Sales Territory and Salesperson Profitability Analysis

Havasu Off-Road Inc. manufactures and sells a variety of commercial vehicles in the Northeast and Southwest regions. There are two salespersons assigned to each territory. Higher commission rates go to the most experienced salespersons. The following sales statistics are available for each salesperson:

a. 1. Prepare a contribution margin by salesperson report. Calculate the contribution margin ratio for each salesperson.

a. 2. Interpret the report.

Paul earns the highest  contribution margin and has the highest  contribution margin ratio. This is because he sells the most  units, has a low  commission rate, and sells a product mix with a high  manufacturing margin. Steve also sells products with a high  average manufacturing margin but at a high  commission rate. Colleen has the poorest  contribution margin ratio among the four salespersons. Although Rene has a high variable cost of goods sold and also sells products with a low  average sales price per unit, she has the second highest  total contribution margin.

b. 1. Prepare a contribution margin by territory report. Calculate the contribution margin for each territory as a percent, rounded to one decimal place.

b. 2. Interpret the report.

The Southwest Region has $ more sales and $ more contribution margin. In the Southwest Region, the salesperson with the highest sales unit volume, has the highest  contribution margin ratio. The Southwest Region has the highest  performance, even though it also has the salesperson with the lowest  contribution margin and contribution margin ratio. The Northeast Region contribution margin is less  than the Southwest Region because of the outstanding performance of Paul .

7. A study of youth video-game culture was conducted in schools throughout British Columbia, Canada. Part of the study focused on the differences in academic performance between "heavy" players and "light" players of video games: heavy players defined as spending more than 7 hours per week on the games; light players defined as spending less than 3 hours per week gaming.

• A sample of 240 "heavy" users had an average GPA of 2.7, with a standard deviation of 0.7.
• A sample of 320 "light" users had an average GPA of 3.2, with a standard deviation of 0.6.

a. Build a 90% confidence interval estimate of the difference in average GPA for the two populations of "heavy" and "light" gamers.

b. Test the hypothesis that mean GPA between heavy and light game players are equal at the a = 5% significance level. What do you find?

8. Two proposed advertising campaigns themes for a new product are being evaluated for effectiveness. A random sample of 120 consumers is exposed to theme A, and another sample of 100 consumers is exposed to theme B. The study asks each customer whether they have a positive opinion of the product.

• 78% of the theme A participants said, yes, they have a positive opinion about the product.
• 64% of the theme B participants said, yes, they have a positive opinion about the product.

Is there enough evidence to support the claim that theme A is a more effective campaign than theme B, with an a = 5% level of significance?

9. In a test of running shoes, German sporting goods manufacturer, Derrunningzmitdershoessenhoffer, randomly selected 8 amateur runners to test two of its new shoe designs. The table shows how long the test shoes lasted before they were no longer usable.

Wear Time in Weeks

Runner

1

2

3

4

5

6

7

8

Design 1

15.6

17.6

10.3

9.4

13.4

13.5

14.7

20.6

Design 2

14.7

16.1

8.0

9.0

15.3

10.2

15.2

18.3

Test the null hypothesis that there is no difference in average life for the two shoes, using a = 5%.

XYZ is a calendar-year corporation that began business on January 1, 2020. For the year, it reported the following information in its current-year audited income statement. Notes with important tax information are provided below. Use Exhibit 16-6.

1. XYZ owns 30 percent of the outstanding Hobble Corp. (HC) stock. Hobble Corp. reported $1,000,000 of income for the year. XYZ accounted for its investment in HC under the equity method, and it recorded its pro rata share of HC’s earnings for the year. HC also distributed a $200,000 dividend to XYZ.
2. Of the $20,000 interest income, $5,000 was from a City of Seattle bond, $7,000 was from a Tacoma City bond, $6,000 was from a fully taxable corporate bond, and the remaining $2,000 was from a money market account.
3. This gain is from equipment that XYZ purchased in February and sold in December (i.e., it does not qualify as §1231 gain).
4. This includes total officer compensation of $2,500,000 (no one officer received more than $1,000,000 compensation).
5. This amount is the portion of incentive stock option compensation that was expensed during the year (recipients are officers).
6. XYZ actually wrote off $27,000 of its accounts receivable as uncollectible.
7. Tax depreciation was $1,900,000.
8. In the current year, XYZ did not make any actual payments on warranties it provided to customers.
9. XYZ made $500,000 of cash contributions to qualified charities during the year.
10. On July 1 of this year XYZ acquired the assets of another business. In the process, it acquired $300,000 of goodwill. At the end of the year, XYZ wrote off $30,000 of the goodwill as impaired.
11. XYZ expensed all of its organizational expenditures for book purposes. XYZ expensed the maximum amount of organizational expenditures allowed for tax purposes.
12. The other expenses do not contain any items with book–tax differences.
13. This is an estimated tax provision (federal tax expense) for the year. Assume that XYZ is not subject to state income taxes.

Estimated tax information:

XYZ made four equal estimated tax payments totaling $360,000 ($90,000 per quarter). For purposes of estimated tax liabilities, assume XYZ was in existence in 2019 and that in 2019 it reported a tax liability of $500,000. During 2020, XYZ determined its taxable income at the end of each of the four quarters as follows:

Finally, assume that XYZ is not a large corporation for purposes of estimated tax calculations. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

e. Determine the quarters for which XYZ is subject to underpayment of estimated tax penalties. (Round "Annualization Factor" for Fourth quarter to 2 decimal places.)

Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 70 units at $30 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 162-unit purchase at $34 per unit; the second was a 200-unit purchase at $36 per unit. During the period, it sold 276 chairs.

.A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges p1 = £4 in one market and p2 = £8 in the other market. At these prices, the price elasticity in the first market is –0.90 and the price elasticity in the second market is –1.30. Which of the following actions is sure to raise the monopolist’s profits?

a. Raise p1.

b. Raise p1 and lower p2.

c. Lower p2.

d. Raise both p1 and p2.

e. Raise p2 and lower p1.

EB1. LO 9.3Assume you have been hired by Cabela’s Sporting Goods. As part of your new role in the accounting department, you have been tasked to set up a responsibility accounting structure for the company. As your first task, your supervisor has asked you to give an example of a cost center, profit center, and an investment center within the Cabela’s organization. Your supervisor is a little unsure of the difference between a profit center and investment center and would like you to explain the difference

Draw two indifference curves for each of the following pairs of goods. Put the quantity of the first good on the horizontal axis and the quantity of the second good on the vertical axis. a. Paul likes pencils and pens, but does not care which he writes with. b. Rhonda likes carrots and dislikes broccoli. c. Emily likes hip-hop iTunes downloads and doesn’t care about heavy metal downloads. d. Michael only likes dress shirts and cufflinks in 1 to 2 proportions. e. Carlene likes pizza and shoes.

Suppose we live in a country that produces two goods.The first good is a composite of everything people need and want (e.g.,water, food, shelter, clothing, technology, transportation, education,news, entertainment, public safety, and other services). The second good is healthcare and every thing related to it. Use the PPF tool and the concept of technical and allocative efficiency to determineand discuss where this country stands in the production of health- related goods and services.Use some real- world data (e.g., gross domestic product by sector) to substantiate your answer.