Kelly Owns a Condo in Wisconsin. During the year, Kelly uses the condo a total of 25 days. The condo is also rented out for a total of 75 days and generates rental income of $14,000. Kelly incurs the following expenses:
Mortgage Interest: $5000
Property Taxes: $2400
Utilities: $2000
Insurance: $1000
Depreciation: $10500
Using the IRS method of allocating expenses, the amount of depreciation that Tamara may take with respect to the rental property will be:
A) $1050
B) $5074
C) $6200
D) $10500
In: Accounting
(URGENT) An extract from the income statement of PoMA Ltd for the previous year is given below:
Rs.
Sales (50,000 units) 1,000,000
Direct materials 350,000
Direct labor cost (50,000 hours) 200,000
Fixed manufacturing overhead 240,000
Variable manufacturing overhead 50,000
Administration overheads 180,000
Selling and distribution overhead 120,000
The directors are keen to improve revenue and productivity and are considering various options. You are the management accountant and are requested to compute the following:
a. If salesmen are paid commission of 10% of sales, how many units must be sold to achieve breakeven point.
b. By how much does profit change (increase or decrease) if the selling price is reduced by 10% resulting in an estimated increase in sales volume (in number of units) by 30%.
c. By how much does profit change (increase or decrease) if the direct labor rate is increased from Rs.4 to Rs.5 per hour. This increase is expected to increase production and sales by 20% without affecting the hours worked. However, advertising costs will increase by Rs.50,000.
d. How many units must be sold in order to achieve a target profit margin of 10% on sales (profit/salesx100) assuming that advertising costs will increase by Rs.300,000 and selling price will increase by 20%
e. What is the Margin of Safety at the sales volume derived in part d above (express as percentage of sales)
In: Accounting
URGENT
An extract from the income statement of PoMA Ltd for the previous year is given below:
Rs.
Sales (50,000 units) 1,000,000
Direct materials 350,000
Direct labor cost (50,000 hours) 200,000
Fixed manufacturing overhead 210,000
Variable manufacturing overhead 50,000
Administration overheads 180,000
Selling and distribution overhead 120,000
The directors are keen to improve revenue and productivity and are considering various options. You are the management accountant and are requested to compute the following:
a. If salesmen are paid commission of 10% of sales, how many units must be sold to achieve breakeven point.
b. By how much does profit change (increase or decrease) if the selling price is reduced by 10% resulting in an estimated increase in sales volume (in number of units) by 30%.
c. By how much does profit change (increase or decrease) if the direct labor rate is increased from Rs.4 to Rs.5 per hour. This increase is expected to increase production and sales by 20% without affecting the hours worked. However, advertising costs will increase by Rs.50,000.
d. How many units must be sold in order to achieve a target profit margin of 10% on sales (profit/salesx100) assuming that advertising costs will increase by Rs.300,000 and selling price will increase by 20%
e. What is the Margin of Safety at the sales volume derived in part d above (express as percentage of sales)
In: Accounting
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $92 per unit, and variable expenses are $62 per unit. Fixed expenses are $836,400 per year. The present annual sales volume (at the $92 selling price) is 25,300 units. Required:
1. What is the present yearly net operating income or loss?
2. What is the present break-even point in unit sales and in dollar sales?
3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?
4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?
In: Accounting
DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations.
|
Month |
||||||||
|
1 |
2 |
3 |
4 |
|||||
|
Throughput time (days) |
? |
? |
? |
? |
||||
|
Delivery cycle time (days) |
? |
? |
? |
? |
||||
|
Manufacturing cycle efficiency (MCE) |
? |
? |
? |
? |
||||
|
Percentage of on-time deliveries |
88 |
% |
83 |
% |
80 |
% |
77 |
% |
|
Total sales (units) |
2830 |
2709 |
2570 |
2473 |
||||
Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months:
|
Average per Month (in days) |
|||||||||
|
1 |
2 |
3 |
4 |
||||||
|
Move time per unit |
0.9 |
0.6 |
0.7 |
0.7 |
|||||
|
Process time per unit |
3.8 |
3.6 |
3.4 |
3.2 |
|||||
|
Wait time per order before start of production |
18.0 |
19.7 |
22.0 |
23.8 |
|||||
|
Queue time per unit |
4.5 |
5.1 |
5.8 |
6.6 |
|||||
|
Inspection time per unit |
0.8 |
1.0 |
1.0 |
0.8 |
|||||
Required:
1-a. Compute the throughput time for each month.
