Super-Tees Company plans to sell 11,000 T-shirts at $24 each in the coming year. Product costs include:

Variable selling expense is the redemption of a coupon, which averages $1.20 per T-shirt; fixed selling and administrative expenses total $15,000.

1. Calculate the following values:
Round dollar amounts to the nearest cent and round ratio values to three decimal places (express the ratio as a decimal rather than a percentage).

2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year. If required, round your per unit answers to the nearest cent.

3. What if the per unit selling expense increased from $1.20 to $2.55? Calculate new values for the following:
Round dollar amounts to the nearest cent and round ratio values to four decimal places (express the ratio as a decimal rather than a percentage):

Ignacio, Inc., had after-tax operating income last year of $1,197,000. Three sources of financing were used by the company: $2 million of mortgage bonds paying 4 percent interest, $4 million of unsecured bonds paying 6 percent interest, and $9 million in common stock, which was considered to be relatively risky (with a risk premium of 8 percent). The rate on long-term treasuries is 3 percent. Ignacio, Inc., pays a marginal tax rate of 30 percent.

Required:

1. Calculate the after-tax cost of each method of financing. Enter your answers as decimal values rounded to three places. For example, 4.36% would be entered as ".044".

2. Calculate the weighted average cost of capital for Ignacio, Inc. Round intermediate calculations to four decimal places. Round your final answer to four decimal places before converting to a percentage. For example, .06349 would be rounded to .0635 and entered as "6.35" percent.

___________%

Calculate the total dollar amount of capital employed for Ignacio, Inc.

$___________

3. Calculate economic value added (EVA) for Ignacio, Inc., for last year. If the EVA is negative, enter your answer as a negative amount.

$ ___________

Is the company creating or destroying wealth?

Destroying

4. What if Ignacio, Inc., had common stock which was less risky than other stocks and commanded a risk premium of 5 percent? How would that affect the weighted average cost of capital?
Lower

What is the new EVA? In your calculations, round weighted average percentage cost of capital to four decimal places. If the EVA is negative, enter your answer as a negative amount.

$ ____________

Variable Costs, Contribution Margin, Contribution Margin Ratio

Super-Tees Company plans to sell 13,000 T-shirts at $24 each in the coming year. Product costs include:

Variable selling expense is the redemption of a coupon, which averages $1.20 per T-shirt; fixed selling and administrative expenses total $13,000.

Required:

1. Calculate the following values:
Round dollar amounts to the nearest cent and round ratio values to three decimal places (express the ratio as a decimal rather than a percentage).

2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year. If required, round your per unit answers to the nearest cent.

3. What if the per unit selling expense increased from $1.20 to $2.55? Calculate new values for the following:
Round dollar amounts to the nearest cent and round ratio values to four decimal places (express the ratio as a decimal rather than a percentage):

Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 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:

It is expected that 21,300 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 25,825 units.

2. What is the expected contribution margin ratio?

3. Determine the break-even sales in units and dollars. Round your answers to the nearest whole number.

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? If applicable, use amounts previously computed and then round your answers to the nearest whole number.

6. Determine the operating leverage. Round to one decimal place.

Ignacio, Inc., had after-tax operating income last year of $1,198,500. Three sources of financing were used by the company: $2 million of mortgage bonds paying 4 percent interest, $4 million of unsecured bonds paying 6 percent interest, and $10 million in common stock, which was considered to be relatively risky (with a risk premium of 8 percent). The rate on long-term treasuries is 3 percent. Ignacio, Inc., pays a marginal tax rate of 30 percent.

Required:

1. Calculate the after-tax cost of each method of financing. Enter your answers as decimal values rounded to three places. For example, 4.36% would be entered as ".044".

2. Calculate the weighted average cost of capital for Ignacio, Inc. Round intermediate calculations to four decimal places. Round your final answer to four decimal places before converting to a percentage. For example, .06349 would be rounded to .0635 and entered as "6.35" percent.

%

Calculate the total dollar amount of capital employed for Ignacio, Inc.

$

3. Calculate economic value added (EVA) for Ignacio, Inc., for last year. If the EVA is negative, enter your answer as a negative amount.

$

Is the company creating or destroying wealth?

Destroying

4. What if Ignacio, Inc., had common stock which was less risky than other stocks and commanded a risk premium of 5 percent? How would that affect the weighted average cost of capital?

What is the new EVA? In your calculations, round weighted average percentage cost of capital to four decimal places. If the EVA is negative, enter your answer as a negative amount.

$

Variable Costs, Contribution Margin, Contribution Margin Ratio

Super-Tees Company plans to sell 13,000 T-shirts at $16 each in the coming year. Product costs include:

Variable selling expense is the redemption of a coupon, which averages $0.80 per T-shirt; fixed selling and administrative expenses total $14,000.

Required:

1. Calculate the following values:
Round dollar amounts to the nearest cent and round ratio values to three decimal places (express the ratio as a decimal rather than a percentage).

2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year. If required, round your per unit answers to the nearest cent.

