Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2019, the first year of operations, Jackson produced 5,700 tons of plastic and sold 4,275 tons. In 2020, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,000, variable manufacturing costs were 18% of the sales price of units produced, variable selling expenses were 9% of the selling price of units sold, fixed manufacturing costs were $3,762,000, and fixed administrative expenses were $550,000.

(1). Prepare income statements for each year using variable costing.

(2). Prepare income statements for each year using absorption costing.

(3). Reconcile the differences each year in net income under the two costing approaches.

Giant Film Company just paid a quarterly dividend of $3 per share yesterday, and has a required return of 12 percent per year. Please answer the following questions:

a. If Giant Film’s future dividends are expected to stay at $3 per quarter forever, what should Giant Film’s current stock price be?

b. If Giant Film’s future dividends are expected to grow at 2% per quarter from now on, and its EPS will stay at $6 per quarter in the foreseeable future, what’s Giant Film’s current stock price?

c. If Giant Film’s future dividends are expected to grow at 10% in the first quarter, 20% in the second quarter, and then turn into a 2% per quarter constant growth rate. What’s Giant Film’s current stock price?

Exercise 8-31 Algo The monthly closing stock prices (rounded to the nearest dollar) for Panera Bread Co. for the first six months of 2010 are reported in the following table. [You may find it useful to reference the t table.] Months Closing Stock Price January 145 February 144 March 149 April 146 May 150 June 140 Source: http://finance.yahoo.com.

a. Calculate the sample mean and the sample standard deviation. (Round intermediate calculations to at least 4 decimal places and "Sample mean" and "Sample standard deviation" to 2 decimal places.)

b. Calculate the 90% confidence interval for the mean stock price of Panera Bread Co., assuming that the stock price is normally distributed. (Round "t" value to 3 decimal places and final answers to 2 decimal places.)

5. (5 pts) Consider a 125,000 euro futures contract in which the current future price is $1.232 per euro. The initial margin requirement is $2,310 per contract, and the maintenance margin requirement is $2,100 per contract. You go short 10 contracts and meet all margin calls but do not withdraw any excess margin. Assume that on the first day, the contract is established at the settlement price, so there is no mark-to-market gain or loss on that day.

b. How much are your total gains or losses by the end of day 4?

Valquez Manufacturing Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first quarter of 2008, the following data are developed:

Sales:                                                                20,000 units

Unit selling price:                                                       RM35

Variable costs per RM of sales:

            Sales commissions                                                 6%

            Delivery expense                                                   2%

            Advertising                                                            4%

Fixed costs per quarter:

            Sales salaries                                             RM24,000

            Office salaries                                                  17,000

            Depreciation                                                      6,000

            Insurance                                                            2,000

            Utilities                                                              1,000

1. Prepare a selling and administrative expense budget for the first quarter of 2008.

2. Discuss 3 rationale behind your budgets that you have prepared above.

(a): The dividends that a firm pays to its stockholders are expected to grow at 3% per quarter for the next four quarters. From t=4 onwards, i.e. from the beginning of the fifth quarter the growth rate in dividends will drop to 1.5% per quarter, and the firm expects to be able to sustain it at this level. Assuming that the market capitalization rate is 2.5% per quarter, work out the price of the firm’s stock assuming that the dividend expected to be paid at t=1, i.e., at the end of the first quarter is $2.25

.(b): Rework your answer assuming that gH, the rate at which the dividends are expected to grow for the first four quarters is 2.5% per quarter.

Saint Nick Enterprises has 17,900 shares of common stock outstanding at a price of $71 per share. The company has two bond issues outstanding. The first issue has 9 years to maturity, a par value of $1,000 per bond, and sells for 102.5 percent of par. The second issue matures in 23 years, has a par value of $2,000 per bond, and sells for 107.5 percent of par. The total face value of the first issue is $270,000, while the total face value of the second issue is $370,000. What is the capital structure weight of debt? Select one: .3467 .4185 .3920 .2045 .3189

Saint Nick Enterprises has 15,500 shares of common stock outstanding at a price of $59 per share. The company has two bond issues outstanding. The first issue has 7 years to maturity, a par value of $1,000 per bond, and sells for 94 percent of par. The second issue matures in 21 years, has a par value of $2,000 per bond, and sells for 101.5 percent of par. The total face value of the first issue is $150,000, while the total face value of the second issue is $250,000. What is the capital structure weight of debt?

Multiple Choice

• .2737

• .3015

• .3468

• .3733

• .1938

O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable costs per unit: Manufacturing: Direct materials $ 30 Direct labor $ 15 Variable manufacturing overhead $ 4 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead $ 510,000 Fixed selling and administrative expenses $ 140,000 During its first year of operations, O’Brien produced 98,000 units and sold 74,000 units. During its second year of operations, it produced 82,000 units and sold 101,000 units. In its third year, O’Brien produced 81,000 units and sold 76,000 units. The selling price of the company’s product is $73 per unit. 3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first): a. Compute the unit product cost for Year 1, Year 2, and Year 3. b. Prepare an income statement for Year 1, Year 2, and Year 3.

Inner Secret T Shirt Company produces and sells one product. The following information pertains to each of the company’s first three years of operations:

Variable costs per unit:     

Manufacturing:     

Direct materials   $   26

Direct labor   $   18

Variable manufacturing overhead   $   5

Variable selling and administrative   $   1

Fixed costs per year:     

Fixed manufacturing overhead   $   540,000

Fixed selling and administrative expenses   $   100,000

During its first year of operations, O’Brien produced 94,000 units and sold 75,000 units. During its second year of operations, it produced 83,000 units and sold 97,000 units. In its third year, O’Brien produced 82,000 units and sold 77,000 units. The selling price of the company’s product is $80 per unit.

Required:

1. Assume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.