In June 2004, Jen Kluger and Suzie Orol received a phone call from Sarah Gibson, one of their retail customers, in Winnipeg, Manitoba. Gibson called with a complaint about how many of her competitors now carried Foxy Originals jewelry. Gibson’s store had been the exclusive carrier of Foxy Originals jewelry in the Winnipeg area for a number of years. With the growing popularity of its designs, many stores in the area now carried the Foxy Originals line. Kluger and Orol, owners and partners of Foxy Originals, were worried. If they continued to saturate the Canadian market, they would be faced with similar concerns from customers across Canada. The partners realized that it was time to grow the outside Canada, and they were excited about the possibility of selling their jewelry in the United States. Their goal was to enter the U.S. market by January 2005, but they would first have to decide on the best method of distribution attending trade shows or hiring sales representatives.

Jen Kluger and Suzie Orol believed that life should be fun and full of excitement, and they founded Foxy Originals based on these beliefs. These two young jewelry designers met while attending The University of Western Ontario, and they set out with a vision to make high style fashion jewelry accessible to young women. Both partners had experience in the jewelry industry. Orol’s parents owned a metal manufacturing company that focused on making jewelry and medals for companies and community groups. Orol was involved in the family business from a young age. Kluger had been designing and selling her own line of necklaces since she was in Grade 11.Kluger and Orol started their business, Foxy Originals (Foxy), in 1998. They sold a modest line of jewelry to friends and acquaintances on campus while attending university. In the summers before graduation, the partners took Foxy on the road to various outdoor festivals and summer concerts. The results were very positive. Upon graduation, with business degrees in their back pockets, Kluger and Orol left corporate job offers behind to work full time at Foxy. The partners spent their time designing new product lines and promoting Foxy in new markets. As the company grew and the jewelry that sold at festivals and summer concerts became more popular, Kluger and Orol began selling their jewelry to retail stores. Each retail account took a significant amount of time to develop, with the partners personally contacting and meeting with each store’s product buyer. The partners were very successful at selling to retailers due to their high energy, enthusiasm and knowledge of the product. As a result, in the first three years of operations, the company’s sales had doubled every year. Sales were continuing to grow at a rapid pace. Kluger and Orol were always very enthusiastic about their designs, and Canadian retailers began placing orders for Foxy jewelry after meeting these dynamic founders and learning about the products. It wasn’t long before Foxy jewelry could be found in 250 boutiques across Canada. Kluger and Orol personally sold (i.e., they had no sales representatives) their product lines to every retailer in Canada and managed all operations. Kluger and Orol described Foxy as a company that managed to stay two steps ahead of the latest trends: In doing so, our collections remain fresh, fun and funky. We realize that in this day and age, being hip and trendy comes at a high cost; not so with Foxy. We are able to provide a selection of necklaces, earrings, bracelets and rings that are truly fashion-forward, at a reasonable price.

Foxy jewelry offered high style and high quality at an affordable price point and targeted women between the ages of 18 to 30 who were style- and price-conscious. The jewelry was designed for three groups of women: The Reversible Enamels Ladies, The Bridge Ladies and The Chain-lovin’ Ladies. Kluger and Orol explained each customer group: The Reversible Enamels Ladies: Reversible necklace enthusiasts are usually the very dedicated Foxy customers who have been following our company since Day 1. They are slightly more conservative with their style and use Foxy jewelry to add a little something special to their outfits. They love the idea that they are getting two necklaces for the price of one. (See Exhibit 1 for sample product preferences for this group.)The Bridge Ladies: These customers consist of young, suit-wearing professionals. They want to add a little accent to their suits, but they need to be careful how much they add. These customers go for the leather necklaces with the bigger pendants. (See Exhibit 2 for sample product preferences for this group.)The Chain-lovin’ Ladies: These customers are more fashion savvy and trendy. They read the fashion magazines and seek out “that look.” These ladies collect our big earrings and long necklaces. They layer the Foxy necklaces and try the newest collections as soon as they are in the stores. (See Exhibit 3 for sample product preferences for this group.)

