Imagen Arquitectonica of Tijuana, Mexico is contemplating a major change in its cost structure

E6-15 Imagen Arquitectonica of Tijuana, Mexico is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Alfredo Ayala, Imagen's owner, is considering replacing the draftsmen with a computerized drafting system.

However, before making the change Alfredo would like to know the consequences of the change, since the volume of business varies significantly from year to year. Shown below are CVP income statements for each alternative.

Manual System Computerized System
Sales $1,500,000 $1,500,000
Variable costs 1,200,000 600,000
Contribution margin 300,000 900,000
Fixed costs 60,000 660,000
Net income $240,000 $240,000

Instructions
a. Determine the degree of operating leverage for each alternative
b. Which alternative would produce the higher net income if sales increase by $100,000.
c. Using the margin of safety ratio, determine which alternative could sustain the greater decline in sales before operating at a loss.

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Tony Siebers is an accounting major at a midwestern state university located approximately 60 miles from a major city

ACC 560 Week 8 Assignment

P12-2A Tony Siebers is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Tony, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Tony has gathered the following investment information.

1. Five used vans would cost a total of $75,000 to purchase and would have a 3-year useful life with negligible salvage value. Tony plans to use straight-line depreciation.
2. Ten drivers would have to be employed at a total payroll expense of $48,000.
3. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,000, Maintenance $4,300, Repairs $5,000, Insurance $5,200, Advertising $2,500.
4. Tony has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 8%. Use this rate for cost of capital.
5. Tony expects each van to make 10 round trips weekly and carry an average of 6 students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12.00 for a round-trip ticket.

Instructions
(a) Determine the annual (1) net income and (2) net annual cash flows for the commuter service.
(b) Compute (1) the cash payback period and (2) the annual rate of return. (Round to two decimals.)
(c) Compute the net present value of the commuter service. (Round to the nearest dollar.)
(d) What should Tony conclude from these computations? Is the commuter service a wise investment?


Click here for the solution: Tony Siebers is an accounting major at a midwestern state university located approximately 60 miles from a major city

What are the major authorization principles the auditor should investigate

What are the major authorization principles the auditor should investigate regarding both cash management and investments in marketable securities?


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What are the major elements of an internal control over property, plant, and equipment?

What are the major elements of an internal control over property, plant, and equipment? For the specific control procedures identified, indicate their importance to the audit.


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After securing lease commitments from several major stores, Auer Shopping Center, Inc was organized and built a shopping center in a growing suburb

After securing lease commitments from several major stores, Auer Shopping Center, Inc was organized and built a shopping center in a growing suburb. The shopping center would had opened on scheduled January 1, 2020 if it had not been struck by a severe tornado in December. Instead, it opened for business on October 1, 2010. All of the additional construction costs were incurred as a result of the tornado were covered by insurance.

In July 2009, in anticipation of the scheduled January opening a permanent staff had been hired to promote the shopping center, obtain tenants for the uncommitted space and manager the property. A summary of some of the costs incurred in 2009 and the firs nine months of 2010 follows:

2009 January 1, 2010 to September 30, 2010
Interest on Mortgage Bonds 720,000 540,000
Cost of obtaining tenants 300,000 360,000
Promotional Advertising 540,000 557,000

The promotional advertising campaign was designed to familiarize shoppers the center. Had it been known in time that the center would not open until October 2010, the 2009 expenditure would not had been made. The advertising had to be repeated in 2010 .
All of the tenants who had leased space in the shopping center at the time of the tornado had accepted the October occupancy date on condition the rental charge for the first 9 months of 2010 was cancelled.

Instructions:
Explain how each of the costs for 2009 and the first 9 months of 2010 should be treated in the accounts of the shopping center corporation. Give reasons for each treatment?


Click here for the solution: After securing lease commitments from several major stores, Auer Shopping Center, Inc was organized and built a shopping center in a growing suburb

What is the major advantage of using the indirect method to present the statement of cash flows?

14. What is the major advantage of using the indirect method to present the statement of cash flows?


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Assume that a company wants to hire a sales engineer-that is, fill a position where the major emphasis is on technical product knowledge

Assume that a company wants to hire a sales engineer-that is, fill a position where the major emphasis is on technical product knowledge. Should this firm recruit engineers and train them to sell or recruit sales reps and teach then the necessary technical information and abilities?


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What are the major advantages of a share repurchase over a cash dividend?

What are the major advantages of a share repurchase over a cash dividend?

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Seebach Corporation has two major business segments-Apparel and Accessories

Seebach Corporation has two major business segments-Apparel and Accessories. Data concerning those segments for June appear below.

Sales revenues, Apparel $700,000
Variable expenses, Apparel $406,000
Traceable fixed expenses, Apparel $98,000
Sales revenues, Accessories $710,000
Variable expenses, Accessories $312,000
Traceable fixed expenses, Accessories $107,000

Common fixed expenses totaled $292,000 and were allocated as follows: $155,000 to the Apparel business segment and $137,000 to the Accessories business segment.

Required:
Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.

Click here for the solution: Seebach Corporation has two major business segments-Apparel and Accessories

Eber Wares is a division of a major corporation

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?

Click here for the solution: Eber Wares is a division of a major corporation

Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company

P23-7 Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative statement of financial position and income statement for Chapman as of May 31, 2010, are shown on the next page. The company is preparing its statement of cash flows.

AND SO ON

The following is additional information concerning Chapman's transactions during the year ended May 31, 2010.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable account.
3. Plant assets costing $98,000 were purchased by paying $28,000 in cash and issuing 7,000 shares of stock.
4. The other expenses are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Chapman issued 2,000 shares of common stock at par value.
7. There were no penalties assessed for the retirement of bonds.
8. Cash dividends of $105,000 were declared and paid at the end of the fiscal year.

Instructions
(a) Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities.
(b) Prepare a statement of cash flows for Chapman Company for the year ended May 31, 2010, using the direct method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.)
(c) Using the indirect method, calculate only the net cash flow from operating activities for Chapman Company for the year ended May 31, 2010.

Click here for the solution: Chapman Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company

The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation

The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. June is Zygon's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $895,000, while conversion costs equaled $4,225,000. Accounting records indicate that 475,000 chips were started in June, and that 425,000 chips were completed.

Ending inventory was 50% complete as to conversion costs.

Required:
a. What is the total manufacturing cost per chip for June?
b. Allocate the total costs between the completed chips and the chips in ending inventory.

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George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company

ACC 421 Week 5

Problem 23-7 (P23-7) (SCF-Direct and Indirect Methods from Comparative Financial Statements) George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative statement of financial position and income statement for Winston as of May 31, 2008, are shown on the next page. The company is preparing its statement of cash flows.

AND SO ON

The following is additional information concerning Winston’s transactions during the year ended
May 31, 2008.
1. All sales during the year were made on account.
2. All merchandise was purchased on account, comprising the total accounts payable account.
3. Plant assets costing $98,000 were purchased by paying $48,000 in cash and issuing 5,000 shares of stock.
4. The “other expenses” are related to prepaid items.
5. All income taxes incurred during the year were paid during the year.
6. In order to supplement its cash, Winston issued 4,000 shares of common stock at par value.
7. There were no penalties assessed for the retirement of bonds.
8. Cash dividends of $105,000 were declared and paid at the end of the fiscal year.

Instructions
(a) Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities.
(b) Prepare a statement of cash flows for Winston Company for the year ended May 31, 2008, using the direct method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.)
(c) Using the indirect method, calculate only the net cash flow from operating activities for Winston Company for the year ended May 31, 2008.


Click here for the solution: George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company