Argentine Partners is concerned about the possible effects of inflation
on its operations. Presently, the company sells 60,000 units for $30 per
unit. The variable production costs are $15 and fixed costs amount to
$700,000. Production engineers have advised management that they expect
unit labor costs to rise by 15 percent and unit materials costs to rise
by 10 percent in the coming year. Of the $15 variable costs, 50 percent
are from labor and 25 percent are from materials. Variable overhead
costs are expected to increase by 20 percent. Sales prices cannot
increase more than 10 percent. It is also expected that fixed costs will
rise by 5 percent as a result of increased taxes and other
miscellaneous fixed charges. The company wishes to maintain the same
level of profit in real dollar terms. It is expected that to accomplish
this objective, profits must increase by 6 percent during the year.
a. Compute the volume in units and the dollar sales level necessary to
maintain the present profit level, assuming that the maximum price
increase is implemented.
b. Compute the volume of sales and the dollar sales level necessary to
provide the 6 percent increase in profits, assuming that the maximum
price increase is implemented.
c. If the volume of sales were to remain at 60,000 units, what price
would be required to attain the 6 percent increase in profits?
Click here for the solution: Argentine Partners is concerned about the possible effects of inflation on its operations
Showing posts with label possible. Show all posts
Showing posts with label possible. Show all posts
Wednesday, September 23, 2015
Tuesday, September 15, 2015
Argentina Partners is concerned about the possible effects of inflation on its operation
Argentina Partners is concerned about the possible effects of inflation
on its operation. Presently, the company sells 60,000 units for $30 per
unit. The variable production costs are $15, and fixed costs amount to
$700,000. Production engineers have advised management that they expect
unit labor cost to rise by 15 percent and unit materials cost to rise by
10 percent in the coming year. Of the $15 variable cost, 50 percent are
from labor and 25 percent are from material. Variable overhead costs
are expected to increase by 20 percent. Sales prices cannot increase
more than 10 percent. It is also expected that fixed cost will rise by 5
percent as a result of increased taxes and other miscellaneous fixed
charges.
The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 6 percent during the year.
Required
a. Compute the volume in units and the dollars sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented.
b. Compute the volume of sales and the dollar sales level necessary to provide the 6 percent increase in profits, assuming that the maximum price increases is implemented.
c. If the volume of dales were to remain at 60,000 units, what price increase would be required to attain the 6 percent increase in profits?
Click here for the solution: Argentina Partners is concerned about the possible effects of inflation on its operation
The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 6 percent during the year.
Required
a. Compute the volume in units and the dollars sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented.
b. Compute the volume of sales and the dollar sales level necessary to provide the 6 percent increase in profits, assuming that the maximum price increases is implemented.
c. If the volume of dales were to remain at 60,000 units, what price increase would be required to attain the 6 percent increase in profits?
Click here for the solution: Argentina Partners is concerned about the possible effects of inflation on its operation
Friday, September 11, 2015
Each of the following situations involves a possible violation of the AICPA's Code of Professional Conduct
Auditing P 4-21 Each of the following situations involves a possible
violation of the AICPA's Code of Professional Conduct. For each
situation, state the applicable section of the rules of conduct and
whether it is a violation.
a. Jose Martinex is a CPA, but not a partner, with 3 years of professional experience with Lyle and Lyle, CPAs. He owns 25 shares of stock in an audit client of the firm, but he does not take part in the audit of the client, and the amount of stock is not material in relation to his total wealth.
b. A nonaudit client requests assistance of J. Bacon, CPA, in the installation of a local area network. Bacon had no experience in this type of work and no knowledge of the consultant is not in the practice of public accounting, but Bacon is confident of his professional skills. Because of the highly technical nature of the work, Bacon is not able to review the consultant's work.
c. In preparing the personal tax returns for a client, Phyllis Allen, CPA, observed that the deductions for contributions and interest were unusually large. When she asked the client for backup information to support the deductions, she was told, "Ask me no questions, and I will tell you no lies." Allen completed the return on the basis of the information acquired from the client.
d. Sally Blanchard, CPA, serves as controller of a U.S. based company that has a significant portion of its operations in several South American countries. Certain government provisions in selected countries require the company to file financial statements based on international standards. Sally oversees the issuance of the company's financial statements and asserts that the statements are based on international financial accounting standards; however the standards she uses are not those issued by the International Accounting Standards Board.