Foxy jewelry was designed and produced in Toronto, Canada. Kluger and Orol designed all the jewelry, releasing two new collections every year. A collection or product line consisted of a number of different styles of necklaces, earrings and rings, where all styles were associated with a central theme such as “Royal Safari.” The designs were assembled by a small production team of professional crafts people.

All Foxy jewelry was made from pewter and coated in sterling silver, matte gold or bronze with a matte finish. Each item was then stamped with the Foxy signature to authenticate the designs (see Exhibit 4 for the Foxy signature tag). From this common starting point, the pieces were transformed into original works through the integration of enamel, stones, leather and ultrasuede.

Kluger and Orol had established a strong Foxy presence in the Canadian market, and they were now ready to expand into the United States. Financially, Foxy was healthy so any distribution costs related to the U.S. expansion could be financed from internal operations (i.e., no funding was needed). The key fashion hubs in the United States were New York, Los Angeles, Chicago and Dallas. Kluger and Orol did not want Foxy to be available on every street corner in every city. Instead, they preferred selling to reputable stores that suited the brand. Kluger and Orol decided to charge the same price for their products in the United States as they did in Canada (i.e., a necklace sold for Cdn$34 and, in the United States would sell for US$34). The U.S. jewelry market was more than 10 times larger than the Canadian jewelry market, offering a much greater opportunity for product exposure. Based on the success they had achieved in Canada, Kluger and Orol believed in their product, but they worried about how responsive the U.S. market would be to their jewelry designs. The partners believed that Canadians supported Canadian businesses and were brand loyal to companies that manufactured locally; however, they suspected that Americans preferred the latest trends regardless of the product’s origin. Classic jewelry (currently 50 per cent of Foxy merchandise in Canada) was also not as popular in the United States. Kluger and Orol would need to stay on top of Foxy’s fashion-forward designs to compete effectively.

Trade shows were one-stop marketplaces for retailers to source products from wholesalers and importers. They were positioned for registered personnel only, usually consisting of buyers from fashion boutiques, accessories, jewelry, gift, fashion chain, department and other specialty stores. These exhibitions were not open to the general public. U.S. trade shows were very large, often with over 75,000 buyers in attendance. Kluger and Orol planned to set up a booth at several trade shows in order to showcase Foxy jewelry to prospective buyers. Buyers would select what merchandise they would like to carry in their stores and would then place their orders with the exhibitor. The partners had plans to attend trade shows devoted to women’s fashion accessories, surf apparel and giftware. There were 10 potential trade shows for 2005 where Foxy could showcase its products. Registration for all shows needed to be complete by November 2004, at an average cost of $3,000 a show. The average trade show lasted three days, wherein Kluger and Orol would require five days of preparation and both would work nine hours a day at the trade show. Kluger and Orol were excited about attending the shows to learn about the U.S. jewelry market and to get ideas for new product innovations. Trade shows were a great way for the partners to personally sell their merchandise and to network with key people in the industry. The partners also loved to travel, and they looked forward to visiting the big U.S. fashion hubs. Because of the diverse attendance at these shows, it was difficult for the partners to predict at which retail stores their merchandise would be sold. Ideally, they preferred that all major fashion-forward stores within a geographic area would support Foxy’s merchandise; however, sales would likely be scattered across locations that were diverse in geography and brand image. One of the principal selling factors at trade shows was the exhibitors’ booth layout –– the more exciting and flashy the booth, the greater the number of visitors. The partners researched a number of booths and settled on one that would cost $4,000 and could be used for approximately 30 trade shows (see Exhibit 5 for booth display). The booth would have to be shipped to each trade show at an average cost of $1,500 a show. Plane tickets and related travel costs would average $2,000per show, and product samples and promotional materials would cost $2,800 per show. Kluger and Orol had friends in many U.S. cities, so they planned to stay overnight with them when visiting the shows.

