Arlington Clothing, Inc., shows the following information for its two divisions for year 1: Lake Region Coastal Region Sales revenue $ 4,160,000 $ 13,070,000 Cost of sales 2,691,300 6,535,000 Allocated corporate overhead 249,600 784,200 Other general and administration 553,900 3,755,000 Required: a. Compute divisional operating income for the two divisions. Ignore taxes. (Enter your answers in thousands of dollars rounded to 1 decimal place.) b-1. What are the gross margin and operating margin percentages for both divisions? (Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.12).) b-2. How well have these divisions performed? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) The gross margin percentage is higher in Lake Region. Divisional income is greater in Coastal Region. The gross margin percentage is higher in Coastal Region. Corporate overhead appears to be allocated on the basis of revenues. The operating margin is greater in Lake Region. Divisional income is greater in Lake Region.
In: Accounting
A firm desires to sell stock to the public. The underwriter charges $0.4 million in fees and offers to buy six million shares from the firm at a price of $30 per share. In addition, registration and audit fees total $120,000, and marketing and miscellaneous fees add up to another $65,000. The underwriter expects to earn gross proceeds per share of $36. a) What is the issuing firm's out-of-pocket dollar transaction cost to issue the stock? (10 marks) b) Immediately after the stock was issued, the stock price rose to $38. What is the issuing firm's opportunity cost? (10 marks) c) What is the total issuance cost, including opportunity costs, as a percentage of the total funds available to the issuing firm? (10 marks)
In: Finance
Terrier Company is in a 40 percent tax bracket and has a bond
outstanding that yields 10 percent to maturity.
a. What is Terrier’s aftertax cost of debt?(Do not round intermediate calculations. Input your answer
as a percent rounded to 2 decimal places.)
b. Assume that the yield on the bond goes down
by 1 percentage point, and due to tax reform, the corporate tax
rate falls to 25 percent. What is Terrier’s new aftertax cost of
debt? (Do not round intermediate calculations. Input your
answer as a percent rounded to 2 decimal places.)
c. Has the aftertax cost of debt gone up or
down from part a to part b?
| It has gone up | |
| It has gone down |
In: Finance
Consider a retailer that sells a single type of product and all assumption of the basic economic order quantity model are valid. The annual demand is 5000 units. Each order release to the supplier incurs a fixed $50 cost and the annual holding cost is $8 per unit. The store manager has already determined the optimal order quantity for this product. (a) If we choose to use an order quantity of q = 350 units, what would be the percentage of increase in the optimal total of ordering and holding costs (the total of ordering and holding costs is also called the dependent cost component)? (b) If the store manager can tolerate only a 2% increase from the optimal total of ordering and holding costs, determine an interval for order quantities that satisfy this tolerance.
In: Accounting
The following information is available for MVF Company (dollar amounts are in millions):
|
2016 |
2015 |
2014 |
2013 |
|
|
Net sales |
$23.2 |
$21.7 |
$19.6 |
$17.4 |
|
Cost of goods sold |
17.1 |
16.8 |
15.2 |
13.5 |
|
Beginning finished goods inventory |
2.3 |
2.1 |
1.9 |
1.5 |
|
Ending finished goods inventory |
2.9 |
2.3 |
2.1 |
1.9 |
|
Materials purchased |
10.6 |
8.8 |
7.5 |
7.1 |
In: Accounting
Johnson Industries finances its projects with 40 percent debt,
10 percent preferred stock, and 50 percent common stock.
|
· |
The company can issue bonds at a yield to maturity of 7.4 percent. |
|
· |
The cost of preferred stock is 9 percent. |
|
· |
The company's common stock currently sells for $32 a share. |
|
· |
The company's dividend has just paid $2.00 a share (D0 = $2.00), and is expected to grow at a constant rate of 7 percent per year. |
|
· |
Assume that the flotation cost on debt and preferred stock is zero, and no new stock will be issued. |
|
· |
The company's tax rate is 30 percent. |
What is the company's weighted average cost of capital (WACC)?
Express your answer in percentage (without the % sign) and round it
to two decimal places.
In: Finance
Johnson Industries finances its projects with 40 percent debt,
10 percent preferred stock, and 50 percent common stock.
|
· |
The company can issue bonds at a yield to maturity of 7.5 percent. |
|
· |
The cost of preferred stock is 9 percent. |
|
· |
The company's common stock currently sells for $31 a share. |
|
· |
The company's dividend has just paid $2.00 a share (D0 = $2.00), and is expected to grow at a constant rate of 8 percent per year. |
|
· |
Assume that the flotation cost on debt and preferred stock is zero, and no new stock will be issued. |
|
· |
The company's tax rate is 30 percent. |
What is the company's weighted average cost of capital (WACC)?