1-b. Compute the delivery cycle time for each month.
1-c. Compute the manufacturing cycle efficiency (MCE) for each month.
2. Evaluate the company’s performance over the last four months.
3-a. Refer to the move time, process time, and so forth, given for month 4. Assume that in month 5 the move time, process time, and so forth, are the same as in month 4, except that through the use of Lean Production the company is able to completely eliminate the queue time during production. Compute the new throughput time and MCE.
3-b. Refer to the move time, process time, and so forth, given for month 4. Assume in month 6 that the move time, process time, and so forth, are again the same as in month 4, except that the company is able to completely eliminate both the queue time during production and the inspection time. Compute the new throughput time and MCE.
In: Accounting
Midlands Inc. had a bad year in 2019. For the first time in its
history, it operated at a loss. The company’s income statement
showed the following results from selling 78,000 units of product:
net sales $1,560,000; total costs and expenses $1,976,000; and net
loss $416,000. Costs and expenses consisted of the
following.
|
Total |
Variable |
Fixed |
||||
|---|---|---|---|---|---|---|
| Cost of goods sold | $1,320,400 | $785,000 | $535,400 | |||
| Selling expenses | 504,600 | 91,000 | 413,600 | |||
| Administrative expenses | 151,000 | 60,000 | 91,000 | |||
| $1,976,000 | $936,000 | $1,040,000 |
Management is considering the following independent alternatives
for 2020.
| 1. | Increase unit selling price 25% with no change in costs and expenses. | |
| 2. | Change the compensation of salespersons from fixed annual salaries totaling $197,000 to total salaries of $42,010 plus a 5% commission on net sales. | |
| 3. | Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. |
(a) Compute the break-even point in dollars for
2019. (Round contribution margin ratio to 4 decimal
places e.g. 0.2512 and final answer to 0 decimal places, e.g.
2,510.)
| Break-even point |
$Enter the break-even point in dollars rounded to 0 decimal places |
(b) Compute the break-even point in dollars under
each of the alternative courses of action for 2020.
(Round contribution margin ratio to 3 decimal places
e.g. 0.251 and final answers to 0 decimal places, e.g.
2,510.)
|
Break-even point |
||||
|---|---|---|---|---|
| 1. | Increase selling price |
$Enter a dollar amount |
||
| 2. | Change compensation |
$Enter a dollar amount |
||
| 3. | Purchase machinery |
$Enter a dollar amount |
Which course of action do you recommend? Alternative1/Alternative
2/Alternative 3
In: Accounting
XYZ Corporation is preparing a cash budget for January of the
coming year. The following data have been forecasted:
January February
Sales 750,000 800000
Purchases 450,000 480000
Operating expenses:
Payroll 146,800 167400
Advertising 52,700 62800
Rent 8,750 8750
Depreciation 23,750 23,750
End-of-December balances:
Cash 120,000
Accounts payable 200,000
Bank loan 480,000
Additional data:
Sales are 40% cash. The term of credit sales is 2/10, n/30. The
collection pattern for credit sales is 75% in the month following
the month of sale (of which 80% are collected within 10 days), and
23% are collected in the month thereafter. The remaining credit
sales are considered as uncollectible.
The accounts receivable balance on January 1 is $1,000,000, of
which $800,000 represents uncollected December sales and $200,000
represents uncollected November sales.