The partners had estimated that an average retailer order would consist of 25 necklaces and 12 pairs of earrings. Retailers would purchase necklaces for $17 and earrings for $12 from Foxy, which they would then sell to their customers for $34 and $24 respectively. Shipping terms were FOB shipping point and cost an average of $15 an order. All necklaces consisted of a chain, a pendant, a label, a clasp, and labor fees for a total cost of $8.05 for each necklace. A pair of earrings cost approximately $5.50 to manufacture. The partners expected anywhere from 20 to 45 orders at each trade show. Historically, 50 per cent of retail buyers at the trade shows would reorder product approximately two times a year.

An alternative method of distribution would be to develop a sales force in the key fashion hubs in the United States. Sales representatives would carry 10 to 15 different brands, usually within the same category of products (i.e., accessories), and would sell to retailers in designated geographic zones. Kluger and Orol wanted to hire people who would be loyal and who could represent the appropriate Foxy brand attributes. Kluger and Orol noted: “The most important characteristics in sales representatives are that they believe in your product, and they are willing to get on the road or travel to show it well.” Kluger and Orol knew having a sales force would be a much faster way for Foxy to enter the market because of the sales representatives’ contacts in the industry, their relationships with existing retailers and the minimum amount of training they would require. They also knew it could be difficult to find the right people with the right characteristics to make this alternative work.

Sales representatives would be compensated with a 15 per cent commission on all sales.

They would also receive $200 a month towards rental space in their jewelry showrooms5(see Exhibit 6 for showroom display), two sets of sample boards6a year for a total cost of $2,900 and catalogues and promotional materials averaging $600 a year. Foxy would have to hire a part-time bookkeeper to pay the sales representatives because calculating sales commissions would be time-consuming and complicated. The bookkeeper’s fee would be $40 an hour, and this person would be required for 48 hours a year. Travel expenses, such as gas and mileage were not covered by Foxy. Production costs and retailer order size were the same for this option as for the trade show option. The average sales representative would sell between 10 to 15 orders each month. The 10 to 15 orders included both new account sales and reorders from existing customers. If this option was chosen, Kluger and Orol planned to hire four sales representatives, one in each of the major cities of New York, Los Angeles, Chicago and Dallas.

Ideally, Foxy preferred to enter the U.S. market by attending trade shows and hiring a sales force. The problem with this alternative was territory ownership. For example, if Kluger and Orol attended a trade show in New York, and had hired a New York based sales representative, it was an industry norm that the sales representative would expect a 15 per cent commission from sales made at the New York trade show. Kluger and Orol investigated structuring the sales representatives’ commission package based on sales they made personally rather than on all sales made within their geographic location. Sales representatives were unhappy with this alternative because not only would competition be created between sales representatives, but also between the sales representatives and Foxy. For example, sales representatives worked hard to establish contracts, and many times, contracts were signed with one store, and as a result, other stores would see the product and would want to carry it themselves. Sales representatives believed they should be compensated for these spillover sales, and they were concerned that the new retail stores could order directly from Foxy. To combat the issue of internal competition, the partners thought about attending trade shows in the major cities and having their sales force work in the smaller cities; however, smaller cities were not as fashion-forward, and would not help to establish the Foxy brand presence in the United States, the way sales representatives could in major cities. In the short term, Kluger and Orol decided to focus on just one of the distribution channels in order to limit the complexities of the U.S. expansion. If the partners decided to pursue both trade shows and sales representatives, it would be a longer-term strategy.

Kluger and Orol were excited about the U.S. opportunities, and they wanted to ensure they were entering the market with a solid strategy. The partners had built the business on the principles of having fun, gaining exposure for new product lines and staying ahead of fashion trends. To date, they had been highly financially successful in doing just this. Knowing the additional workload that the U.S. expansion would create, they hoped their profit would grow by at least $100,000. Both options appeared promising but not without risks. Kluger and Orol had to make a decision quickly to prepare for a January 2005 launch.