Express your answer in percentage (without the % sign) and round it
to two decimal places.
In: Finance
Johnson Industries finances its projects with 40 percent debt, 10 percent preferred stock, and 50 percent common stock. · The company can issue bonds at a yield to maturity of 8.8 percent. · The cost of preferred stock is 8 percent. · The company's common stock currently sells for $30 a share. · The company's dividend has just paid $2.00 a share (D0 = $2.00), and is expected to grow at a constant rate of 7 percent per year. · Assume that the flotation cost on debt and preferred stock is zero, and no new stock will be issued. · The company's tax rate is 30 percent. What is the company's weighted average cost of capital (WACC)? Express your answer in percentage (without the % sign) and round it to two decimal places.
In: Finance
Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
| Estimated Fixed Cost |
Estimated Variable Cost (per unit sold) |
||||||
| Production costs: | |||||||
| Direct materials | — | $17 | |||||
| Direct labor | — | 12 | |||||
| Factory overhead | $840,500 | 9 | |||||
| Selling expenses: | |||||||
| Sales salaries and commissions | 174,700 | 4 | |||||
| Advertising | 59,100 | — | |||||
| Travel | 13,100 | — | |||||
| Miscellaneous selling expense | 14,400 | 3 | |||||
| Administrative expenses: | |||||||
| Office and officers' salaries | 170,700 | — | |||||
| Supplies | 21,000 | 1 | |||||
| Miscellaneous administrative expense | 19,780 | 2 | |||||
| Total | $1,313,280 | $48 | |||||
It is expected that 10,640 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 13,000 units.
Required:
1. Prepare an estimated income statement for 20Y7.
| Belmain Co. | |||
| Estimated Income Statement | |||
| For the Year Ended December 31, 20Y7 | |||
| $ | |||
| Cost of goods sold: | |||
| $ | |||
| Total cost of goods sold | |||
| Gross profit | $ | ||
| Expenses: | |||
| Selling expenses: | |||
| $ | |||
| Total selling expenses | $ | ||
| Administrative expenses: | |||
| $ | |||
| Total administrative expenses | |||
| Total expenses | |||
| Operating income | $ | ||
2. What is the expected contribution margin
ratio? Round to the nearest whole percent.
%
3. Determine the break-even sales in units and dollars.
| Units | units |
| Dollars | $ |
4. Construct a cost-volume-profit chart on your
own paper. What is the break-even sales?
$
5. What is the expected margin of safety in dollars and as a percentage of sales?
| Dollars: | $ | |
| Percentage: (Round to the nearest whole percent.) | % |
6. Determine the operating leverage. Round to one decimal place.
In: Accounting
Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
| Estimated Fixed Cost |
Estimated Variable Cost (per unit sold) |
||||||
| Production costs: | |||||||
| Direct materials | — | $17 | |||||
| Direct labor | — | 12 | |||||
| Factory overhead | $840,500 | 9 | |||||
| Selling expenses: | |||||||
| Sales salaries and commissions | 174,700 | 4 | |||||
| Advertising | 59,100 | — | |||||
| Travel | 13,100 | — | |||||
| Miscellaneous selling expense | 14,400 | 3 | |||||
| Administrative expenses: | |||||||
| Office and officers' salaries | 170,700 | — | |||||
| Supplies | 21,000 | 1 | |||||
| Miscellaneous administrative expense | 19,780 | 2 | |||||
| Total | $1,313,280 | $48 | |||||
It is expected that 10,640 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 13,000 units.
Required:
1. Prepare an estimated income statement for 20Y7.
| Belmain Co. | |||
| Estimated Income Statement | |||
| For the Year Ended December 31, 20Y7 | |||
| $ | |||
| Cost of goods sold: | |||
| $ | |||
| Total cost of goods sold | |||
| Gross profit | $ | ||
| Expenses: | |||
| Selling expenses: | |||
| $ | |||
| Total selling expenses | $ | ||
| Administrative expenses: | |||
| $ | |||
| Total administrative expenses | |||
| Total expenses | |||
| Operating income | $ | ||
2. What is the expected contribution margin
ratio? Round to the nearest whole percent.
%
3. Determine the break-even sales in units and dollars.
| Units | units |
| Dollars | $ |
4. Construct a cost-volume-profit chart on your
own paper. What is the break-even sales?
$
5. What is the expected margin of safety in dollars and as a percentage of sales?
| Dollars: | $ | |
| Percentage: (Round to the nearest whole percent.) | % |
6. Determine the operating leverage. Round to one decimal place.
In: Accounting