During her first quarter review of the financial statements, Debra Bell, the CFO of HAL Computer Corporation

Problem 12-7 Foreign Currency Risk

During her first quarter review of the financial statements, Debra Bell, the CFO of HAL Computer Corporation, was distressed to notice the company’s transaction loss had been steadily increasing each month. HAL is a publicly held manufacturer of “PC clone” personal computers. Like most manufacturers of its kind, HAL does not manufacture domestically but utilizes lower cost offshore suppliers for components and subcontractors for assembly. As it is HAL’s policy to denominate foreign contracts in U.S. dollars whenever possible, the increase in transaction losses was particularly puzzling. Subsequent conversations with HAL’s controller, Tom Stewart, revealed all new contracts had been denominated in foreign currencies (primarily the South Korean won and Taiwanese dollar) in order to obtain more favorable purchase terms. Further, Mr. Stewart believed that the U.S. dollar would strengthen due to it being an election year. Since these contracts specify delivery and payment at various dates over the next 12 months, tremendous potential for exposure exists for the company if the dollar continues to decline against the major foreign currencies.

Required:
A. Mr. Stewart executed all new foreign contracts in foreign currencies in the belief it would help the company. (1) Do you think he was justified in his actions given the company policy? (2) On what basis did you decide if the controller was justified or not? (3) Was the loss a factor in your decision? Is this appropriate?
B. A substantial amount of foreign denominated contracts already exist for goods and services not yet received. (1) What actions may HAL take to minimize potential losses? (2) What are the advantages and disadvantages of these actions? (3) What implication does each of these scenarios have for financial statement disclosure?
C. Assume that you are Ms. Bell, and you are concerned about how the Board of Directors and the stockholders may react. Additionally, you are about to purchase a new home and are planning to sell some HAL stock for the down payment. (1) After carefully considering all of your options, what action do you decide to take? (2) Did concern over the Board, stockholders, or HAL’s stock price enter into your decision? Why or why not?

Click here for the solution: During her first quarter review of the financial statements, Debra Bell, the CFO of HAL Computer Corporation

Pletcher Company's manufacturing overhead budget for the first quarter of 2008 contained the following data

ACC 560 Week 6 Assignment

E10-7 Pletcher Company's manufacturing overhead budget for the first quarter of 2008 contained the following data.

Variable Costs Fixed Costs
Indirect materials $12,000 Supervisory salaries $36,000
Indirect labor 10,000 Depreciation 7,000
Utilities 8,000 Property taxes and insurance 8,000
Maintenance 6,000 Maintenance 5,000

Actual variable costs were: indirect materials $13,800, indirect labor $9,600, utilities $8,700, and maintenance $4,900. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,200. The actual activity level equaled the budgeted level.

All costs are considered controllable by the production department manager except for depreciation, and property taxes and insurance.

Instructions
(a) Prepare a flexible manufacturing overhead budget report for the first quarter.
(b) Prepare a responsibility report for the first quarter.

Click here for the solution: Pletcher Company's manufacturing overhead budget for the first quarter of 2008 contained the following data

Nafari Company's sales budget has the following unit sales projection for each quarter of the calendar year 2011

Nafari Company's sales budget has the following unit sales projection for each quarter of the calendar year 2011.

January -March 1,080,000
April-June 1,360,000
July-September 980,000
October-December 1,100,000
Total 4,520,000

Sales for the first quarter of 2012 are expected to be 1,200,000 units. Ending Inventory of finished goods for each quarter is scheduled to equal 10 percent of next quarter's budgeted sales. The company's ending inventory on December 31, 2010, is estimated at 94,500 units. Develop a quarterly production budget for 2011 and for the year in total.

Assignment Checklist:
1) Prepare the beginning inventory for the first quarter
2) Prepare the budgeted beginning inventory for the second - fourth quarters
3) Prepare the budgeted production for each quarter
4) Prepare the budgeted production for the year


Click here for the solution: Nafari Company's sales budget has the following unit sales projection for each quarter of the calendar year 2011

In late 2010, you purchased the common stock of a company that has reported earnings increase in nearly every quarter since your purchase

In late 2010, you purchased the common stock of a company that has reported earnings increase in nearly every quarter since your purchase. The price of the stock increased from $12 a share at the time of purchase to a current level of $45. Notwithstanding the success of the company, competitors are gaining much strength. Further, your analysis indicates that the stock may be over-priced based on your projection of future earnings growth. Your analysis, however, was the same one year ago and the earnings have continued to increase. Actions that you might take range from an outright sale of the stock (and the payment of capital gains tax) to doing nothing and continuing to hold the shares. You reflect on these choices as well as other actions that could be taken. Describe the various actions that you might take and their implications.

Click here for the solution: In late 2010, you purchased the common stock of a company that has reported earnings increase in nearly every quarter since your purchase

For the quarter ended March 31, 2012, Maris Company accumulates the following sales data for its product, Garden-Tools

For the quarter ended March 31, 2012, Maris Company accumulates the following sales data for its product, Garden-Tools: $321,700 budget; $333,100 actual.

Prepare a static budget report for the quarter.

Click here for the solution: For the quarter ended March 31, 2012, Maris Company accumulates the following sales data for its product, Garden-Tools