WITHOUT USING EXCEL:

1. Calculate the number of orders at a target profit of $100,000

Your company is considering the purchase of a new production system with an installed cost of $1,250,000. The cost will be depreciated on a straight-line basis to zero over the five-year life of the project, and the system can be sold at the end of the project for $225,000. It will provide additional revenue of $685,000 in the first year, and the additional revenue is expected to grow 5% per year thereafter. The associated cost of goods sold is estimated to be 30% of revenue, and other operating expenses are estimated to be 23% of revenue. The project will also require an initial working capital investment of $180,000, which will be recovered at the end of the project. If the tax rate is 21% and the required rate of return is 10%, what is the NPV of this project?

Please use excel, this is how I need to answer it and it's confusing to me

Orchard Relief is a product that is designed to improve sleep at night. The company, Eli Orchard, is guessing that sales of the product is somewhat related to sleeping patterns of customers over the days of the week. Before mass production of the product, Eli Orchid has market-tested Orchid Relief in only Orange County over the past 8 weeks. The weekly demand is recorded. Eli Orchid is now trying to use the sales pattern over the past 8 weeks to predict sales in US for the upcoming few weeks, especially for days 57 and 60. An accurate forecast would be helpful in arrangements for the company’s production processes and design of price promotions over each week.

Using the regression method on the de-seasonalized time series, what is a de-seasonalized forecast for day 60?

Orchard Relief is a product that is designed to improve sleep at night. The company, Eli Orchard, is guessing that sales of the product is somewhat related to sleeping patterns of customers over the days of the week. Before mass production of the product, Eli Orchid has market-tested Orchid Relief in only Orange County over the past 8 weeks. The weekly demand is recorded. Eli Orchid is now trying to use the sales pattern over the past 8 weeks to predict sales in US for the upcoming few weeks, especially for days 57 and 60. An accurate forecast would be helpful in arrangements for the company’s production processes and design of price promotions over each week.

What is the MAD using the exponential smoothing constant of 0.7?

Earthcom Inc. is in the telecommunications industry. The company builds and maintains telecommunication lines that are buried in the ground. The company is a public company and has been having some bad luck. One of its main underground telecommunications lines was cut by accident and the company cannot determine the exact location of the problem. As a result, many of the company’s customers have lost service. Because Earthcom did not have a backup plan, it is uncertain about how long it will take to restore service. The affected customers are not happy and are threatening to sue. In order to try to calm them down, Earthcom has managed to purchase some capacity from a competitor. Unfortunately, the cost of the service is much higher than the revenues from Earthcom’s customers. Earthcom is also currently spending quite a bit on consulting fees (on lawyers and damage control consultants).

In addition, Earthcom is spending a significant amount of money trying to track down the problem with its line, and although it has had no luck so far, the company recently announced that it was confident that services would be restored imminently. As a result of the work done, Earthcom feels that it will be in a better position to restore service if this ever happens again.

The company has been upgrading many of its very old telecommunications lines that were beginning to degrade due to age. It has capitalized these amounts and they are therefore showing up as investing activities on the cash flow statement. The company’s auditors have questioned this as they feel that the amounts should be expensed. As a result of all this, Earthcom’s share price has plummeted, making its stock options worthless. Management has historically been remunerated solely based on these stock options, however. The company’s CFO meanwhile has just announced that he is leaving and is demanding severance pay for what he is calling constructive dismissal. He feels that because the stock options are worthless, he is working for free – which he cannot afford to do – and that the company has effectively fired him.

Adopt the role of the company controller and discuss the financial reporting issues.

Question 1

Which of the following is not a characteristic of the structure of perfectly competitive markets?

Each individual firm is small in size relative to the overall market.

Few sellers.

Homogeneous product.

Easy, low cost entry and exit.

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Question 4

Marginal revenue is the change in:

total revenue resulting from a one unit change in output.

total revenue resulting from a change in marginal cost.

price resulting from a one unit change in output.

none of these.

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Question 5

Perfectly competitive markets are characterized by:

a small number of very large producers.

very strong barriers to entry and exit.

firms selling a homogeneous product.

all of these.

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Question 7

Price discrimination requires:

a firm to be a competitive firm.

a firm to be able to segment its customers based on different price elasticities of demand.

arbitrage.

that the product can be easily resold.

