The company you are working for has decided to put on a banquet to raise money for a charity and must decide between two catering services to supply the food and servers. You have been assigned to the Banquet Planning Committee. Simplify completely.

Research Provided

The company's research department has provided the following estimates.

• A demand of 230 banquet attendees can be expected at a dinner plate price of $80.00 each. A demand of 370 banquet attendees can be expected at a dinner plate price of $45.00 each.

• Catering Service A has a fixed cost of $1,900 and a marginal cost of $30 for each plate.

• Catering Service B has a fixed cost of $3,000 and a marginal cost of $22 for each plate.

• Costs for both caterers include the food, drinks, plates, utensils, tablecloths, glasses, crew, and cleanup.

• Dinner plates will only be sold as an entire unit. To justify company resources and to ensure the event will benefit the charity, the CEO insists the tickets be sold for no less than $40. All profits will go toward a charity of the committee's choosing.

• Additional spontaneous donations to the charity will be accepted the night of the banquet. Studies estimate that 5% will give $5, 23% will give $20, 18% will give $50, 7% will give $100, and 2% will give $500.

Analysis

Each team should perform the following analyses:

1. Assume the price-demand function is linear. Use the research estimates to find the relationship between the price p, and the number of banquet attendees demanded, x. Find the relevant domain.

2. Find the revenue function, R(x), in terms of the number of banquet attendees x. Find the relevant domain by considering realistic limitations on the number of attendees and on price. Sketch a graph on the work page.

3. Assume the cost function is linear and use the research estimates to find the cost function for each of the two possible catering services in terms of the number of banquet attendees x. Sketch a graph on the work page.

4. Determine the break-even quantities for each of the two possible catering services.

5. Find the Profit function, P(x), for each of the two possible catering services in terms of the number of banquet attendees x.

6. If it is projected that there will be 100 tickets sold at a dinner price of $112.50, which catering service should the committee recommend in order to earn the most profit for the charity?

7. Decide which catering service your company should choose if the projections yield 200 attendees. Include the ticket price at this demand.

8. Find the average cost function for Catering Service A. Evaluate the average cost per attendee if 50 tickets are purchased. Evaluate the average cost per attendee if 400 tickets are purchased.

9. On average, how much can you expect to receive in spontaneous donations for each banquet attendee? (Determine the per person expected value (weighted average) of donations.) Which charity does the committee recommend for receipt of banquet donations?

10. Overall recommendations: Which catering service does your committee recommend in order to obtain the most profit for the charity? How many people should attend the banquet to earn that profit and what profit can be expected from the banquet ticket sales? What price would you recommend for each dinner plate (ticket)? What dollar amount is expected from spontaneous donations? What will be the expected total amount raised for the charity (including the dinner ticket profits and spontaneous donations)?

Instructions:

Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows:

Part C—August Variance Analysis

During September of the current year, the controller was asked to perform variance analyses for August. The January operating data provided the standard prices, rates, times, and quantities per case. There were 1,500 actual cases produced during August, which was 250 more cases than planned at the beginning of the month. Actual data for August were as follows:

The prices of the materials were different than standard due to fluctuations in market prices. The standard quantity of materials used per case was an ideal standard. The Mixing Department used a higher grade labor classification during the month, thus causing the actual labor rate to exceed standard. The Filling Department used a lower grade labor classification during the month, thus causing the actual labor rate to be less than standard.

10. Determine and interpret the direct materials price and quantity variances for the three materials. For those boxes in which you must enter subtractive or negative numbers use a minus sign. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your price values for Cream Base to three decimal places and Natural Oils & Bottles to two decimal places.

The fluctuation in __________ caused the direct material price variances. All the Direct material quantity variances were ____________ indicating ____________ .

Fill in the blank options questions 16:

0.66:1

cost of goods available for sale

estimated cost of goods sold

FIFO

first-in, first-out

gross margin method

higher      

historical

last-in, first-out

less

LIFO

Lower

Merchandise Inventory

net sales

replacement

retail inventory method

Fill in the blank options questions 17:

$840

$957

$990

$1017

$1525.50

$3360

$3393

$3510

$32250

$32500

$54000

$55880

Fill in the blank options questions 18:

Overstated

understated

Fill in the blank options questions 19(1-3 Ending Inventory/Cost of Goods Sold):

$840

$957

$990

$1017

$1525.50

$3360

$3393

$3510

$32250

$32500

$54000

$55880

Fill in the blank options questions 20:

0.66:1

cost of goods available for sale

estimated cost of goods sold

FIFO

first-in, first-out

gross margin method

higher      

historical

last-in, first-out

less

LIFO

Lower

Merchandise Inventory

net sales

replacement

retail inventory method

Local Cost Smartphones Inc (LCS) is considering launching a new smartphone. with a product life cycle of 4 years. The firm expects to sell 10 million units per year over the next 4 years. The price of the smartphone is expected to be $99 per unit. which will decline by 5% per year.

