Questions
QUESTION 14 Table 24-1 The table below pertains to Pieway, an economy in which the typical...

QUESTION 14

  1. Table 24-1

    The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.

    Year

    Price of
    Peaches

    Price of
    Pecans

    2005

    $11 per bushel

    $6 per bushel

    2006

    $9 per bushel

    $10 per bushel


    Refer to Table 24-1. If 2006 is the base year, then the CPI for 2006 was
    a.

    100.
    b.

    83.3.
    c.

    120.
    d.

    240.

QUESTION 15

  1. Table 24-1

    The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.

    Year

    Price of
    Peaches

    Price of
    Pecans

    2005

    $11 per bushel

    $6 per bushel

    2006

    $9 per bushel

    $10 per bushel


    Refer to Table 24-1. If 2005 is the base year, then the inflation rate in 2006 was
    a.

    16.7 percent.
    b.

    40 percent.
    c.

    20 percent.
    d.

    44.1 percent.

QUESTION 16

  1. Table 24-1

    The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.

    Year

    Price of
    Peaches

    Price of
    Pecans

    2005

    $11 per bushel

    $6 per bushel

    2006

    $9 per bushel

    $10 per bushel


    Refer to Table 24-1. If 2006 is the base year, then the inflation rate in 2006 was
    a.

    44.1 percent.
    b.

    16.7 percent.
    c.

    40 percent.
    d.

    20 percent

QUESTION 18

  1. The substitution bias in the consumer price index refers to the

    a.

    substitution by consumers toward a smaller number of high-quality goods and away from a larger number of low-quality goods.
    b.

    substitution by consumers toward new goods and away from old goods.
    c.

    substitution by consumers toward goods that have become relatively less expensive and away from goods that have become relatively more expensive.
    d.

    substitution of new prices for old prices in the CPI basket of goods and services from one year to the next.

In: Economics

We want to investigate now whether the average occupancy rate in May differs across the three...

We want to investigate now whether the average occupancy rate in May differs across the three regions.2.1 State the null and alternative hypotheses for the above research question.2.2 Conduct a Levene test for the homogeneity of the variances at the 10% level using the absolute deviations from the median. Make sure you state both the null and alternative hypotheses and the conclusions of your test.2.3 Test the null hypothesis in 1.1 at the 10% significance level.2.4 What can you conclude from the above test in 2.3? Explain the importance of the results in 2.2 for the procedure you performed in 2.3.

region id 1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3

OR_MAY
60
86
93
89
74
81
83
71
90
83
77
82
90
81
20
87
48
60
45
80
65
60
75
15
16
97
74
62
40
82
24
49
16
60
42
68
55
75
35
0
40
40
10
83
50
77
81
37
27
49
53
60
80
58
64
65
68
75
55
60
56
10
85
4
24
85
75
44
45
0
34
35
70
65
15
40
10
10
35
50
2
0
3
30
15
83
91
85
80
50
79
92
87
84
65
86
62
70
87
87
50
61
59
77
46
81
48
15
80
52
90
90
75
20
10
30
53
52
90
53
48
84
90
35
25
35
10
10
60
70
3
10
10
75
10

In: Statistics and Probability

We want to investigate now whether the average occupancy rate in May differs across the three...

We want to investigate now whether the average occupancy rate in May differs across the three regions.2.1 State the null and alternative hypotheses for the above research question.2.2 Conduct a Levene test for the homogeneity of the variances at the 10% level using the absolute deviations from the median. Make sure you state both the null and alternative hypotheses and the conclusions of your test.2.3 Test the null hypothesis in 2.1 at the 10% significance level.2.4 What can you conclude from the above test in 2.3? Explain the importance of the results in 2.2 for the procedure you performed in 2.3.

region id 1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3

OR_MAY
60
86
93
89
74
81
83
71
90
83
77
82
90
81
20
87
48
60
45
80
65
60
75
15
16
97
74
62
40
82
24
49
16
60
42
68
55
75
35
0
40
40
10
83
50
77
81
37
27
49
53
60
80
58
64
65
68
75
55
60
56
10
85
4
24
85
75
44
45
0
34
35
70
65
15
40
10
10
35
50
2
0
3
30
15
83
91
85
80
50
79
92
87
84
65
86
62
70
87
87
50
61
59
77
46
81
48
15
80
52
90
90
75
20
10
30
53
52
90
53
48
84
90
35
25
35
10
10
60
70
3
10
10
75
10

In: Statistics and Probability

We want to investigate now whether the average occupancy rate in May differs across the three...

