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)?

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.

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:

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.

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.

Management is considering the following independent alternatives for 2020.

(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.)

(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.)

Which course of action do you recommend? Alternative1/Alternative 2/Alternative 3

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?

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.

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.

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?

A company is planning a four-year project, with an initial cost of $1.67 million. This investment cost is amortized to zero over four years on a straight-line basis. However, the asset could be disposed of for $435,000 in four years. The project requires $198,000 in working capital initially and is fully recoverable after the project is completed. The project generates $1,850,000 in sales and $1,038,000 in costs each year. If the tax rate is 21% and the required return rate is 16.4%, what is NPV?

A magazine published data on the best small firms in a certain year. These were firms that had been publicly traded for at least a year, have a stock price of at least $5 per share, and have reported annual revenue between $5 million and $1 billion. The table below shows the ages of the corporate CEOs for a random sample of these firms. 49 57 51 60 57 59 74 63 53 50 59 60 60 57 46 55 63 57 47 55 57 43 61 62 49 67 67 55 55 49 Use this sample data to construct a 90% confidence interval for the mean age of CEO's for these top small firms. Use the Student's t-distribution. (Round your answers to two decimal places.) ,

Assume that you are considering the purchase of a 15-year bond with an annual coupon rate of 9.5%. The bond has face value of $1,000 and makes semiannual interest payments. If you require a 8% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?