Problem 3-24B Assessing simultaneous changes in CVP relationships using the equation method

Milton Company sells tennis racquets; variable costs for each are $45, and each is sold for $135. Milton incurs $540,000 of fixed operating expenses annually.

Required

Determine the sales volume in units and dollars required to attain a $270,000 profit. Verify your answer by preparing an income statement using the contribution margin format.

Milton is considering establishing a quality improvement program that will require a $15 increase in the variable cost per unit. To inform its customers of the quality improvements, the company plans to spend an additional $150,000 for advertising. Assuming that the improvement program will increase sales to a level that is 5,000 units above the amount computed in Requirement a, should Milton proceed with plans to improve product quality? Support your answer by preparing a budgeted income statement.

Determine the new break-even point and the margin of safety percentage, assuming Milton adopts the quality improvement program. Round your figures to two decimal points.

Prepare a break-even graph using the cost and price assumptions outlined in Requirement c.

Prepare T account, trial balance, balance sheet and changes in owner's equity statement.

1. Jan-1 The JW-Corp Received $120,000 from Investors in Exchange for 6,000 shares of Common Stock.
2. Jan-2 JW-Corp Borrowed $150,000 from SCHWAB BANK and signed a Note Due in 24 months.
3. Jan-3 JW Corp purchased Office Equipment worth $120,000 (5 year life), with a $40,000 Down payment of Cash and the remainder Due on account to Target-Corp within 9 Months.
4. Jan-4 JW Corp purchased an Office Building for $420,000 (25 year life), by making a Down payment of $60,000 and then signed a Note for the remainder Due in 18 Months to CHASE Bank.
5. Jan-5 JW Corp paid $15,000 with a check for Office Rent for the next 3 months.
6. Jan-10 JW Corp paid $4,000 with a check for Business Insurance for this month.
7. Jan-11 JW Corp provided CPA Services to the Gavilan Corp worth $138,000 and Collected $58,000 Cash and Billed them the remainder on Account.
8. Jan-15 JW-Corp received This Month’s Utility Bill from PGE for $2,000 to be paid Later.
9. Jan-16 JW-Corp received This Month’s Telephone Bill from Skype for $800 to be paid Later.
10. Jan-17 JW-Corp received a $10,000 check from Gavilan Corp on Account.
11. Jan-20 JW-Corp received a BILL for $12,000 for Legal Fees used this month to be Paid Later.
12. Jan-23 JW-Corp paid $11,000 with Checks for this Months Salaries expenses.
13. Jan-24 JW-Corp Received a $13,000 check from Gavilan Corp on Account.
14. Jan-25 JW-Corp received a $27,000 check from Garlic-Corp for Services to be Provided Later.
15. Jan-26 JW-Corp Paid Target $33,000 with a Check towards the Equipment from Transaction #3.
16. Jan-27 JW Corp Wrote a Check to Skype for the Full Amount Due on account for the Telephone Bill from #9.
17. Jan-28 JW Corp Paid $4.20 Cents per Share to the Owners of the Business with Checks.
18. Jan-29 JW-Corp paid $9,000 with a Check on the Note Payable from Transaction #2, $2,800 was for Interest Expense, and the remainder reduced the Note Payable.
19. Jan-31 JW-Corp recorded one Month of RENT Expense from the Prepaid Account.
20. Jan-31 JW-Corp recorded one Month of Depreciation Expense on The Office Equipment Using the Straight Line Depreciation Method.
21. Jan-31 The JW Corp recorded one Month of Depreciation Expense on the Office Building using the Straight Line Depreciation Method.
22. Jan-31 the JW-Corp Recorded the Income Tax Payable for the Month, which is 40% of Net Income.(Type or paste question here

Multiple-Product Analysis, Changes in Sales Mix, Sales to Earn Target Operating Income

Basu Company produces two types of sleds for playing in the snow: basic sled and aerosled. The projected income for the coming year, segmented by product line, follows:

The selling prices are $30 for the basic sled and $60 for the aerosled. (Round break-even packages and break-even units to the nearest whole unit.)

Required:

1. Compute the number of units of each product that must be sold for Basu to break even.

2. Assume that the marketing manager changes the sales mix of the two products so that the ratio is five basic sleds to three aerosleds. Compute the number of units of each product that must be sold for Basu to break even. Round your answers to the nearest whole number.

3. Conceptual Connection: Refer to the original data. Suppose that Basu can increase the sales of aerosleds with increased advertising. The extra advertising would cost an additional $195,000, and some of the potential purchasers of basic sleds would switch to aerosleds. In total, sales of aerosleds would increase by 12,000 units, and sales of basic sleds would decrease by 5,000 units. Would Basu be better off with this strategy? If so, give the amount of increase in income.
___ $

Problem 6-07

The following are monthly percentage price changes for four market indexes.

Compute the following.

1. Average monthly rate of return for each index. Round your answers to five decimal places.

   DJIA:

   S&P 500:

   Russell 2000:

   Nikkei:

2. Standard deviation for each index. Do not round intermediate calculations. Round your answers to four decimal places.

   DJIA:

   S&P 500:

   Russell 2000:

   Nikkei:

3. Covariance between the rates of return for the following indexes. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to six decimal places.