The cost of production is expected to be $20 per unit. Furthermore, marketing and support costs are expected to be $2.5 million per year during the product life.

Initial capital expenditures are $100 million, 20% of which are expected to be salvaged at the end of year 4. There is an initial increase in NWC of $5 million during each of the first 2 years. In year 3. NWC will remain at the level of Year 2. Investments in NWC will be recovered at the end of year 4.

Note the following assumptions. Purchased capital assets become part of the CCA asset pool depreciated at the rate 40% per year and it is expected that in year 4 there will be a continuing pool and negative net additions. Furthermore, the firm's income tax rate is 35% and its cost of capital is 8%.

a) Determine the impact on NPV of the items listed below. Be careful: for items that have a negative impact on NPV, indicate their amounts as negative numbers.

i.) the initial capital expenditure and salvage of capital assets (ignore CCA tax

shields at this point)?

ii.) the incremental revenues of the project?

iii.) the incremental production costs of the project?

iv.) the changes in net working capital amounts?

v.) the equipment's CCA tax shields?

b) Determine the NPV of the new smartphone product?

c) Should the new smartphone product be launched? Why?

To please be done in excel: Based on a market survey (which cost $100 000), the probable demand for “Tab” in the first year has been estimated. New plant with a maximum annual capacity of 10 000 units can be purchased for $3.5 million. The plant has an estimated useful life for four years, at the end of which the residual value is expected to be $350 000. Variable production costs are estimated at $1 000 per unit, while additional fixed costs, based on a capacity of 10 000 units and before allowing for depreciation, are expected to amount to $250 per unit. These fixed costs will be avoidable if local manufacture does not take place. The “Tab” would sell for $1 700 each, some $500 less than the selling price of the cheap imported tablets currently sold by ABC. This would mean that the current sales of 7 000 units per annum of the cheap imported machines would cease. The contribution generated by sale of these imported machines amounts to $250 per unit. Existing fixed costs amount to $1,75 million per annum, and will still be incurred if local manufacture takes place. The new plant would be written off over 5 years on a straight-line basis for tax purposes. The corporate tax rate is 30% and ABC uses a discount rate of 18% for all projects of this type. There are no expected changes to the working capital of the business. Question: Assuming that all four years have the same net incremental cash flows as calculated, and taking into account any other relevant cash flows, show that the NPV, IRR and Payback Period of the project as a whole are: $274 805.27, 21.8% and 2.66 years respectively.

Lynbrook, Inc. was formed on January 2, 2015 with the authorization to issue 300,000 shares of $10 par value common stock and 20,000 shares of $100 par value cumulative preferred stock. During 2015, all the preferred stock was issued at par, and 170,000 shares of common stock were sold for $25 per share. The preferred stock is entitled to a dividend equal to 8 percent of its par value before any dividends are paid on the common stock.

During its first five years of business (2015 through 2019), the company earned income totaling $4,200,000 and paid dividends of 40 cents per share each year on the common stock outstanding as of December 31.

On January 2, 2017, the company purchased 20,000 shares of its own common stock in the open market for $300,000. On January 2, 2019, it reissued 15,000 shares of this treasury stock for $270,000. The remaining 5,000 were still held in treasury at December 31, 2019.

Instructions

a. Prepare the stockholders' equity section of the balance sheet for Lynbrook, Inc. at December 31, 2019. Include supporting schedules showing (1) your computation of any paid-in capital on treasury stock and (2) retained earnings at the balance sheet date. (use the Review Problem at end of Chapter 10, page 550-552, as a guide for your solution)

b. At December 31, 2019, shares of the company's common stock were trading at $30. Explain what would have happened to the market price per share had the company split its stock 3-for-1 at this date. Also explain what would have happened to the par value of the common stock and to the number of common shares outstanding.

