" for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your answers to the nearest dollar amount.)
| No | Year | General Journal | Debit | Credit |
|---|---|---|---|---|
| 1 | 2021 | Construction in progress | 2,000,000 | |
| Various accounts | 2,000,000 | |||
| 2 | 2021 | Accounts receivable | 2,500,000 | |
| Billings on construction contract | 2,500,000 | |||
| 3 | 2021 | Cash | 2,500,000 | |
| Accounts receivable | 2,500,000 | |||
| 4 | 2021 | Cost of construction | 2,544,445 | |
| Construction in progress | 1,777,778 | |||
| Revenue from long-term contracts | 766,667 |
In: Accounting
Campbell Corporation has three divisions, each operating as a responsibility center. To provide an incentive for...
Campbell Corporation has three divisions, each operating as a responsibility center. To provide an incentive for divisional executive officers, the company gives divisional management a bonus equal to 15 percent of the excess of actual net income over budgeted net income. The following is Atlantic Division’s current year’s performance:
**What is requirement B2? Please assist & how did you get the answer***
|
Current Year |
|||||
|
Sales revenue |
$ |
4,150,000 |
|||
|
Cost of goods sold |
2,410,000 |
||||
|
Gross profit |
1,740,000 |
||||
|
Selling & administrative expenses |
810,000 |
||||
|
Net income |
$ |
930,000 |
|||
The president has just received next year’s budget proposal from the vice president in charge of Atlantic Division. The proposal budgets a 3 percent increase in sales revenue with an extensive explanation about stiff market competition. The president is puzzled. Atlantic has enjoyed revenue growth of around 8 percent for each of the past five years. The president had consistently approved the division’s budget proposals based on 3 percent growth in the past. This time, the president wants to show that he is not a fool. “I will impose a 13 percent revenue increase to teach them a lesson!” the president says to himself smugly.
Assume that cost of goods sold and selling and administrative expenses remain stable in proportion to sales.
Required
a. Prepare the budgeted income statement based on Atlantic Division’s proposal of a 3 percent increase.
b-1. Prepare income statement with 8% growth.
b-2. If growth is actually 8 percent as usual, how much bonus would Atlantic Division’s executive officers receive if the president had approved the division’s proposal?
c. Prepare the budgeted income statement based on the 13 percent increase the president imposed.
d. If the actual results turn out to be a 8 percent increase as usual, how much bonus would Atlantic Division’s executive officers receive since the president imposed a 13 percent increase?
Requirement A
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Requirement B1
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Requirement B
If growth is actually 8 percent as usual, how much bonus would Atlantic Division’s executive officers receive if the president had approved the division’s proposal?
What is the Bonus??????
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Requirement C & D
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In: Accounting
1. Computers R US took out a 9 month, 4.25, $17,000 note on August 1, 2019...
1. Computers R US took out a 9 month, 4.25, $17,000 note on August 1, 2019 with interest and principal to be paid on maturity. 2. On October 1, 2019, Computers R US rented some storage space at a rate of $450 per month. On that date, Computers R US recorded Rent Expense for six months rent paid in advance 3. Computers R US purchased $4,780 of office supplies during the year and the asset office supplies account was increased A count of the supplies on hand Dec 31, 2019, indicates a balance of $485. 4. $16,500 of store supplies were purchased during the year and were immediately expensed. A count of the store supplies on hand December 31, 2019, indicates a balance of $1.275. 5. On June 1, 2019 an 18-month insurance policy was purchased for $9,000. 6. On Dec 1, 2019, Computers R US collected $32,000 for consulting services to be performed from Dec. 1, 2019 to Feb. 28, 2020. The company credited the revenue account when paid. 7. On October 1, 2019, Computers R Us issued a 5-month note receivable to Morerams Inc. at an annual interest rate of 5%. Principle and interest will be paid at the end of the 5-months. The note was recorded in Notes Receivable and is the only note outstanding.