e. Bill Wendal, CPA, set up a casualty and fire insurance agency to complement his auditing and tax services. He does not use his own name on anything pertaining to the insurance agency and has a highly competent manager, Frank Jones, who runs it. Wendal often requests Jones to review the adequacy of a client's insurance with management if it seems underinsured. He believes that he provides a valuable service to clients by informing them when they are underinsured.
f. Five small Chicago CPA firms have become involved in an information project by taking part in an interim working paper review program. Under the program, each firm designates two partners to review the audit files, including the tax returns and the financial statements of another CPA firm taking part in the program. At the end of each review, the auditors who prepared the working papers and the reviewers have a conference to discuss the strengths and weaknesses of the audit. The do not obtain conference to discuss the strengths and weaknesses of the audit. They do not obtain authorization from the audit client before the review takes place.
g. James Thurgood, COA stated longer than he should have at the annual Christmas party of Thurgood and Thrugood, CPAs. On his way home he drove through a red light and was stopped by a police officer, who observed that he was intoxicated. In a jury trial, Thurgood was found guilty of drives under the influence of alcohol. Because this was not his first offense, he was sentenced to 30 days in jail and his driver's license was revoked for 1 year.
h. Rankin, CPA, provides tax services, management advisory services, and bookkeeping services and conducts audits for the same nonpublic client. Because the firm is small, the same person often provides all the services.
Click here for the solution: Each of the following situations involves a possible violation of the AICPA's Code of Professional Conduct
a. Jose Martinex is a CPA, but not a partner, with 3 years of professional experience with Lyle and Lyle, CPAs. He owns 25 shares of stock in an audit client of the firm, but he does not take part in the audit of the client, and the amount of stock is not material in relation to his total wealth.
b. A nonaudit client requests assistance of J. Bacon, CPA, in the installation of a local area network. Bacon had no experience in this type of work and no knowledge of the consultant is not in the practice of public accounting, but Bacon is confident of his professional skills. Because of the highly technical nature of the work, Bacon is not able to review the consultant's work.
c. In preparing the personal tax returns for a client, Phyllis Allen, CPA, observed that the deductions for contributions and interest were unusually large. When she asked the client for backup information to support the deductions, she was told, "Ask me no questions, and I will tell you no lies." Allen completed the return on the basis of the information acquired from the client.
d. Sally Blanchard, CPA, serves as controller of a U.S. based company that has a significant portion of its operations in several South American countries. Certain government provisions in selected countries require the company to file financial statements based on international standards. Sally oversees the issuance of the company's financial statements and asserts that the statements are based on international financial accounting standards; however the standards she uses are not those issued by the International Accounting Standards Board.
e. Bill Wendal, CPA, set up a casualty and fire insurance agency to complement his auditing and tax services. He does not use his own name on anything pertaining to the insurance agency and has a highly competent manager, Frank Jones, who runs it. Wendal often requests Jones to review the adequacy of a client's insurance with management if it seems underinsured. He believes that he provides a valuable service to clients by informing them when they are underinsured.
f. Five small Chicago CPA firms have become involved in an information project by taking part in an interim working paper review program. Under the program, each firm designates two partners to review the audit files, including the tax returns and the financial statements of another CPA firm taking part in the program. At the end of each review, the auditors who prepared the working papers and the reviewers have a conference to discuss the strengths and weaknesses of the audit. The do not obtain conference to discuss the strengths and weaknesses of the audit. They do not obtain authorization from the audit client before the review takes place.
g. James Thurgood, COA stated longer than he should have at the annual Christmas party of Thurgood and Thrugood, CPAs. On his way home he drove through a red light and was stopped by a police officer, who observed that he was intoxicated. In a jury trial, Thurgood was found guilty of drives under the influence of alcohol. Because this was not his first offense, he was sentenced to 30 days in jail and his driver's license was revoked for 1 year.
h. Rankin, CPA, provides tax services, management advisory services, and bookkeeping services and conducts audits for the same nonpublic client. Because the firm is small, the same person often provides all the services.
Click here for the solution: Each of the following situations involves a possible violation of the AICPA's Code of Professional Conduct
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