McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 25 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost.

Manufacturing overhead for year 1 totaled $630,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following.

Required:

a. Based on the CFO's new policy, calculate the profit margin for both chairs and desks.

b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $670,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2?

A- Profit margin

Chairs- % ?

Desks- % ?

Req B- Estimated margin for desk- Year 2 : %?

3. Use relevant diagrams to answer the following:

(Assume a closed economy unless stated otherwise)

a. The stock market just crashed; the Dow Jones Industrial Average fell by 750 points. How does this impact the goods market equilibrium interest rate, savings and investment?

b. Suppose your company is in equilibrium, with its capital stock at its desired level. A permanent decline in the expected real interest rate now has what effect on your desired capital stock?

c. If consumers foresee future taxes completely, what would be the impact of reduction in taxes this year that is accompanied by an offsetting increase in future taxes, on the goods market equilibrium. (Assumes that taxes don’t impact investment decisions and also assume consumption smoothing)

d. The tax code changes so that business firms face higher tax rates on their revenue (offset by other lump-sum tax changes so there's no overall change in tax revenue). What happens to saving, investment, real interest rate and current account balance in a small open economy.

The following extracts are from the statements of profit or loss by Snow Co's and its subsidiary Ice Co for the year ended 31 December 2018.

During the year Snow Co sold goods to Ice Co for €20,000, making a profit of €5,000.

Fill in the blanks in the sentences below referring to the consolidated statement of profit or loss of Snow Co group for the year ended 31 December 2018 by writing the appropriate amounts in the answer boxes:

1. If all of these goods were sold by Ice Co before the year end, the total revenue would be €  

2. If all of these goods were sold by Ice Co before the year end, the gross profit would be €  

3. If all of these goods were still in the inventory held by Ice Co as at 31 December 2018, the cost of sales would be €     and the gross profit would be €  

4. If half of these goods were sold by Ice Co before the year end, the unrealised profit would be €  

1.) (15 pts.) Miamiville Interiors is a small shop that produces a variety of items that are sold through home improvement departments at local hardware stores. Among the items MI produces are replacement cabinet facings for kitchen and bathroom cabinets. The production manager must decide how many of each of two types of cabinet should be produced in the next production period. The net revenues and demand for each type of cabinet are listed in the table below. Also, in the table are production cost per unit and the units available for each of three types of wood used in the cabinet construction. Revenue per unit Maple Pine Walnut Demand Cabinet A $8 6 11 400 Cabinet B 13 4 9 600 Cost/unit $3.00 $1.80 $3.75 Units Available 400 600 200 Formulate a linear program to determine how many of each of the types of cabinet should be produced, using each type of wood. You seek to maximize profit (revenue – cost), while satisfying demand for the two cabinet styles.

You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $160,000 for labor, $50,000 for rent, and $30,000 for equipment. There is a one-half probability that revenues will be $210,000 and a one-half probability that revenues will be $400,000.

c. Suppose the government imposes a 25 percent tax on accounting profits. This tax is only levied if a firm is earning positive accounting profits. What will your after-tax accounting profit be in the low-revenue case?

In the high-revenue case?

What will your average after-tax accounting profit be?

What about your average after-tax economic profit?

Will you now want to quit your job and try your hand at being an entrepreneur?

   (Click to select)  No  Yes

d. Other things equal, does the imposition of the 25 percent profit tax increase or decrease the supply of entrepreneurship in the economy?

Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models: a small portable gas grill, a larger stationary gas grill, and the specialty smoker. In the coming year, Texas-Q expects to sell 13,800 portable grills, 50,600 stationary grills, and 4,600 smokers. Information on the three models is as follows:

Total fixed cost is $2,163,490.

Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted Unit Sales 37,000 57,000 28,500 57,000 Each T-shirt is expected to sell for $12. The purchasing manager buys the T-shirts for $5 each. The company needs to have enough T-shirts on hand at the end of each quarter to fill 22 percent of the next quarter’s sales demand. Selling and administrative expenses are budgeted at $74,000 per quarter plus 20 percent of total sales revenue. Required:

1. Determine budgeted sales revenue for each quarter.

2. Determine budgeted cost of merchandise purchased for each quarter.

3. Determine budgeted cost of good sold for each quarter.

4. Determine selling and administrative expenses for each quarter.

5. Complete the budgeted income statement for each quarter.

The following account balances were taken from ABC Company’s unadjusted trial
balance at December 31, 2020:

Accounts Payable ............  $56,000
Accounts Receivable .........  $42,000
Cash ........................  $11,000
Common Stock ................  $63,000
Cost of Goods Sold ..........  $52,000
Income Tax Expense ..........  $12,000
Insurance Expense ...........  $21,000
Inventory ...................  $70,000
Land ........................  $68,000
Mortgage Payable ............  $49,000
Patent ......................  $31,000
Prepaid Insurance ...........  $17,000
Rental Revenue ..............  $46,000
Retained Earnings ...........  $72,000 (at January 1, 2020)
Sales Revenue ...............  $95,000
Supplies ....................  $19,000
Wage Expense ................  $38,000

ABC Company has not yet recorded adjusting entries related to the following
two items:

(1)  $11,000 of supplies were used up during 2020.

(2)  ABC Company has provided services to a customer totaling $14,000 as of
     December 31, 2020. However, the customer has not yet paid ABC Company.

Calculate the total assets reported in ABC Company's December 31, 2020 balance
sheet after the appropriate adjusting entries have been recorded and posted.

Via Gelato is a popular neighborhood gelato shop. The company has provided the following cost formulas and actual results for the month of June:

While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be $6,500 plus $2.30 per liter of gelato sold and the actual wages for June were $21,300. Via Gelato expected to sell 6,400 liters in June, but actually sold 6,600 liters.

Required:

Calculate Via Gelato revenue and spending variances for June. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

For this discussion question you are gong to pick a tax that you or someone you know has to pay and do a little research to determine where that tax goes and what it pays for. You can choose any federal, state or local tax (although state or local taxes may be easier). Once you've picked a tax, make a post below and answer the following questions:

What is the tax you picked?

What type of tax is it? (e.g. excise, percentage, etc.)

Why does this tax exist and where does the tax revenue go? What does the tax fund? (for this one you might have to do a little research)

Based on what the tax funds, do you think it is a tax we should have? (i.e. do you think the tax revenue should go where it does? somewhere else? should the tax be abolished? etc)

NOTE: In your post please include links to any sources where you found information about the tax you are looking at (county web pages, etc.)