Homework for my class

1.
(TCO D) Financial data for Beaker Company for last year appear below.

Beaker Company

Statement of Financial Position

Beginning
Ending

Balance
Balance

Assets

Cash
$50,000
$70,000

Accounts receivable
20,000
25,000

Inventory
30,000
35,000

Plant and Equipment (net)
120,000
110,000

Investment in Cedar Company
80,000
100,000

Land (undeveloped)
170,000
170,000

Total Assets
$470,000
510,000

Liabilities and Owners’ Equity

Accounts payable
$70,000
$90,000

Long-term debt
250,000
250,000

Owner’s equity
150,000
170,000

Total liabilities and owner’s equity
$470,000
$510,000

Beaker Company

Income Statement

Sales

$414,000

Less Operating Expenses

351,900

Net Operating Income

62,100

Less Interest and Taxes

Interest Expense
$30,000

Tax Expense
10,000
40,000

Net Income

$22,000

The company paid
dividends of $2,100 last year. The Investment in Cedar Company on the
statement of financial position represents an investment in the stock of
another company.

Required:

i. Compute the company’s margin, turnover, and return on investment for last year.

ii. The board of directors of Beaker Company has set a minimum required
return of 20%. What was the company’s residual income last year?

(Points : 15)

Question 2.

2.
(TCO D) Eber Wares is a division of a major corporation. The following data are for the latest year of operations. Sales $30,000,000 Net Operating income $1,170,000 Average operating assets $8,000,000 The company’s minimum required rate of return 18% Required:i. What is the division’s margin?ii. What is the division’s turnover?iii. What is the division’s ROI?iv. What is the division’s residual income?
(Points : 15)

Question 3.

3.
(TCO
D) The management of Thews Corporation is considering dropping product
E28I. Data from the company’s accounting system appear below.

Sales
$480,000

Variable Expenses
$202,000

Fixed Manufacturing Expenses
$158,000

Fixed Selling and Administrative Expenses
$130,000

All fixed expenses of the company are fully allocated to products in the
company’s accounting system. Further investigation has revealed that
$86,000 of the fixed manufacturing expenses and $67,000 of the fixed
selling and administrative expenses are avoidable if product E28I is
discontinued.

Required:

i. What is the net operating income earned by product E28I according to the company’s accounting system? Show your work!

ii. What would be the effect on the company’s overall net operating
income of dropping product E28I? Should the product be dropped? Show
your work!
(Points : 15)

Question 4.

4.
(TCO
D) Rosiek Corporation uses part A55 in one of its products. The
company’s accounting department reports the following costs of producing
the 4,000 units of the part that are needed every year. Per Unit Direct Materials $2.80 Direct Labor $6.30 Variable Overhead $8.50 Supervisor’s Salary $2.60 Depreciation of Special Equipment $6.80 Allocated General Overhead $6.10 An
outside supplier has offered to make the part and sell it to the
company for $32.30 each. If this offer is accepted, the supervisor’s
salary and all of the variable costs, including direct labor, can be
avoided. The special equipment used to make the part was purchased many
years ago and has no salvage value or other use. The allocated general
overhead represents fixed costs of the entire company. If the outside
supplier’s offer were accepted, only $4,000 of these allocated general
overhead costs would be avoided. In addition, the space used to produce
part A55 could be used to make more of one of the company’s other
products, generating an additional segment margin of $26,000 per year
for that product.Required:i. Prepare a report that shows
the effect on the company’s total net operating income of buying part
A55 from the supplier rather than continuing to make it inside the
company.ii. Which alternative should the company choose?
(Points : 15)

Question 5.

5.
(TCO
D) Manning Co. manufactures and sells trophies for winners of athletic
and other events. Its manufacturing plant has the capacity to produce
18,000 trophies each month; current monthly production is 15,300
trophies. The company normally charges $141 per trophy. Cost data for
the current level of production are shown below. Variable Costs Direct Materials $948,600 Direct Labor $290,700 Selling and Administrative $41,300 Fixed Costs Manufacturing $579,870 Selling and Administrative $134,640 The
company has just received a special one-time order for 900 trophies at
$73 each. For this particular order, no variable selling and
administrative costs would be incurred. This order would also have no
effect on fixed costs.Required:Should the company accept this special order? Why?
(Points : 15)

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