Mirabel Manufacturing is a small but growing company that manufactures and sells marine sonar equipment. They employee a national sales force and their primary customers are marine retailers and boat dealerships. The company has expanded over the last 5 years and Paul Mirabel, the founder and CEO has become concerned that he no longer has a clear picture of their cost structure. He calls his CFO, Mary Jane Montgomery in for a meeting. “Mary Jane, I am concerned that I am not current on our cost structure and how that is impacting our bottom line,” Paul begins. “Well, Paul, the company has grown considerably over the past 5 years, so I’m not surprised that you feel a little disconnected with how things are going,” Mary Jane replied. She continued “In fact, I’ve been meaning to talk to you about a couple of big items such as increasing the sales commission to 15%. We’ve lost two of our best account managers in the last 9 months. It seems like we are behind the curve paying only 12% on gross sales.” “What do you mean we are behind the curve,” Paul replied angrily. “We have always been the leader in every aspect of our business.” “Well, that may have been the case in the past, Paul, but frankly we need to step up our compensation package to stay competitive,” Mary Jane replied. She continued, “And that’s not everything. I met with Frank Jacobs from marketing and he said we need to have a bigger presence at the trade show in March. He told me he would need about $650,000 added to the marketing budget to support new marketing materials.” “Come on, Mary Jane, how can we do that when we are going to have to increase commission?” He continued, “I spoke with Dan Clark in production and he indicated that we have two pieces of equipment that need to be replaced by the end of the quarter and that’s going to set us back almost $1.2 million.” Mary Jane shook her head. “Paul, I hate to bring this up but while we are talking costs, but Bob in purchasing stopped by the office and dropped off some revised cost information – it looks like several of our suppliers are talking about significant price increases by the end of the year.” Paul slumped in his chair. “This is a mess, Mary Jane. Increasing commissions, new equipment, materials price increases and marketing expenses all at once. Even if Frank Mallow is correct that we should see a 10% increase in sales for the coming year, I just don’t see how we can make this work. We have to maintain enough profit to keep the shareholders happy and I can’t sleep when we dip below that $2 million margin of safety.” Mary Jane gathered up her papers. “Before you get too distressed, let me put together some figures and let’s see what this looks like on paper. I’ll get back to you by the end of the week. In the meantime, stay positive, we’ll find the best solution.” The following income and cost data for Mirabel is provided: Mirabel Manufacturing Budgeted Income Statement For the Year Ending December 31 Sales $ 36,750,000 Cost of goods sold: Variable $ 13,300,000 Fixed $ 9,300,000 Gross Margin $ 14,150,000 Selling & Administrative Commissions $ 4,410,000 Fixed Marketing Expenses $ 1,350,000 Fixed Administrative $ 6,000,000 Net Operating Income $ 2,390,000 Model 101 Model 201 Model 301 Normal Annual Sales Volume 16,000 19,000 11,000 Unit Selling Price $ 650 $ 750 $ 1,100 Variable expense per unit $ 250 $ 200 $ 500 (Note: Each of the following questions is independent of the others) What is Mirabel’s over-all break-even point in sales dollars? Assume that sales revenue remains constant, what is the impact on break-even and the margin of safety if Paul takes Mary Jane’s advice and increases sales commission to 15%? If Mirabel purchases the new equipment for $1,200,000, it will increase fixed costs by 10% but will decrease the variable cost per unit for all 3 models by 5%. What will Mirabel’s new break-even point be? If Mirabel invests the additional $650,000 in fixed marketing expenses, sales of the Model 301 are expected to increase by 8%. What is the break-even and margin of safety under these circumstances? If the projection is that sales will increase by 10% in the coming year, can the company afford to also increase commission from 12% to 15%? Why or why not. Assume that sales volume remains fixed but there is a 5% increase in variable expenses (materials cost) for the Model 101 and 301, and a 10% increase in variable expenses for Model 201. What is the new break-even? Report: Prepare a report from Mary Jane to Don explaining how these changes will affect Mirabel’s overall cost structure. For those changes that are controllable, make a recommendation considering the uncontrollable cost changes. Be certain to consider not only the company’s break-even point, but also the desired margin of safety. Expert Answer for Report at bottom

H and W are married and have twins that are attending State University as freshmen this year. State University is on the semester system and charges $10,000 tuition per semester. H and W pay State University $20,000 this year. H and W have adjusted gross income of $165,000. The allowable HOPE (or American Opportunity Tax Credit) credit for H and W is a. $5,000 b. $2,000 c. $1,250 d. $3,750 e. $0

