Periodic Inventory by Three Methods

Dymac Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the next 12 months, and the inventory count at December 31 are summarized as follows:

Required:

1. Determine the cost of the inventory on December 31 by the first-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the units PURCHASED MOST RECENTLY first.

2. Determine the cost of the inventory on December 31 by the last-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the OLDEST units first.

3. Determine the cost of the inventory on December 31 by the weighted average cost method.

4. would be preferred for income tax purposes in periods of rising prices.

Periodic Inventory by Three Methods

Dymac Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the next 12 months, and the inventory count at December 31 are summarized as follows:

Required:

1. Determine the cost of the inventory on December 31 by the first-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the units PURCHASED MOST RECENTLY first.

2. Determine the cost of the inventory on December 31 by the last-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the OLDEST units first.

3. Determine the cost of the inventory on December 31 by the weighted average cost method.

4. would be preferred for income tax purposes in periods of rising prices.

Periodic Inventory by Three Methods

Pappa's Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the year, and the inventory count at December 31 are summarized as follows:

Required:

1. Determine the cost of the inventory on December 31 by the first-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the units PURCHASED MOST RECENTLY first.

2. Determine the cost of the inventory on December 31 by the last-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the OLDEST units first.

3. Determine the cost of the inventory on December 31 by the weighted average cost method.

4.   would be preferred for income tax purposes in periods of declining prices.

Use the following financial data for Greta’s Gadgets, Inc.

Greta’s Gadgets, Inc.

Income Statement
For the Year Ended December 31, 2014

Greta’s Gadgets, Inc.

Balance Sheet

As of December 31, 2014

1. Calculate the current (2014) net profit margin, total asset turnover, assets-to-equity ratio, return on total assets, and return on common equity for Greta’s. Show your calculations!

2. Show mathematically the tax disadvantage to organizing a U.S. business today as a corporation versus a partnership, given the following assumptions. All earnings will be paid out as dividends, and operating income before taxes will be $1,500,000. The effective corporate tax rate is 35%, and the tax rate on corporate dividends is 15%. The average personal tax rate for partners in the business is 35%.

Tax Table

3. Refer to the Tax Table. First Watch, Inc. has a pretax income of $3,755,250. What is the company’s average tax rate, marginal tax rate and tax liability?

4. The Park Corp. had earnings before interest and taxes of $500,000 and had a depreciation expense of $200,000 this last year. If the firm was subject to an average tax rate of 30%, what was Park’s operating cash flow for the year? If you need to, assume that Park’s interest expense was zero for the year.

5. List and briefly describe the three general areas of responsibility for a financial manager.

6. Give some examples of ways in which manager's goals can differ from those of shareholders.

Galaxy Interiors

2011 Income Statement ($ in Millions)

Net Sales: $21415

Cost of goods sold: 16408

Depreciation: 1611

Earnings before Interest and taxes: 3396

Interest Paid: 1282

Taxable Income: 2114

Less Taxes: 740

Net Income: 1374  

Galaxy Interiors  

2010 and 2011 Balance Sheet ($ in millions)

cash: $668(2010) $297(2011)

Accounts Rec: 1611(2010) 1527(2011)

Inventory:3848(2010) 2947(2011)

Total: $6127(2010) $4771(2011)

Net fixed assets: 17489(2010) 17107(2011)

Total assets: $23616(2010) $21878(2011)

Accounts payable: $1694 (2010) $1532 (2011)  

Notes payable: 2500 (2010) 0 (2011)

Total: $4194 (2010) $1532 (2011)  

Long term debt: 9800 (2010) 10650 (2011)  

Common stock: 7500 (2010) 7000 (2011)

Retained Earnings: 2122 (2010) 2696 (2011)

Total liab. & Equity: $23616 (2010) $21878 (2011)  

7. What is the cash flow from assets for 2011? What is the cash flow to creditors for 2011? What is the cash flow to stockholders for 2011? Show your calculations!

8. Discuss the difference between book values and market values and explain which one is more important to the financial manager and why.

9. It is commonly recommended that the managers of a firm compare the performance of their firm to that of its peers. Increasingly, this is becoming a more difficult task. Explain some of the reasons why comparisons of this type can frequently be either difficult to perform or produce misleading results.

Assume Acme Corporation is a typical monopoly:

• Construct a graph illustrating Acme’s average and marginal cost curves and the demand curve facing it. Identify profit maximizing output and price, total revenues, total costs, and total profits.

Get Hitched Inc. is a production company that is in the process of testing a strategic initiative aimed at increasing gross profit. The company’s current sales revenue is $2,100,000. Currently, the company’s gross profit is 35% of sales, but the company’s target gross profit percentage is 40%. The company’s current monthly cost of production is $1,365,000. Of this cost, 50% is for labor, 20% is for materials, and 30% is for overhead.

The strategic initiative being tested at Get Hitched is a redesign of its production process that splits the process into two sequential procedures. The make up of the costs of production for Procedure 1 is currently 50% direct labor, 45% direct materials, and 5% overhead. The makeup of the costs of production for Procedure 2 is currently 55% direct labor, 25% direct materials, and 20% overhead. Company management estimates that Procedure 1 costs twice as much as Procedure 2.

1. Determine what the cost of labor, materials, and overhead for both Procedures 1 and 2 would need to be for the company to meet its target gross profit at the current level of sales.

Cost makeup of Procedure 1:

Data concerning three of the activity cost pools of Salcido LLC, a legal firm, have been provided below:

The activity rate for the “meeting with clients” activity cost pool is closest to:

Multiple Choice

$72 per meeting hour

$164 per meeting hour

$92 per meeting hour

$1,205,892 per meeting hour

9.     a. Suppose that a firm’s production function is q=9x^1/2 in the short run, where there are fixed costs of $1000, and x is the variable input whose cost is $4000 per unit. What is the total cost of producing a level of output q? In other words, identify the total cost function C(q).

b.   Write down the equation for the supply curve.

c.   If price is $1000, how many units will the firm produce? What is the level of profit? Illustrate your answer on a cost curve graph.

NEED GRAPH FOR C

[Monopoly Pricing] A monopolist operates with the following data on cost and de- mand. It has a total fixed cost of $1,500 and a total variable cost of Q2, where Q is the number of units of output it produces. The market demand function is Qd = 60 − 0.5P . The firm expects the conditions of demand and cost to continue in the foreseeable future.

1. (a) What is the profit maximizing monopoly price and quantity?

2. (b) What is the dead weight loss from the monopoly pricing?

3. (c) Should the firm continue to operate in the short run, or should it shut down? Explain briefly.

Shower Power, Inc., a firm in monopolistic competition, produces shower radios. The company's economists know that it can sell no radios at $80, and for each $10 cut in price, the quantity of radios it can sell increases by 50 a day. This relationship continues to hold until the price falls to $20. The firm's total fixed cost is $3,000 a day. Its marginal cost is constant at $20 per radio.

a)Draw the demand curve faced by the firm and its marginal revenue curve. Also, draw ShowerPower's marginal cost and average total cost curves.

Please explain