We want to investigate now whether the average occupancy rate in May differs across the three regions.2.1 State the null and alternative hypotheses for the above research question.2.2 Conduct a Levene test for the homogeneity of the variances at the 10% level using the absolute deviations from the median. Make sure you state both the null and alternative hypotheses and the conclusions of your test.2.3 Test the null hypothesis in 1.1 at the 10% significance level.2.4 What can you conclude from the above test in 2.3? Explain the importance of the results in 2.2 for the procedure you performed in 2.3.

region id 1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,2,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3,3

OR_MAY
60
86
93
89
74
81
83
71
90
83
77
82
90
81
20
87
48
60
45
80
65
60
75
15
16
97
74
62
40
82
24
49
16
60
42
68
55
75
35
0
40
40
10
83
50
77
81
37
27
49
53
60
80
58
64
65
68
75
55
60
56
10
85
4
24
85
75
44
45
0
34
35
70
65
15
40
10
10
35
50
2
0
3
30
15
83
91
85
80
50
79
92
87
84
65
86
62
70
87
87
50
61
59
77
46
81
48
15
80
52
90
90
75
20
10
30
53
52
90
53
48
84
90
35
25
35
10
10
60
70
3
10
10
75
10

In: Statistics and Probability

Compute and Interpret Liquidity, Solvency and Coverage Ratios Balance sheets and income statements for Lockheed Martin...

Compute and Interpret Liquidity, Solvency and Coverage Ratios
Balance sheets and income statements for Lockheed Martin Corporation follow. Refer to these financial statements to answer the requirements.