The Japanese market is on the verge of rising again, and the UK market is doing better than the US market in the current economic recovery. Therefore, as a US investor, John is contemplating investing in the Japanese and UK stock markets. Using the historical data, John has estimated the means, volatilities, and correlation of the US, UK, and Japanese stock markets as the following:
US UK Japan
Means 0.120 0.150 0.084
St. Dev. 0.150 0.240 0.220
Correlation matrix:
US UK Japan
US 1.000 0.500 0.266
UK 0.500 1.000 0.358
Japan 0.266 0.358 1.000
Assume that the risk-free rate is 4%. .
(a) Given the data above, what are the Sharpe ratios on the US portfolio and the UK portfolio? Given the correlation between US and UK above, should John add the UK portfolio to his US only portfolio?
(b) To see how robust his conclusion is on the issue of adding UK stocks to his portfolio, John wants to know the lowest expected return on UK stock can be in order to improve his Sharpe ratio from holding the two country stocks, given the correlations, volatilities and US Sharpe ratio. What is it? Show your reasoning and computations.
(c) What is the Sharpe ratio for the Japanese equity? Similar to (b), compute the lowest expected return for the Japanese equity. Are the differences between your answers to (b) and (c) surprising? Why or why not?

An incomplete cost of goods manufactured schedule is presented below for Cepeda Manufacturing Company for the year ended December 2020:

Complete the cost of goods manufactured schedule for Cepeda Manufacturing Company.

An incomplete cost of goods manufactured schedule is presented below for Cepeda Manufacturing Company for the year ended December 2020:

Complete the cost of goods manufactured schedule for Cepeda Manufacturing Company.

As a team, you are required to create the 4 basic financial statements for ZZZ Widget Company. Go through details described below, and create an Excel spreadsheet that shows an income statement, balance sheet, statement of owners equity, and statement of retained earnings.

Grading is based on accuracy as well as the style of the Excel sheet. I expect for you to use formulas and references as needed.

ZZZ Widget Company was formed Dec 1, 2020 with a $200,000 owner investment.

Took a 50,000 loan on 6/31 (12% annual interest rate)

Distributed $10,000 in dividends in December.

Purchased $100,000 of inventory in August (cash).

In September, sold half of inventory for $200,000 cash.

Purchased $50,000 building in January, 2020. Lifetime of 10 years.

Paid $50,000 R&D in May

The company pays 21% in corporate taxes.

Gelmite & Sons Hardware is considering introducing a cash discount policy to its customers so as to

improve current sales. There are three possible scenarios that include monthly estimates. Gelmite

& Sons uses a 60% mark up on cost on all their products as a general rule. Fixed costs are R8 000

per month.

Scenario A: Representing the Current Scenario

Company sold 600 units of the spark nail which they ordered at a wholesaler in Shoppers Town for

a cost price of R100 each.

Scenario B: Representing initial sales target

Company will sell 800 units of the spark nail which they ordered at a wholesaler in Shoppers Town

for a cost price of R100 each.

These sales units are achieved after the introduction of a 20% markdown on the original selling

price.

19; 20 2020

© The Independent Institute of Education (Pty) Ltd 2020

Page 4 of 11

Scenario C: Representing a scenario where sales targets are surpassed

Company will sell 1 000 units of the spark nail which they ordered at a wholesaler in Shoppers Town

for a cost price of R100 each. In order to achieve the increased sales, additional marketing costs of

R3 000 will be incurred.

These sales units are achieved after the introduction of a 20% markdown from original selling price.

Required:

Which of the three scenarios would you recommend to management? Provide a reason for your

answer with reference to net profit before tax.

Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2014, Pesto sold 6 percent bonds payable with a $14.0 million face value (maturing in 20 years) on the open market at a premium of $1,070,000. On January 1, 2017, Salerno acquired 40 percent of these same bonds from an outside party at 96.6 percent of face value. Both companies use the straight-line method of amortization. For a 2018 consolidation, what adjustment should be made to Pesto's beginning Retained Earnings as a result of this bond acquisition?

Multiple Choice

• $543,000 increase

• $521,600 increase

• $554,200 increase

• $532,300 increase

A manufacturer of fabricated metal products has acquired a new plasma table for $37,000. It is projected that the acquisition of this equipment will increase revenue by $10,000 per year. Operating costs for the machine will average $2,600 per year. The machine will be depreciated using the MACRS method, with a recovery period of 7 years. The company uses an after-tax MARR rate of 10% and has an effective tax rate of 30%.

2. Now, suppose that the duration of the project is six years and that an estimate of the value of the equipment cannot be obtained from the marketplace.

2.1. Estimate the SV value at the end of the project period using the appropriate technique. In subsequent parts, assume the estimated SV is $12,000, regardless of the result that you actually obtained.

Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2014, Pesto sold 10 percent bonds payable with a $18.0 million face value (maturing in 20 years) on the open market at a premium of $760,000. On January 1, 2017, Salerno acquired 40 percent of these same bonds from an outside party at 96.6 percent of face value. Both companies use the straight-line method of amortization. For a 2018 consolidation, what adjustment should be made to Pesto's beginning Retained Earnings as a result of this bond acquisition?

Multiple Choice

• $503,200 increase

• $481,200 increase

• $488,800 increase

• $473,600 increase