Record the following transactions using the below accounting equation. The first one has been completed for you as an example. Make sure to indicate the specific account name and use a + or – sign to indicate if the overall category is being increased or decreased. Items that effect net income should only be shown in the net income column and not in stockholders’ equity.

After recording all transactions, calculate total assets, total liabilities, stockholders’ equity, revenues and expense. Prove your accounting equation is in balance.

1. Common Stock of $5,000 was sold for cash.
2. A company paid $100 to car servicing store for an oil change and regular maintenance for a corporate owned automobile. Make the entry to record this.
3. Make the entry to record $1500 of depreciation on company owned laptops.
4. Make the entry to record the purchase of equipment for $2,000 along with $200 for installation.
5. Sold land that had originally cost $100,000 for $115,000 in cash.
6. For the payroll period ended on October 19, 2018, gross pay was $22,300, net pay was $17,000, FICA tax withholdings were $1,500, income tax withholdings were $3,000, and medical insurance contributions were $800. Prepare the entry below to show the effects of the payroll accrual on October 19, 2018.  
7. The Defiance College sells season tickets for four home football games at a price of $60. For the 2018 season, 5,000 season tickets were sold.
   (a.) Record the journal entry below to show the effect of the sale of the season tickets.
   (b.) Record the journal entry to show the effect of hosting a home football game

Through the payment of $12,377,000 in cash, Drexel Company acquires voting control over Young Company. This price is paid for 60 percent of the subsidiary's 110,000 outstanding common shares ($50 par value) as well as all 10,000 shares of 7 percent, cumulative, $100 par value preferred stock. Of the total payment, $3.8 million is attributed to the fully participating preferred stock with the remainder paid for the common. This acquisition is carried out on January 1, 2021, when Young reports retained earnings of $10.7 million and a total book value of $17.2 million. The acquisition-date fair value of the noncontrolling interest in Young's common stock was $5,718,000. On this same date, a building owned by Young (with a 5-year remaining life) is undervalued in the financial records by $350,000, while equipment with a 15-year remaining life is overvalued by $120,000. Any further excess acquisition-date fair value is assigned to a brand name with a 20-year remaining life.

During 2021, Young reports net income of $970,000 while declaring $470,000 in cash dividends. Drexel uses the initial value method to account for both of these investments.

Prepare appropriate consolidation entries for 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars and not in millions.)

1. Prepare a combined entry for Consolidation Entries S and A.

2. Prepare Consolidation Entry I1 for the dividends declared on preferred stock.

3. Prepare Consolidation Entry I1 for the dividends declared on common stock.

4. Prepare Consolidation Entry E to record amortization.

You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.9 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $3.1 million on an aftertax basis. In four years, the land could be sold for $3.3 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $375,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 7,100, 7,800, 8,400, and 6,700 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $525 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. PUTZ believes that fixed costs for the project will be $755,000 per year, and variable costs are 15 percent of sales. The equipment necessary for production will cost $3.65 million and qualifies for 100 percent bonus depreciation in the first year. At the end of the project, the equipment can be scrapped for $615,000. Net working capital of $325,000 will be required immediately. PUTZ has a tax rate of 25 percent, and the required return on the project is 13 percent. What is the NPV of the project?

A company employs plumbers to service, repair and replace pipes and other fittings for customers throughout the country. These plumbers are based at different locations. Four requests for service have been received and the company finds that four plumbers are available. The distances each of the plumbers is from the various customers are given in the following table. The company wishes to assign plumbers to customers to minimise the total distance to be travelled.

1. Using the Hungarian (manual) method, determine the optimal assignment of plumbers to customers in order to minimize the total distance travelled. Indicate this overall distance and show all working.                                                                              [12 marks]
2. Write an LP formulation that could be used to solve this problem with the relevant LP software packages.       [13 marks]

[TOTAL 25 MARKS]

QUESTION 4

A manufacturer of car transmissions wants to develop a cost estimate for a customer’s order for 25 transmissions. It is estimated that the first transmission will take 100 hours of shop time and an 80% learning curve is expected. Using the learning curve tables:-

1. How many labour-hours should the 25^th transmission require?                                 [5 marks]
2. How many labour-hours should the whole order for 25 transmission require?    [5 marks]
3. If the labour hour rate is $50 per hour and the pricing policy of the company is to double the labour costs of the order, what is the customer price for each transmission?     [6 marks]
4. Total Quality Management (TQM) can be an excellent quality management technique if properly implemente Discuss the obstacles associated with the implementation of TQM. [9 marks]