1.Alaska. Data concerning the most recent year appear below:
| Sales | $ 18,200,000 |
|---|---|
| Net operating income | $ 4,600,000 |
| Average operating assets | $ 35,700,000 |
Required:
Compute the return on investment (ROI) for Alyeska Services Company.Note: Round your intermediate calculations and final answer to 2 decimal places.
Compute the margin for Alyeska Services Company.Note: Round your answer to 2 decimal places.
Compute the turnover for Alyeska Services Company.Note: Round your answer to 2 decimal places.
2.Management of Mittel Company wants to reduce the elapsed time from when a customer places an order to when it is shipped. It provided the following data for a recent quarter:
| Inspection time | 0.5 | days |
|---|---|---|
| Wait time (from order to start of production) | 17.0 | days |
| Process time | 3.4 | days |
| Move time | 1.1 | days |
| Queue time | 3.9 | days |
Required:
If using Lean Production eliminates all queue time, what will be the new MCE?Note: Round your percentage answer to 1 decimal place.
Compute the throughput time.Note: Round your answer to 1 decimal place.
Compute the manufacturing cycle efficiency (MCE) for the quarter.Note: Round your percentage answer to nearest whole percent.
What percentage of the throughput time was spent in non–value-added activities?Note: Round your percentage answer to nearest whole percent.
Compute the delivery cycle time.Note: Round your intermediate calculations and final answer to 1 decimal place.
3.Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:
| Division | ||
|---|---|---|
| Osaka | Yokohama | |
| Sales | $ 11,000,000 | $ 40,000,000 |
| Net operating income | $ 880,000 | $ 4,000,000 |
| Average operating assets | $ 2,750,000 | $ 20,000,000 |
Required:
1. Compute the residual income for each division assuming the company’s minimum required rate of return is 18%.
2.For each division, compute the return on investment (ROI).
4.Barlow Company manufactures three products—A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:
| Product | |||
|---|---|---|---|
| A | B | C | |
| Selling price | $ 180 | $ 300 | $ 240 |
| Variable expenses: | |||
| Direct materials | 18 | 90 | 27 |
| Other variable expenses | 126 | 120 | 177 |
| Total variable expenses | 144 | 210 | 204 |
| Contribution margin | $ 36 | $ 90 | $ 36 |
| Contribution margin ratio | 20% | 30% | 15% |
The same raw material is used in all three products. Barlow Company has only 6,300 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier’s plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $9 per pound.
Required:
A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. Assuming Barlow’s estimated customer demand is 600 units per product line and the company has used its 6,300 pounds of raw material in an optimal fashion, what is the highest price Barlow Company should be willing to pay for an additional pound of materials?
Calculate the contribution margin per pound of the constraining resource for each product.
Assuming Barlow has unlimited demand for each of its three products, what is the maximum contribution margin the company can earn when using the 6,300 pounds of raw material on hand?
Assuming Barlow’s estimated customer demand is 600 units per product line, what is the maximum contribution margin the company can earn when using the 6,300 pounds of raw material on hand?
5.Kristen Lu purchased a used automobile for $15,000 at the beginning of last year and incurred the following operating costs:
| Depreciation ($15,000 ÷ 5 years) | $ 3,000 | |
|---|---|---|
| Insurance | $ 1,500 | |
| Garage rent | $ 800 | |
| Automobile tax and license | $ 400 | |
| Variable operating cost | $ 0.08 | per mile |
The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates, at her current rate of usage, the car will have zero resale value in five years, so the annual straight-line depreciation is $3,000. The car is kept in a garage for a monthly fee.
Required:
Kristen drove the car 19,000 miles last year. Compute the average cost per mile of owning and operating the car.Note: Round your answers to 2 decimal places.
