Marie and Alex just paid $250,000 for a house. They made a down payment of $50,000 and assumed a 30-year $200,000 mortgage with a fixed annual interest rate of 5.50%. The house will serve as a residence for several years, but Marie and Alex also view it as an investment, as property values in the neighborhood are projected to increase at a rate of 5% per year in the near future. Property taxes on their home will be $4,236 the first year and are expected to increase 3% a year. Homeowners insurance will cost $632 the first year and is expected to increase at a rate of 2% each year. The couple plans to sell the house after eight years. Answer the following questions.

What will the couple pay in total mortgage payments over the 8 years (Mortgage payments include an Escrow Account that pays for Homeowners Insurance and Property Taxes. See questions 1, 2, 3 and 4 for amounts. )?

Canadian Solar (NASDAQ: CSIQ) and other solar panel manufacturers are facing a shortage of a key raw material used in the production of solar panels, polysilicon. Environmental regulators in China shut down several factories, triggering the shortage. The cost of polysilicon has risen by as much as 35% in the past several months. A kilogram of polysilicon went from $14 to $19 near the end of 2017.

In addition to the rise in the cost of polysilicon, the selling price of solar panels has been falling throughout the world.

Assignment:

You are a financial officer of Canadian Solar. The company president has asked you for information on the three specific topics below. In a memo format the questions that were asked and at least one more financial ratio/tool that would be impacted by these changes.

Begin you memo by briefly restating the request that was made. This will help define the scope of the assignment. Your one additional ratio should come after you have covered the requested material.

1. What would be the impact of the increase in the cost of the polysilicon on Canadian Solar’s gross profit? Explain.

2. What would be the impact of the decrease in the selling price of solar panels on Canadian Solar’s gross margin? Explain.

3. Assume that Canadian Solar uses a standard costing system for tracking the production of its solar panels. What variance(s), if any, have been impacted by the increase in the cost of polysilicon? Explain

Chapter 6 Homework

Required information

Exercise 6A-2 Least-Squares Regression [LO6-11]

[The following information applies to the questions displayed below.]

Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the variable and fixed portions of its car washing costs. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the variable portion of its car washing costs relates to the number of rental returns. Accordingly, the following data have been compiled:

Exercise 6A-2 Part 2

2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. (Round your Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.)

Required information

Exercise 5A-2 (Algo) Least-Squares Regression [LO5-11]

[The following information applies to the questions displayed below.]

Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the variable and fixed portions of its car washing costs. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the variable portion of its car washing costs relates to the number of rental returns. Accordingly, the following data have been compiled:

Exercise 5A-2 Part 2 (Algo)

2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. (Round Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.)

CHC Salmon Processing manufactures and sells canned salmon. Variable cost per can amounts to $9 and the selling price of each can is $33. Total annual fixed costs amount to $20,233,846. Sales are estimated to amount to 1,370,000 cans of salmon.

Do not enter dollar signs or commas in the input boxes.
Round dollar answers to the nearest whole number and round BE units up to the nearest whole number, unless otherwise indicated.

a) Calculate the following values.
Gross Sales: $Answer
Total Variable Costs: $Answer
Contribution Margin: $Answer
Operating Income: $Answer

b) If the company sells according to their estimates, what is the degree of operating leverage? The break-even point (in units)?
Round the degree of operating leverage to 2 decimal places.

Degree of operating leverage: Answer
Break-even Point (units): Answer

c) If the company increases the sales volume (cans) by 34%, by what percentage will operating income increase? By what dollar amount will operating income increase? Use the degree of operating leverage.
Round the percentage increase to 2 decimal places.

Percentage Increase: Answer%
Dollar Increase: $Answer

d) If the company spends $22,000 as additional advertising expense (fixed cost), sales volume will increase by 7%. Determine the new operating leverage and the new break-even point in units.
Round the degree of operating leverage to 2 decimal places.