3. What if the per unit selling expense increased from $0.80 to $1.75? Calculate new values for the following:
Round dollar amounts to the nearest cent and round ratio values to four decimal places (express the ratio as a decimal rather than a percentage):

ABC hotel has 200 rooms and has a policy to determine its room rates based on consumers capacity to pay. For example busniess clients pay $1,200 per night and group tours $900 per night. The incremental cost of servicing a room is worked out at $110 per room. On average, most guest stay for three (3) nights. Rooms division manager is trying to establish if four (4) week advance reservation should be taken for a group booking of 40 rooms and three (3) nights of 7th , 8th and 9th June 2018. According to the reservation record, 80 rooms for the three (3) nights of 7th , 8th , and 9th , June 2018 are already booked by various business clients, and the historical trends of the past four (4) years suggest that 90% of the remaing 120 rooms would be sold to other busniess clients. Your are required to b) In the highly competitive environment, tourism and hospitality busniess can aspire to optimise revenue for the long term survival. Discuss " one pricing strategy " and its effect on tourism and hospitality businesses as a whole focus on the pricing strategy in tourism and hospitality business and highlight their strengths and weaknesses as reported in the published literature.

In accordance with the current Conceptual Framework, define liability as one of the five elements of the statutory financial statements and outline its recognition criteria.

Further, explain whether or not you would recognise each of the following independent items as a liability, by reference to the abovementioned liability definition and recognition criteria:

1. Your company has a 30-year history of donating $5 000 each year to The Salvation Army. So far, no amount has been paid in the current year and nothing has been recorded in the accounts.
2. Your rich uncle has lent $30 000 to your small business of delivery service (a single proprietorship) to buy a van, and told you to repay him whenever you like.

3. Yesterday a court of law ordered you and all your business partners to repair significant environmental damage that your partnership firm had caused to a park next to your firm’s premises. However, you do not yet have any idea as to how much this repair work will cost for your partnership business for which negotiations are being planned for two additional loans, each worth $3 million, from City Bank and ZNA Bank respectively.

Your company, XYZ, Inc., wants to create an outdoor area adjacent to its office building for its employees to enjoy during lunch, breaks or during non-business hours.The city, Village Township, has restrictions of the use of the land (zoning) and the type of structures that may be erected on the land. The plans that your company have created is in violation of the city ordinances. Your company does not want to spend a lot of money to resolve negotiate with the city regarding the ordinance problem because the plans and cost of building the park are over budge. You are in charge of helping find a resolution for this conflict with the city. You report directly to the CEO of XYZ, Inc., and she has asked you to research whether arbitration, mediation or litigation would be in the best interest of both parties to resolve this conflict.

1. Differentiate the roles of a mediator and arbitrator so your boss clearly understand the difference.
2. Explain all three options (arbitration, mediation, and litigation) in relation to the conflict with they city.
3. Explain which option you think is best for the company to resolve this conflict.
   • Describe why it's the best option for the company based on the facts related to the company and the conflict.
   • Provide references to resources that help support for your position.

Problems:

The Diamond Glitter Company is in the process of preparing its financial statements for 2016. Assume that no entries for depreciation have been recorded in 2016. The following information related to depreciation of fixed assets is provided to you.

1. The company purchased equipment on January 2, 2013, for $165000. At that time, the equipment had an estimated useful life of 7 years with a $25000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2016, as a result of additional information, the company determined that the equipment has a remaining useful life of 3 years with a $15000 salvage value.

2. During 2016, the company changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $625000. It had a useful life of 10 years and a salvage value of $50000. The following computations present depreciation on both bases for 2014 and 2015. 2015 2014 Straight-line $ 57,500 $ 57,500 Declining-balance $ 92,000 $ 115,000

3. The company purchased a machine on July 1, 2014, at a cost of $450000. The machine has a salvage value of $25000 and a useful life of 10 years. The company's bookkeeper recorded straight-line depreciation in 2014 and 2015 but failed to consider the salvage value. Ignore Tax effect.

4. The company has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows. December 31, 2015 $ 5,400 December 31, 2016 $ 4,600

5. In reviewing the December 31, 2015, inventory, the company discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect, as follows. The company has already made an entry that established the incorrect December 31, 2016, inventory amount.

December 31, 2014 Understated $ 32,000

December 31, 2015 Understated $ 51,000

December 31, 2016 Overstated $ 9,500

6. At December 31, 2016, the company decided to change to the straight-line depreciation method on its retail display equipment from double-declining-balance. The equipment had an original cost of $250000 when purchased on January 1, 2015. It has a salvage value of 0 and a 8-year useful life. Depreciation expense recorded prior to 2016 under the double-declining-balance method was $62,500. The company has already recorded 2016 depreciation expense of $46,875 using the double-declining-balance method.

7. Before the current year, the company accounted for its income from long-term construction contracts on the completed-contract basis. Early this year, the company changed to the percentage-of-completion basis for accounting purposes, but continues to use the completed-contract method for tax purposes. Income for the current year has been recorded using the new method. Prior year tax effects must be considered. The following information is available.

Pretax Income

              Percentage-of-Completion      Completed-Contract

Prior to 2016       $320,000                        $180,000

2016                     $140,000                       $120,000

Required:

Prepare the journal entries necessary at December 31, 2016 to record the corrections and changes made to date related to the information provided. The books are still open for 2016. The income tax rate is 35%. The company has not yet recorded its 2016 income tax expense and payable amounts so current-year tax effects may be ignored.