Income Statement
Year Ended December 31 (In millions) 2005 2004 2003
Net sales
Products $ 31,518 $ 30,202 $ 27,290
Service 5,695 5,324 4,534
37,213 35,526 31,824
Cost of sales
Products 27,882 27,637 25,306
Service 5,073 4,765 4,099
Unallocated coporate costs 803 914 443
33,758 33,316 29,848
3,455 2,210 1,976
Other income (expenses), net (449) (121) 43
Operating profit 3,006 2,089 2,019
Interest expense 370 425 487
Earnings before taxes 2,636 1,664 1,532
Income tax expense 811 398 479
Net earnings $ 1,825 $ 1,266 $ 1,053
Balance Sheet
December 31 (In millions) 2005 2004
Assets
Cash and cash equivalents $ 2,164 $ 780
Short-term investments 429 396
Receivables 4,579 4,094
Inventories 1,921 1,864
Deferred income taxes 861 982
Other current assets 495 557
Total current assets 10,449 8,673
Property, plant and equipment, net 3,924 3,599
Investments in equity securities 196 812
Goodwill 8,447 7,892
Purchased intangibles, net 560 672
Prepaid pension asset 1,360 1,030
Other assets 2,728 2,596
Total assets $ 27,664 $ 25,274
Liabilities and stockholders' equity
Accounts payable $ 1,998 $ 1,726
Customer advances and amounts in excess of costs incurred 4,331 4,028
Salaries, benefits and payroll taxes 1,475 1,346
Current maturities of long-term debt 202 15
Other current liabilities 1,422 1,451
Total current liabilities 9,428 8,566
Long-term debt 4,664 5,264
Accrued pension liabilities 2,097 1,300
Other postretirement benefit liabilities 1,277 1,236
Other liabilities 2,331 1,887
Stockholders' equity
Common stock, $1 par value per share 432 438
Additional paid-in capital 1,724 2,223
Retained earnings 7,278 5,915
Accumulated other comprehensive loss (1,553) (1,532)
Other (14) (23)
Total stockholders' equity 7,867 7,021
Total liabilities and stockholders' equity $ 27,664 $ 25,274
Consolidated Statement of Cash Flows
Year Ended December 31 (In millions) 2005 2004 2003
Operating Activities
Net earnings $ 1,825 $ 1,266 $ 1,053
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization 555 511 480
Amortization of purchased intangibles 150 145 129
Deferred federal income taxes 24 (58) 467
Changes in operating assets and liabilities:
Receivables (390) (87) (258)
Inventories (39) 519 (94)
Accounts payable 239 288 330
Customer advances and amounts in excess of costs incurred 296 (228) (285)
Other 534 568 (13)
Net cash provided by operating activities 3,194 2,924 1,809
Investing Activities
Expenditures for property, plant and equipment (865) (769) (687)
Acquisition of business/investments in affiliated companies (84) (91) (821)
Proceeds from divestiture of businesses/Investments in affiliated companies 935 279 234
Purchase of short-term investments, net (33) (156) (240)
Other 28 29 53
Net cash used for investing activities (19) (708) (1,461)
Financing Activities
repayment of long-term debt (413) (1,369) (2,202)
Issuances of long-term debt -- -- 1,000
Long-term debt repayment and issuance costs (12) (163) (175)
Issuances of common stock 406 164 44
Repurchases of common stock (1,310) (673) (482)
Common stock dividends (462) (405) (261)
Net cash used for financing activities (1,791) (2,446) (2,076)
Net increase (decrease) in cash and cash equivalents 1,384 (230) (1,728)
Cash and cash equivalents at beginning of year 780 1,010 2,738
Cash and cash equivalents at end of year $ 2,164 $ 780 $ 1,010

(a) Compute Lockheed Martin's current ratio and quick ratio for 2005 and 2004. (Round your answers to two decimal places.)
2005 current ratio = Answer


2004 current ratio = Answer

2005 quick ratio = Answer
2004 quick ratio = Answer

Which of the following best describes the company's current ratio and quick ratio for 2005 and 2004?

The current ratio has increased while the quick ratio has decreased in the period from 2004 to 2005, which suggests the company has a shortage of liquid assets.

Both the current and quick ratios have decreased from 2004 to 2005. The company is fairly illiquid.

Both the current and quick ratios have increased from 2004 to 2005. The company is fairly liquid.

The current ratio has decreased while the quick ratio has increased in the period from 2004 to 2005, which suggests the company has a shortage of current assets.



(b) Compute total liabilities-to-equity ratios and total debt-to-equity ratios for 2005 and 2004. (Round your answers to two decimal places.)
2005 total liabilities-to-stockholders' equity = Answer
2004 total liabilities-to-stockholders' equity = Answer

2005 total debt-to-equity = Answer
2004 total debt-to-equity = Answer

Which of the following best describes the company's total liabilities-to-equity ratios and total debt-to-equity ratios for 2005 and 2004?

The total liabilities-to-equity ratio has decreased while the total debt-to-equity ratio has increased in the period from 2004 to 2005, which suggests the company has decreased the use of short-term debt financing.

The total liabilities-to-equity ratio has increased while the total debt-to-equity ratio has decreased in the period from 2004 to 2005, which suggests the company has increased the use of short-term debt financing.

Both the total liabilities-to-equity and total debt-to-equity ratios have increased from 2004 to 2005. These increases suggest that the company is less solvent.

Both the total liabilities-to-equity and total debt-to-equity ratios have decreased from 2004 to 2005. The difference between these two measures reveals that any solvency concerns would be for the short run.



(c) Compute times interest earned ratio, cash from operations to total debt ratio, and free operating cash flow to total debt ratios. (Round your answers to two decimal places.)
2005 times interest earned = Answer
2004 times interest earned = Answer

2005 cash from operations to total debt = Answer
2004 cash from operations to total debt = Answer

2005 free operating cash flow to total debt = Answer
2004 free operating cash flow to total debt = Answer

Which of the following describes the company's times interest earned, cash from operations to total debt, and free operating cash flow to total debt ratios for 2005 and 2004? (Select all that apply)
Answeryesno Lockheed Martin's free operating cash flow to total debt ratio increased slightly over the year 2005 due to increased cash flow from operations and decreased levels of debt.
Answeryesno Lockheed Martin's cash from operations to total debt ratio increased slightly over the year 2005 due to increased cash flow from operations and decreased levels of debt.
Answeryesno Lockheed Martin's times interest earned increased significantly during 2005, due to both an increase in profitability and a decrease in interest expense.
Answeryesno Lockheed Martin's times interest earned decreased significantly during 2005, due to both a decrease in profitability and an increase in interest expense.

(d) Summarize your findings in a conclusion about the company's credit risk. Do you have any concerns about the company's ability to meet its debt obligations?

Lockheed Martin's total debt-to-equity is very low, thus increasing any immediate solvency concerns. The company's ability to meet its debt requirements will depend on increasing short-term debt.

Lockheed Martin's quick ratio is very low, thus increasing immediate solvency concerns. The company's ability to meet its debt requirements will depend on liquidating inventories for emergency cash.

Lockheed Martin's times interest earned ratio is high, thus lessening any immediate solvency concerns. The company's ability to meet its debt requirements will depend on its continued profitability.

Lockheed Martin's total liabilities-to-equity is high, thus lessening any immediate solvency concerns. The company's ability to meet its debt requirements will depend on its use of equity financing.

In: Accounting

Compute and Interpret Liquidity, Solvency and Coverage Ratios Balance sheets and income statements for Lockheed Martin...

Compute and Interpret Liquidity, Solvency and Coverage Ratios
Balance sheets and income statements for Lockheed Martin Corporation follow. Refer to these financial statements to answer the requirements.

Income Statement
Year Ended December 31 (In millions) 2005 2004 2003
Net sales
Products $ 31,518 $ 30,202 $ 27,290
Service 5,695 5,324 4,534
37,213 35,526 31,824
Cost of sales
Products 28,800 27,879 25,306
Service 5,073 4,765 4,099
Unallocated coporate costs 803 914 443
34,676 33,558 29,848
2,537 1,968 1,976
Other income (expenses), net 449 121 43
Operating profit 2,986 2,089 2,019
Interest expense 370 425 487
Earnings before taxes 2,616 1,664 1,532
Income tax expense 791 398 479
Net earnings $ 1,825 $ 1,266 $ 1,053
Balance Sheet
December 31 (In millions) 2005 2004
Assets
Cash and cash equivalents $ 2,244 $ 1,060
Short-term investments 429 396
Receivables 4,579 4,094
Inventories 1,921 1,864
Deferred income taxes 861 982
Other current assets 495 557
Total current assets 10,529 8,953
Property, plant and equipment, net 3,924 3,599
Investments in equity securities 196 812
Goodwill 8,447 7,892
Purchased intangibles, net 560 672
Prepaid pension asset 1,360 1,030
Other assets 2,728 2,596
Total assets $ 27,744 $ 25,554
Liabilities and stockholders' equity
Accounts payable $ 1,998 $ 1,726
Customer advances and amounts in excess of costs incurred 4,331 4,028
Salaries, benefits and payroll taxes 1,475 1,346
Current maturities of long-term debt 202 15
Other current liabilities 1,422 1,451
Total current liabilities 9,428 8,566
Long-term debt 4,784 5,104
Accrued pension liabilities 2,097 1,660
Other postretirement benefit liabilities 1,277 1,236
Other liabilities 2,291 1,967
Stockholders' equity
Common stock, $1 par value per share 432 438
Additional paid-in capital 1,724 2,223
Retained earnings 7,278 5,915
Accumulated other comprehensive loss (1,553) (1,532)
Other (14) (23)
Total stockholders' equity 7,867 7,021
Total liabilities and stockholders' equity $ 27,744 $ 25,554
Consolidated Statement of Cash Flows
Year Ended December 31 (In millions) 2005 2004 2003
Operating Activities
Net earnings $ 1,825 $ 1,266 $ 1,053
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization 555 511 480
Amortization of purchased intangibles 150 145 129
Deferred federal income taxes 24 (58) 467
Changes in operating assets and liabilities:
Receivables (390) (87) (258)
Inventories (39) 519 (94)
Accounts payable 239 288 330
Customer advances and amounts in excess of costs incurred 296 (228) (285)
Other 534 568 (13)
Net cash provided by operating activities 3,194 2,924 1,809
Investing Activities
Expenditures for property, plant and equipment (865) (769) (687)
Acquisition of business/investments in affiliated companies (564) (91) (821)
Proceeds from divestiture of businesses/Investments in affiliated companies 935 279 234
Purchase of short-term investments, net (33) (156) (240)
Other 28 29 53
Net cash used for investing activities (499) (708) (1,461)
Financing Activities
repayment of long-term debt (133) (1,089) (2,202)
Issuances of long-term debt -- -- 1,000
Long-term debt repayment and issuance costs (12) (163) (175)
Issuances of common stock 406 164 44
Repurchases of common stock (1,310) (673) (482)
Common stock dividends (462) (405) (261)
Net cash used for financing activities (1,511) (2,166) (2,076)
Net increase (decrease) in cash and cash equivalents 1,184 50 (1,728)
Cash and cash equivalents at beginning of year 1,060 1,010 2,738
Cash and cash equivalents at end of year $ 2,244 $ 1,060 $ 1,010


(a) Compute Lockheed Martin's current ratio and quick ratio for 2005 and 2004. (Round your answers to two decimal places.)
2005 current ratio = Answer


2004 current ratio = Answer



2005 quick ratio = Answer


2004 quick ratio = Answer



Which of the following best describes the company's current ratio and quick ratio for 2005 and 2004?

The current ratio has increased while the quick ratio has decreased in the period from 2004 to 2005, which suggests the company has a shortage of liquid assets.

Both the current and quick ratios have decreased from 2004 to 2005. The company is fairly illiquid.

Both the current and quick ratios have increased from 2004 to 2005. The company is fairly liquid.

The current ratio has decreased while the quick ratio has increased in the period from 2004 to 2005, which suggests the company has a shortage of current assets.



(b) Compute total liabilities-to-equity ratios and total debt-to-equity ratios for 2005 and 2004. (Round your answers to two decimal places.)
2005 total liabilities-to-stockholders' equity = Answer


2004 total liabilities-to-stockholders' equity = Answer



2005 total debt-to-equity = Answer


2004 total debt-to-equity = Answer



Which of the following best describes the company's total liabilities-to-equity ratios and total debt-to-equity ratios for 2005 and 2004?

The total liabilities-to-equity ratio has decreased while the total debt-to-equity ratio has increased in the period from 2004 to 2005, which suggests the company has decreased the use of short-term debt financing.

The total liabilities-to-equity ratio has increased while the total debt-to-equity ratio has decreased in the period from 2004 to 2005, which suggests the company has increased the use of short-term debt financing.

Both the total liabilities-to-equity and total debt-to-equity ratios have increased from 2004 to 2005. These increases suggest that the company is less solvent.

Both the total liabilities-to-equity and total debt-to-equity ratios have decreased from 2004 to 2005. The difference between these two measures reveals that any solvency concerns would be for the short run.



(c) Compute times interest earned ratio, cash from operations to total debt ratio, and free operating cash flow to total debt ratios. (Round your answers to two decimal places.)
2005 times interest earned = Answer


2004 times interest earned = Answer



2005 cash from operations to total debt = Answer


2004 cash from operations to total debt = Answer



2005 free operating cash flow to total debt = Answer


2004 free operating cash flow to total debt = Answer



Which of the following describes the company's times interest earned, cash from operations to total debt, and free operating cash flow to total debt ratios for 2005 and 2004? (Select all that apply)
Answeryesno

Lockheed Martin's free operating cash flow to total debt ratio increased slightly over the year 2005 due to increased cash flow from operations and decreased levels of debt.
Answeryesno

Lockheed Martin's times interest earned decreased significantly during 2005, due to both a decrease in profitability and an increase in interest expense.
Answeryesno

Lockheed Martin's cash from operations to total debt ratio increased slightly over the year 2005 due to increased cash flow from operations and decreased levels of debt.
Answeryesno

Lockheed Martin's times interest earned increased significantly during 2005, due to both an increase in profitability and a decrease in interest expense.

(d) Summarize your findings in a conclusion about the company's credit risk. Do you have any concerns about the company's ability to meet its debt obligations?

Lockheed Martin's total debt-to-equity is very low, thus increasing any immediate solvency concerns. The company's ability to meet its debt requirements will depend on increasing short-term debt.

Lockheed Martin's quick ratio is very low, thus increasing immediate solvency concerns. The company's ability to meet its debt requirements will depend on liquidating inventories for emergency cash.

Lockheed Martin's times interest earned ratio is high, thus lessening any immediate solvency concerns. The company's ability to meet its debt requirements will depend on its continued profitability.

Lockheed Martin's total liabilities-to-equity is high, thus lessening any immediate solvency concerns. The company's ability to meet its debt requirements will depend on its use of equity financing.

In: Finance

During this accounting period, a company has variable costs of €27410, total fixed costs per period...

During this accounting period, a company has variable costs of €27410, total fixed costs per period of €20820, contribution margin ratio of 67 percent and an income tax rate of 27 percent.

If the desired after tax net income is €9320; then the sales revenue (in Euros) for this period is ________.

In: Accounting

I do not understand question number three. However, I belive the answers to questions number 1...

I do not understand question number three. However, I belive the answers to questions number 1 and 2 are already on chegg I just need clarification with how to do question number 3. PLEASE HELP

Q. 1.    Prepare a budgeted income statement for Premium Grade Ovenware for 2007 if the engineers’ redesign efforts had worked as originally planned. Use these assumptions:

First quarter sales of 1,500,000 units will be achieved each quarter in 2007.

The selling price for 2007 will remain 10% below the price charged from 2002-2006, and there were no sales price increases during the 2002-2006 period.

Variable cost of goods sold averaged about $5.55 per unit of ovenware from 2002-2006.

Variable production costs will be reduced by 35% due to the new design.

The fixed cost of production in 2006 contained one-time, increased costs (about $4,000,000) for the design changes. For 2007, fixed costs are expected to be about 3.5% higher than 2005.

Marketing costs contain both fixed and variable elements, however, it is budgeted based on spending 7% of expected sales revenue.

Other fixed costs are expected to increase about 2.5% over 2006.

Would the product manager have met his profit target of 25% return on sales in 2007 for the product line with the redesign?

Q. 2.    Prepare the budgeted 2007 income statement for Premium Grade Ovenware that the production, quality, and product managers considered when they discussed the first option available to them.

a.   Under that option, shipment would be delayed and about one third of the year’s sales of 6,000,000 units would be lost.

  

Product would be sold at the 10% price reduction but produced under the old cost structure for six months (variable production costs of $5.55 per unit). After the six months the variable cost savings of 35% would be achieved.

Assume that recycling the current production would add $500,000 to the fixed production costs originally budgeted for 2007. In addition, the product line will incur an additional $2,000,000 in design engineering to solve the problem within a 6-month period (this will involve the use of overtime and consultants).

Other cost items would stay as originally budgeted for 2007.

What would the product line’s profit be under this alternative? What would the return on sales for the product line be?

Q. 3.     The production, quality and product managers considered their second option to be producing and selling flawed units for 6 months while engineers corrected the problem. Under this option, the company would not disclose the problem and hope for the best. Perhaps none of the product claims would involve any injury; only product replacement would be required at a cost of about $12 per unit.

a.    Adjust the 2007 budget for an assumed defect rate of .25% for 6 months production. (Note this is a defect rate in addition to the normal rate faced in each year, 2002-2006, which is already accounted for in marketing cost.)

b.   Adjust the fixed production cost for 2007 for an additional $2,000,000 in design engineering to solve the problem within a 6-month period. (This will involve the use of overtime and consultants).

What would the budgeted profit and return on sales be if option two were selected?

If the engineer’s redesign efforts had worked originally, the Budgeted Income Statement for Premium Grade Overnware in 2007 would have been:

a.)

Expected Sales Revenue

1,500,000 ×4 Quarters×($15-10%)

$81,000,000

b.)

Variable cost of goods sold

1,500,000 ×4 Quarters×($5.55-35%)

$21,450,000

c.)

Fixed cost of production

($23,221,033 + 3.5%)

$24,033,769

d.)

Gross Profit

$81,000,000 - ($21,450,000 + $24,033,769)

$35,516,231

e.)

Attributable Costs

$35,516,231 - $27,265,756

$8,250,475

i.)

Marketing Costs

$81,000,000 x 7%

$5,670,000

ii.)

Other Fixed Costs

$2,517,537 + 2.5%

$2,580,475

f.)

Product line profit before G&A allocation

[35,516,231 - 8,250,475)

$27,265,756

g.)

Return on sales

($27,265,756 / $81,000,000) x 100

33.66%

Since the budgeted profit target is 33.66%, the product manager met his profit target of 25% return on sales in 2007 for the product line with the redesign.

The production, quality, and product managers used this budgeted income statement to consider the first option that was given:

2)

2007

Sales

$ 54,270,000

Sales Units

4,020,000

COGS

   Variable

14,502,150

   Fixed

26,533,769.16

Gross Profit

$13,234,080.84

Attributable Cost

    Market

5,798,900

    Other

580,475.425

Prod. Line Profit

Before G&A allocation

$6,854,705.415

Return of Sales

12.63%

In: Accounting

The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.


  1. Table 24-1

    The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.

    Year

    Price of
    Peaches

    Price of
    Pecans

    2005

    $11 per bushel

    $6 per bushel

    2006

    $9 per bushel

    $10 per bushel

       



    Refer to Table 24-1. The cost of the basket in 2006 was

     a.

    $210.

     b.

    $240.

     c.

    $245.

     d.

    $200.



  1. Table 24-1

    The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.

    Year

    Price of
    Peaches

    Price of
    Pecans

    2005

    $11 per bushel

    $6 per bushel

    2006

    $9 per bushel

    $10 per bushel

       



    Refer to Table 24-1. If 2005 is the base year, then the CPI for 2005 was

     a.

    120.

     b.

    83.3.

     c.

    100.

     d.

    200.



  1. Table 24-1

    The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.

    Year

    Price of
    Peaches

    Price of
    Pecans

    2005

    $11 per bushel

    $6 per bushel

    2006

    $9 per bushel

    $10 per bushel

       



    Refer to Table 24-1. If 2005 is the base year, then the CPI for 2006 was

     a.

    120.

     b.

    83.3.

     c.

    240.

     d.

    100.



  1. Table 24-1

    The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.

    Year

    Price of
    Peaches

    Price of
    Pecans

    2005

    $11 per bushel

    $6 per bushel

    2006

    $9 per bushel

    $10 per bushel

       



    Refer to Table 24-1. If 2006 is the base year, then the CPI for 2005 was

     a.

    120.

     b.

    100.

     c.

    83.3.

     d.

    200.

In: Economics

The average number of customers at a window of a certain bank per minute during banking...

The average number of customers at a window of a certain bank per minute during banking hours is four. Find the probability that during a given minute. i. No customers appear ii. Three or fewer customers

In: Statistics and Probability