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Question 9

Compared to a perfectly competitive firm, a monopolist:

charges a higher price.

produces lower output.

fails to achieve an efficient allocation of resources.

all of these.

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Question 14

Which of the following is the best example of an oligopoly?

Area restaurants.

The automobile industry.

Agricultural markets free of government support.

Local utilities.

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Question 18

Since the demand for labor depends on the demand for the product labor produces, the demand for labor is called:

primary demand.

secondary demand.

dependent demand.

derived demand.

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Question 19

The demand for a factor of production depends on the:

supply of the factor.

supply of other factors of production.

demand for other factors of production.

demand for the products that it helps to produce.

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Question 20

Exhibit 11-2 Labor and output data

Labor    Output

0                 0

1             20

2             45

3             80

4             100

5             110

In Exhibit 11-2, the marginal product of the 4th unit of labor is equal to:

80.

45.

35.

100.

20.

Option #1: The Four Steps in the Accounting Process

You own an independent CPA firm. One client had the following transactions in January 20x7.

Issued share capital for $5,000 cash

Purchased $3,000 of equipment on credit

Paid $600 cash for this month’s rent

Purchased on credit $3,000 of supplies to be used next month

Billed $3,500 to customers for repairs made to date

Paid cash for one-half of the amount owing in Transaction 4

Collected $400 cash of the amount billed in Transaction 5

Sold one-half of the equipment purchased in Transaction 2 for $1,200 in cash.

Required:

Use the four steps in the accounting process to analyze business transactions, a) Identifying transactions and source documents, b) Analyzing transactions using the accounting equation, c) Recording the journal entry and d) Posting the entry to the ledger to complete the following:

Prepare journal entries for each of the above transactions.

Post the journal entries to T–accounts and total the accounts.

From the T–accounts, prepare an unadjusted trial balance. List expenses in alphabetical order.

Use the following chart of accounts names and the template:

Cash, Capital Stock, Equipment, Accounts Payable, Rent Expense, Supplies, Accounts Receivable, Revenue.

Decision Problem 1
Your friend, Amin Akmali, has asked your advice about the effects that certain business
transactions will have on his business. His business, Car Finders, finds the best deals on
automobiles for clients. Time is short, so you cannot journalize transactions. Instead, you
must analyze the transactions and post them directly to T-accounts. Akmali will continue in
the business only if he can expect to earn monthly net income of $8,000. The business had
the following transactions during March 2017:
a. Akmali deposited $50,000 cash in a business bank account.
b. The business borrowed $8,000 cash from the bank, which is recorded as a note payable
due within one year.
c. Purchased for cash a vehicle to drive clients to appointments, $27,000.
d. Paid $1,600 cash for supplies.
e. Paid cash for advertising in the local newspaper, $1,200.
f. Paid the following cash expenses for one month: commission, $12,400; office rent, $800;
utilities, $600; gas, $1,000; interest, $200.
g. Earned revenue on account, $20,600.
h. Earned $7,500 revenue and received cash.
i. Collected cash from customers on account, $2,400.
Required
1. Open the following T-accounts: Cash; Accounts Receivable; Supplies; Vehicle; Notes
Payable; Amin Akmali, Capital; Advising Revenue; Advertising Expense; Interest
Expense; Rent Expense; Commission Expense; Gas Expense; Utilities Expense.
2. Record the transactions directly in the T-accounts without using a journal. Identify each
transaction by its letter.
3. Prepare an unadjusted trial balance at March 31, 2017. List expenses alphabetically.
4. Compute the amount of net income or net loss for this first month of operations. Would
you recommend Akmali continue in business?

1. Entries for Bad Debt Expense under the Direct Write-Off and Allowance Methods

   The following selected transactions were taken from the records of Shipway Company for the first year of its operations ending December 31:

   Apr. 13	Wrote off account of Dean Sheppard, $5,280.
   May 15	Received $2,640 as partial payment on the $7,020 account of Dan Pyle. Wrote off the remaining balance as uncollectible.
   July 27	Received $5,280 from Dean Sheppard, whose account had been written off on April 13. Reinstated the account and recorded the cash receipt.
   Dec. 31	Wrote off the following accounts as uncollectible (record as one journal entry):
   	Paul Chapman $3,540 Duane DeRosa 2,640 Teresa Galloway 1,580 Ernie Klatt 2,220 Marty Richey 790
   Dec. 31	If necessary, record the year-end adjusting entry for the uncollectible accounts.

   For those amount boxes in which no entry is required, leave the box blank. If an entry is not required, select "No entry" from the dropdown box(es).

   a. Journalize the transactions under the direct write-off method.

   Apr. 13		fill in the blank 44afbf0cafa7fe8_2
   			fill in the blank 44afbf0cafa7fe8_4
   May 15		fill in the blank 44afbf0cafa7fe8_6	fill in the blank 44afbf0cafa7fe8_7
   		fill in the blank 44afbf0cafa7fe8_9	fill in the blank 44afbf0cafa7fe8_10
   		fill in the blank 44afbf0cafa7fe8_12	fill in the blank 44afbf0cafa7fe8_13
   July 27-reinstate		fill in the blank 44afbf0cafa7fe8_15
   			fill in the blank 44afbf0cafa7fe8_17
   July 27-collection		fill in the blank 44afbf0cafa7fe8_19
   			fill in the blank 44afbf0cafa7fe8_21
   Dec. 31-write-off		fill in the blank 44afbf0cafa7fe8_23	fill in the blank 44afbf0cafa7fe8_24
   		fill in the blank 44afbf0cafa7fe8_26	fill in the blank 44afbf0cafa7fe8_27
   		fill in the blank 44afbf0cafa7fe8_29	fill in the blank 44afbf0cafa7fe8_30
   		fill in the blank 44afbf0cafa7fe8_32	fill in the blank 44afbf0cafa7fe8_33
   		fill in the blank 44afbf0cafa7fe8_35	fill in the blank 44afbf0cafa7fe8_36
   		fill in the blank 44afbf0cafa7fe8_38	fill in the blank 44afbf0cafa7fe8_39
   Dec. 31-adjusting		fill in the blank 44afbf0cafa7fe8_41
   			fill in the blank 44afbf0cafa7fe8_43

   b. Shipway Company uses the percent of credit sales method of estimating uncollectible accounts expense. Based on past history and industry averages, 3% of credit sales are expected to be uncollectible. Shipway Company recorded $858,500 of credit sales during the year.

   Journalize the transactions under the allowance method.

   Apr. 13		fill in the blank 667e2f03c047ffe_2
   			fill in the blank 667e2f03c047ffe_4
   May 15		fill in the blank 667e2f03c047ffe_6	fill in the blank 667e2f03c047ffe_7
   		fill in the blank 667e2f03c047ffe_9	fill in the blank 667e2f03c047ffe_10
   		fill in the blank 667e2f03c047ffe_12	fill in the blank 667e2f03c047ffe_13
   July 27-reinstate		fill in the blank 667e2f03c047ffe_15
   			fill in the blank 667e2f03c047ffe_17
   July 27-collection		fill in the blank 667e2f03c047ffe_19
   			fill in the blank 667e2f03c047ffe_21
   Dec. 31-write-off		fill in the blank 667e2f03c047ffe_23	fill in the blank 667e2f03c047ffe_24
   		fill in the blank 667e2f03c047ffe_26	fill in the blank 667e2f03c047ffe_27
   		fill in the blank 667e2f03c047ffe_29	fill in the blank 667e2f03c047ffe_30
   		fill in the blank 667e2f03c047ffe_32	fill in the blank 667e2f03c047ffe_33
   		fill in the blank 667e2f03c047ffe_35	fill in the blank 667e2f03c047ffe_36
   		fill in the blank 667e2f03c047ffe_38	fill in the blank 667e2f03c047ffe_39
   Dec. 31-adjusting		fill in the blank 667e2f03c047ffe_41
   			fill in the blank 667e2f03c047ffe_43

   c. How much higher (lower) would Shipway Company's net income have been under the direct write-off method than under the allowance method?
     by $fill in the blank 333ee4f3b077fff