Purchases are all on credit, with 40% paid in the month of purchase
and the balance the following month. Operating expenses are paid in
the month incurred.
Starting from January, the firm desires to maintain a minimum cash
balance of $150,000 at the end of each month. 6% APR loans are used
to maintain the minimum cash balance. At the end of each month,
monthly interest is paid on the outstanding loan balance as of the
beginning of the month. Repayments are made (at the end of the
month) whenever the cash balance exceeds $150,000.
Required:
What is amount of cash inflow from operations in January?
What is amount of cash outflow from operations in January?
What is amount of loan balance at the end of January after loan
repayments, if any?
In: Accounting
The stockholders’ equity section of Cullumber Inc. at the
beginning of the current year appears below.
Common stock, $10 par value, authorized 953,000 shares, 284,000
shares issued and
outstanding
$2,840,000
Paid-in capital in excess of par—common
stock
644,000
Retained
earnings
578,000
During the current year, the following transactions occurred.
1. The company issued to the stockholders 99,000 rights. Ten rights are needed to buy one share of stock at $32. The rights were void after 30 days. The market price of the stock at this time was $34 per share.
2. The company sold to the public a $198,000, 10% bond issue at 103. The company also issued with each $100 bond one detachable stock purchase warrant, which provided for the purchase of common stock at $30 per share. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $7.
3. All but 4,950 of the rights issued in (1) were exercised in 30 days.
4. At the end of the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding and in good standing.
5. During the current year, the company granted stock options for 9,700 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. The option price is $30. The options were to expire at year-end and were considered compensation for the current year.
6. All but 970 shares related to the stock-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract.
a.) Prepare general journal entries for the current year to record the transactions listed above.
b.) Prepare the stockholders’ equity section of the balance sheet at the end of the current year. Assume that retained earnings at the end of the current year is $743,000.
In: Accounting
A firm’s balance sheets for the last two years are as follows:
Year 2019
Assets Liabilities and Equity
Cash $19,000 Accounts payable $12,000
Market securities 10,000 Accruals 10,000
Accounts receivable 21,000 Current bank note 10,000
Inventory 10,000 Long-term debt 30,000
Plant 40,000 Common stock 14,000
Retained earnings 24,000
$100,000 $100,000
Year 2020
Assets Liabilities and Equity
Cash $12,000 Accounts payable $12,000
Market securities 8,000 Accruals 10,000
Accounts receivable 18,000 Current bank note 30,000
Inventory 20,000 Long-term debt 10,000
Plant 42,000 Common stock 18,000
Retained earnings 20,000
$100,000 $100,000
Sales in 2019 were $400,000. Sales in 2020 were $400,000.
Answer the following questions in 20 words or less. Be certain to refer to the above financial statements (Asserting an answer without verification using the financial statements will earn you no credit.)
Has inventory turnover improved?
Has the firm’s risk exposure decreased?
Did the firm issue new stock during 2020?
If the firm bought $4,000 in new plant, what was the implied depreciation expense during 2020?
A Firm with sales of $3,650,000 has account receivable of $600,000. The industry average for days sales outstanding is 40 days. What is the potential savings in interest expense if the cost of credit is 10 percent and the firm achieves the industry average?
Why does times-interest-earned use operating income, but the return on equity uses net income instead of operating income?
In the Altman Z calculation one of the ratios was retained earnings/total assets. What is the impact on the numerical value of the ratio if
a) Accounts receivable are collected? Briefly explain.
b) The firm breaks even but maintains its dividend? Briefly explain.
In: Accounting
A year ago, an investor bought 1,000 shares of a mutual fund at the net asset value of $25 per share. The fund distributed dividends of $2.5 and capital gains of $2. Today, the NAV is $28. a. What’s the holding period return? b. Assuming all dividends and capital gain distributions are reinvested into additional shares of the fund at an average price of $26 per share. What’s holding period return?
In: Finance