   Covariance (DJIA, S&P 500):

   Covariance (S&P 500, Russell 2000):

   Covariance (S&P 500, Nikkei):

   Covariance (Russell 2000, Nikkei):

4. The correlation coefficients for the same four combinations. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to four decimal places.

   Correlation (DJIA, S&P 500):

   Correlation (S&P 500, Russell 2000):

   Correlation (S&P 500, Nikkei):

   Correlation (Russell 2000, Nikkei):

5. Using the unrounded answers from parts (a), (b), and (d), calculate the expected return and standard deviation of a portfolio consisting of equal parts of (1) the S&P and the Russell 2000 and (2) the S&P and the Nikkei. Do not round intermediate calculations. Round your answers to five decimal places.

   Expected return (S&P 500 and Russell 2000):

   Standard deviation (S&P 500 and Russell 2000):

   Expected return (S&P 500 and Nikkei):

   Standard deviation (S&P 500 and Nikkei):

   Since S&P 500 and Russell 2000 have a strong -Select-negativepositive correlation, meaningful reduction in risk -Select-is not observedis observed if they are combined.

   Since S&P 500 and Nikkei have a strong -Select-negativepositive correlation, meaningful reduction in risk -Select-is not observedis observed if they are combined.

Address the following questions:1.Between journalizing and posting, which step changes the balance of an account? Explain.2.What are some key differences between each of three trial balances?

Analyzing & Recording Posting to the ledger (T-Accounts)Preparing a Unadjusted Trial Balance #1Adjustments for accruals and deferralsPreparing an Adjusted Trial Balance #2Prepare Financial StatementsClosing Temporary AccountPreparing a Post-Closing Trial Balance #3

Problem 16-12
Working Capital Cash Flow Cycle

Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $2,825,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 5.5 times during the year, and its DSO was 43 days. Its annual cost of goods sold was $1,650,000. The firm had fixed assets totaling $495,000. Strickler's payables deferral period is 46 days. Assume 365 days in year for your calculations. Do not round intermediate calculations.

1. Calculate Strickler's cash conversion cycle. Round your answer to two decimal places.
         days
   
2. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover. Round your answer to two decimal places.
        x
   Calculate its ROA. Round your answer to two decimal places.
         %
   
3. Suppose Strickler's managers believe the annual inventory turnover can be raised to 8 times without affecting sale or profit margins. What would Strickler's cash conversion cycle have been if the inventory turnover had been 8 for the year? Round your answer to two decimal places.
         days
   What would Strickler's total assets turnover have been if the inventory turnover had been 8 for the year? Round your answer to two decimal places.
         x
   What would Strickler's ROA have been if the inventory turnover had been 8 for the year? Round your answer to two decimal places.
         %

Problem 16-12
Working Capital Cash Flow Cycle

Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $3,140,000 (all on credit), and its net profit margin was 8%. Its inventory turnover was 7 times during the year, and its DSO was 36 days. Its annual cost of goods sold was $1,750,000. The firm had fixed assets totaling $515,000. Strickler's payables deferral period is 40 days. Assume 365 days in year for your calculations. Do not round intermediate calculations.

1. Calculate Strickler's cash conversion cycle. Round your answer to two decimal places.
        days
   
2. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover. Round your answer to two decimal places.
        x
   Calculate its ROA. Round your answer to two decimal places.
        %
   
3. Suppose Strickler's managers believe the annual inventory turnover can be raised to 10 times without affecting sale or profit margins. What would Strickler's cash conversion cycle have been if the inventory turnover had been 10 for the year? Round your answer to two decimal places.
        days
   What would Strickler's total assets turnover have been if the inventory turnover had been 10 for the year? Round your answer to two decimal places.
         x
   What would Strickler's ROA have been if the inventory turnover had been 10 for the year? Round your answer to two decimal places.
        %

Problem 16-12
Working Capital Cash Flow Cycle

Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Strickler's sales last year were $2,357,500 (all on credit), and its net profit margin was 7%. Its inventory turnover was 5.5 times during the year, and its DSO was 43 days. Its annual cost of goods sold was $1,375,000. The firm had fixed assets totaling $397,500. Strickler's payables deferral period is 46 days. Assume 365 days in year for your calculations. Do not round intermediate calculations.

1. Calculate Strickler's cash conversion cycle. Round your answer to two decimal places.
        days
   
2. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover. Round your answer to two decimal places.
        x
   Calculate its ROA. Round your answer to two decimal places.
        %
   
3. Suppose Strickler's managers believe the annual inventory turnover can be raised to 10 times without affecting sale or profit margins. What would Strickler's cash conversion cycle have been if the inventory turnover had been 10 for the year? Round your answer to two decimal places.
        days
   What would Strickler's total assets turnover have been if the inventory turnover had been 10 for the year? Round your answer to two decimal places.
         x
   What would Strickler's ROA have been if the inventory turnover had been 10 for the year? Round your answer to two decimal places.
        %