Degree of operating leverage: Answer
Break-even point (units): Answer

Barfield Corporation prepares business plans and marketing analyses for startup companies in the Cleveland area. Barfield has been very successful in recent years in providing effective service to a growing number of clients. The company provides its service from a single office building in Cleveland and is organized into two main client-service groups: one for market research and the other for financial analysis. The two groups have budgeted annual costs of $440,000 and $770,000, respectively. In addition, Barfield has a support staff that is organized into two main functions: one for clerical, facilities, and logistical support (called the CFL group) and another for computer-related support. The CFL group has budgeted annual costs of $432,000, while the annual costs of the computer group are $717,000.

Tom Brady, CFO of Barfield, plans to prepare a departmental cost allocation for his four groups, and he assembles the following information.

Percentage of estimated dollars of work and time by CFL group:

Percentage of estimated dollars of work and time by the computer group:

Required:
Determine the total cost in the financial analysis and market research groups, after departmental allocation, using (a) the direct method, (b) the step method when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method.

Annual demand is 12500 units, cost per order is $60 and carrying cost per unit as a    percentage is 8%. The company works 50 weeks a year; the lead-time on all orders placed is 5 weeks.
Assuming constant lead-time demand, and a unit cost of $40 what is the economic order quantity? What is the reorder point.
If lead-time demand shows variability that follows a normal distribution with a mean μ =280 and a standard deviation σ =20, what will the revised reorder point if two stock-outs (shortages) are allowed?
What is the company’s reorder point if the probability of a stock-out on any cycle is restricted to 0.05

FQ3. Annual demand is 12500 units, cost per order is $60 and carrying cost per unit as a    percentage is 8%. The company works 50 weeks a year; the lead-time on all orders placed is 5 weeks.

1. Assuming constant lead-time demand, and a unit cost of $40 what is the economic order quantity? What is the reorder point.
2. If lead-time demand shows variability that follows a normal distribution with a mean μ =280 and a standard deviation σ =20, what will the revised reorder point if two stock-outs (shortages) are allowed?
3. What is the company’s reorder point if the probability of a stock-out on any cycle is restricted to 0.05?

Highlander Corporation is a manufacturer that uses the average cost method to account for costs production. Highlander manufactures a product that is produced in three separate departmenst: Molding, Assembling, and Finshing. The following information was obtained for the assembling department for the month of June. Work in process, Jun 1 : 4,000 units composed of the following: Transferred in from the molding department Amount 60,000 percent of completion 100%, Cost added by the assembling department: Direct Materials $ 0 , percentage of completion 0%, Direct Labor amount 12,300, percent of completion 60%. factory overhead 4,700, percentage of completion 50%, total amount !7,00 , Work in process, June 1 amount $ 77,000. The following activity occured during the month of June: 1) 20,000 units were transferred in from the molding department at a cost of $ 300,000. 2) costs were added by the assembling department as follows: Direct materials $ 93,600, direct labor $ 43,200, Factory overhead $ 19,420.,Total $ 156.000. 3) materials are added at the end of the process.. 4) 18,000 units were completed and transferred to the finishing department, At June 30, 6,000 units were still in process. The degree of completion of work in process at June 30 follows: Direct labor 70%. Factory Overhead 35%. Requiered: Prepare in good form a cost of production for the assembling department for the month of June. Show supporting computations in good form. The report should include: A) equivalent units of production. B) Total manufacturing costs. C) Cost per equivalent unit. D) Dollar amount of ending work in process, E) Dollar amount of inventory cost transferred out.

Income Statement

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 53,100 units will be produced, with the following total costs:

Next year, Pietro expects to purchase $119,500 of direct materials. Projected beginning and ending inventories for direct materials and work in process are as follows:

Next year, Pietro expects to produce 53,100 units and sell 52,400 units at a price of $15.00 each. Beginning inventory of finished goods is $39,500, and ending inventory of finished goods is expected to be $31,000. Total selling expense is projected at $27,500, and total administrative expense is projected at $126,000.

Required:

1. Prepare an income statement in good form. Round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35.

2. What if the cost of goods sold percentage for the past few years was 54.77 percent? Management's reaction might be: