Susan Corporation started the year expecting to produce and sell 117,000 units of its super-insulating coffee mugs, but it ended the year having produced and sold even more than that-129,000 units. Needless to say, owners Eli and his sister Anna were thrilled to have exceeded sales goals for the year. By the end of the third quarter, results looked promising. They were even more excited to see the final year-end financial statements and share the great news with their crew. The actual results, along with the original master budget for the year, are as follows. Sales Variable costs: DM DL Variable-MOH Variable SG&A Contribution margin Fixed costs: Fixed-MOH Fixed SG&A Operating income Actual Income $2,560,650 389,064 621,264 268,320 122,550 1,159,452 442,728 436,500 $280,224 Flexible Budget Master Budget $2,357,550 351,000 561,600 210,600 111,150 1,123,200 421,200 409,000 $293,000 In addition to seeing total actual results, the owners would like a more thorough analysis of many of these accounts.

I would like to expand my business by creating a new production line. Today, I hired a consultant to plan the project, at a cost of 200,000. In the first year, I spent $800,000 on new machinery. In the second year, I made $125,000. In the third year, I made $200,000. In the fourth year, I made $ 360,000. In the fifth year, I made $620,000. During years 6-8, I made $540,000 each year. Assuming a discount rate of 7.1%, what was the NPV of this project? Question $973,179 $1,242,275 None of these $1,042,275

5. Your company has been doing well, reaching $1.15 million in earnings, and is considering launching a new product. Designing the new product has already cost $466,000. The company estimates that it will sell 756,000 units per year for $2.94 per unit and variable non-labor costs will be $1.03 per unit. Production will end after year 3. New equipment costing $1.07 million will be required. The equipment will be depreciated to zero using the 7-year MACRS schedule. You plan to sell the equipment for book value at the end of year 3. Your current level of working capital is $306,000. The new product will require the working capital to increase to a level of $378,000 immediately, then to $396,000 in year 1, in year 2 the level will be $354,000, and finally in year 3 the level will return to $306,000. Your tax rate is 21%. The discount rate for this project is 9.8%. Do the capital budgeting analysis for this project and calculate its NPV. Note: Assume that the equipment is put into use in…

Environmental Designs, Inc., produces and installs energy-efficient window systems in commercial buildings. During the past ten years, sales revenue has increased from $25 million to $65 million. (A) Calculate the company's growth rate in sales using the constant growth model with annual compounding. (B) Derive a five-year and a ten-year sales forecast. 3

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Smartlink Computer Services Co. specializes in customized software development for the broadcast and telecommunications industries. The company was started by three people to develop software primarily for a national network to be used in broadcasting national election results. After sustained and manageable growth for many years, the company has grown very fast over the last three years, doubling in size. This growth has placed the company in a challenging financial position. Within thirty days, Smartlink will need to renew its P300,000 loan with Philippine National Bank. This loan is classified as a current liability on Smartlink’s balance sheet. Steve Heart, president of Smartlink, is concerned about renewing the loan. The bank has requested Smartlink's most recent financial statements which appear below, including balance sheets for this year and last year. The bank has also requested four ratios relating to operating performance and liquidity. Required: Explain why the Philippine…

A new CEO takes control of Do-Da Industries to turn it around (to make it profitable). Based on market research she wants to focus on two specific product lines. By the end of the first year the company exceeded budgeted profits by 18%. The company’s controller knows his annual bonus depends on exceeding budgeted profit and that next year’s performance would unlikely be similar to this year’s. Profit must exceed budget by 10% before the controller’s bonus kicks in.   The controller realizes he can accrue some of next year’s expenses and defer some of this year’s revenue while still exceeding this year’s budgeted profit by 10%.   Required: Why would the controller want to defer revenues but accrue expenses? Is this ethical? Why?

Cigars for Enthusiasts Inc., a start-up company, founded by Cuauhtemoc Meza and Lars Knutson following their respective tours with the United States Army, is off to a great start.  Both gentlemen enjoy the premium products themselves and expect their initial first year as an online distributor of premium cigars and accessories to bust records for start-ups. Cigars for Enthusiasts expects to maintain the same inventories at the end of the year as at the beginning of the year.  The estimated fixed costs for the year are $ 288,000 and the estimated variable costs per unit are $ 14.  It is expected that 60,000 units will be sold at a price of $ 20 per unit.  Maximum sales within the relevant range are 70,000 units. What is (a) the contribution margin ratio and (b) the unit contribution margin? Determine the break-even point in units. Construct a cost-volume-profit chart, indicating the break-even point. Construct a profit-volume chart, indicating the break-even point. What is the margin…

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