6.Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $370,000 per quarter. For financial reporting purposes, the company allocates these costs to the joint products based on their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:
| Product | Selling Price | Quarterly Output | ||
|---|---|---|---|---|
| A | $ 24.00 | per pound | 13,800 | pounds |
| B | $ 18.00 | per pound | 21,500 | pounds |
| C | $ 30.00 | per gallon | 5,000 | gallons |
Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below:
| Product | Additional Processing Costs | Selling Price | |
|---|---|---|---|
| A | $ 81,150 | $ 29.50 | per pound |
| B | $ 117,125 | $ 24.50 | per pound |
| C | $ 52,900 | $ 38.50 | per gallon |
Required:
Based on your analysis in requirement 1, which product or products should be sold at the split-off point and which should be processed further?
What is the financial advantage (disadvantage) of further processing each of the three products beyond the split-off point?
7.Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 94,800 units per year is:
| Direct materials | $ 2.00 |
|---|---|
| Direct labor | $ 3.00 |
| Variable manufacturing overhead | $ 1.00 |
| Fixed manufacturing overhead | $ 3.25 |
| Variable selling and administrative expenses | $ 1.80 |
| Fixed selling and administrative expenses | $ 2.00 |
The normal selling price is $19.00 per unit. The company’s capacity is 129,600 units per year. An order has been received from a mail-order house for 2,900 units at a special price of $16.00 per unit. This order would not affect regular sales or total fixed costs.
Required:
As a separate matter from the special order, assume the company’s inventory includes 1,000 units that are inferior quality. The units must be sold through regular channels at a reduced price. The company does not expect the selling of these inferior units to affect regular sales. What unit cost is relevant for establishing a minimum selling price for the inferior units?
What is the financial advantage (disadvantage) of accepting the special order?
8.Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $35 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows:
| Per Unit | 22,000 Units Per Year | |
|---|---|---|
| Direct materials | $ 15 | $ 330,000 |
| Direct labor | 8 | 176,000 |
| Variable manufacturing overhead | 3 | 66,000 |
| Fixed manufacturing overhead, traceable | 3* | 66,000 |
| Fixed manufacturing overhead, allocated | 6 | 132,000 |
| Total cost | $ 35 | $ 770,000 |
*One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).
Required:
Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?
If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 22,000 carburetors from the outside supplier?
Should the outside supplier’s offer be accepted?
Suppose if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product with a segment margin of $220,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 22,000 carburetors from the outside supplier?
9.Required information
[The following information applies to the questions displayed below.]
Nick’s Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $225,000, have a fifteen-year useful life, and have a total salvage value of $22,500. The company estimates annual revenues and expenses associated with the games as follows:
| Revenues | $ 220,000 | |
|---|---|---|
| Less operating expenses: | ||
| Commissions to amusement houses | $ 70,000 | |
| Insurance | 25,000 | |
| Depreciation | 13,500 | |
| Maintenance | 80,000 | 188,500 |
| Net operating income | $ 31,500 |
Required:
1b. Assume Nick’s Novelties, Incorporated, will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?
1a. Compute the payback period associated with the new electronic games.
10.Required information
[The following information applies to the questions displayed below.]
Nick’s Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $225,000, have a fifteen-year useful life, and have a total salvage value of $22,500. The company estimates annual revenues and expenses associated with the games as follows:
| Revenues | $ 220,000 | |
|---|---|---|
| Less operating expenses: | ||
| Commissions to amusement houses | $ 70,000 | |
| Insurance | 25,000 | |
| Depreciation | 13,500 | |
| Maintenance | 80,000 | 188,500 |
| Net operating income | $ 31,500 |
2b. If the company requires a simple rate of return of at least 13%, will the games be purchased?
2a. Compute the simple rate of return promised by the games.
11.Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return she is earning. For example, three years ago she paid $24,000 for 890 shares of Malti Company’s common stock. She received a cash dividend of $837 on the stock at the end of each year for three years. At the end of three years, she sold the stock for $25,000. Kathy would like to earn a return of at least 13% on all of her investments. She is not sure whether the Malti Company stock provides a 13% return and would like some help with the necessary computations.
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Required:
Did the Malti Company stock provide a 13% return?
Compute the net present value Kathy earned on her investment in Malti Company stock.