, A. Prepare a worksheet (Show formulas and use an "IF" statement)
B. Prepare the adjusting journal entries
C. Prepare a multiple step income statement
D. Prepare a statement of retained earnings
E. Prepare a balance sheet
F. Prepare the closing entries
| Unadjusted | Adjusted | |||||
| Account Title | Trial Balance | Adjustments | Trial Balance | |||
| DR | CR | DR | CR | DR | CR | |
| Cash | 67,000 | - | ||||
| Accounts Receivable | 530,000 | - | ||||
| Allowance for Doubtful Accounts | 8,800 | |||||
| Interest Receivable | - | |||||
| Merchandise Inventory | 242,500 | - | ||||
| Prepaid Insurance | 9,000 | - | ||||
| Prepaid Rent | - | |||||
| Store Supplies | - | - | ||||
| Office Supplies | 4,780 | - | ||||
| Note Receivable | 2,500 | |||||
| Store Equipment | 110,000 | - | ||||
| Accumulated Depreciation - Store Equipment | - | 36,000 | ||||
| Office Equipment | 56,000 | - | ||||
| Accumulated Depreciation - Office Equipment | - | - | ||||
| Accounts Payable | - | 48,000 | ||||
| Salaries Payable | - | - | ||||
| Interest Payable | - | - | ||||
| Utilities Payable | ||||||
| Unearned Consulting Revenue | - | |||||
| Unearned Rent Revenue | 18,000 | |||||
| Note Payable | - | 17,000 | ||||
| Common Stock | - | 300,000 | ||||
| Retained Earnings | - | 263,450 | ||||
| Dividends | 12,000 | - | ||||
| Sales Revenue | - | 970,000 | ||||
| Consulting Revenue | - | 32,000 | ||||
| Rent Revenue | ||||||
| Interest Revenue | ||||||
| Sales Returns and Allowances | 15,800 | - | ||||
| Sales Discounts | 11,000 | - | ||||
| Cost of Goods Sold | 350,000 | - | ||||
| Sales Salaries Expense | 170,000 | |||||
| Office Salaries Expense | 80,000 | - | ||||
| Miscellaneous Administrative Expense | 4,500 | - | ||||
| Miscellaneous Selling Expense | 8,970 | - | ||||
| Depreciation Expense - Store Equipment | - | - | ||||
| Depreciation Expense - Office Equipment | - | - | ||||
| Store Supplies Expense | 16,500 | - | ||||
| Office Supplies Expense | - | - | ||||
| Rent Expense | 2,700 | - | ||||
| Insurance Expense | - | - | ||||
| Interest Expense | - | - | ||||
| Bad Debt Expense | - | - | ||||
| Utilities Expense-Store | ||||||
| Utilities Expense-Office | ||||||
| 1,693,250 | 1,693,250 | |||||
In: Accounting
Pastina Company sells various types of pasta to grocery chains as private label brands. The company's...
Pastina Company sells various types of pasta to grocery chains as private label brands. The company's reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below.
| Account Title | Debits | Credits | ||
| Cash | 32,000 | |||
| Accounts receivable | 40,600 | |||
| Supplies | 1,800 | |||
| Inventory | 60,600 | |||
| Notes receivable | 20,600 | |||
| Interest receivable | 0 | |||
| Prepaid rent | 1,200 | |||
| Prepaid insurance | 6,600 | |||
| Office equipment | 82,400 | |||
| Accumulated depreciation | 30,900 | |||
| Accounts payable | 31,600 | |||
| Salaries payable | 0 | |||
| Notes payable | 50,600 | |||
| Interest payable | 0 | |||
| Deferred sales revenue | 2,300 | |||
| Common stock | 64,200 | |||
| Retained earnings | 30,000 | |||
| Dividends | 4,600 | |||
| Sales revenue | 149,000 | |||
| Interest revenue | 0 | |||
| Cost of goods sold | 73,000 | |||
| Salaries expense | 19,200 | |||
| Rent expense | 11,300 | |||
| Depreciation expense | 0 | |||
| Interest expense | 0 | |||
| Supplies expense | 1,400 | |||
| Insurance expense | 0 | |||
| Advertising expense | 3,300 | |||
| Totals | 358,600 | 358,600 | ||
Information necessary to prepare the year-end adjusting entries appears below.
- Depreciation on the office equipment for the year is $10,300.
- Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $900.
- On October 1, 2021, Pastina borrowed $50,600 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.
- On March 1, 2021, the company lent a supplier $20,600 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022.
- On April 1, 2021, the company paid an insurance company $6,600 for a two-year fire insurance policy. The entire $6,600 was debited to prepaid insurance.
- $560 of supplies remained on hand at December 31, 2021.
- A customer paid Pastina $2,300 in December for 900 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue.
- On December 1, 2021, $1,200 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $600 per month. The entire amount was debited to prepaid rent.
3. Prepare an adjusted trial balance. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)
Adjusted Trial Balance
Debit Credit
| Cash | ||
| Accounts receivable | ||
| Supplies | ||
| Inventory | ||
| Notes receivable | ||
| Interest receivable | ||
| Prepaid rent | ||
| Prepaid insurance | ||
| Office equipment | ||
| Accumulated depreciation | ||
| Accounts payable | ||
| Salaries payable | ||
| Notes payable | ||
| Interest payable | ||
| Deferred sales revenue | ||
| Common stock | ||
| Retained earnings | ||
| Dividends | ||
| Sales revenue | ||
| Interest revenue | ||
| Cost of goods sold | ||
| Salaries expense | ||
| Rent expense | ||
| Depreciation expense | ||
| Interest expense | ||
| Supplies expense | ||
| Insurance expense | ||
| Advertising expense | ||
| Totals | $0 | $0 |
In: Accounting