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At the end of January, Mineral Labs had an inventory of 925 units,

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At the end of January, Mineral Labs had an inventory of 925 units, which cost $9 per unit to produce. During;February, the company produced 1,650 units at a cost of $13 per unit.;a. If the firm sold 2,350 units in February, what was the cost of goods sold? (Assume LIFO inventory;accounting.);Cost of goods sold;$;b. If the firm sold 2,350 units in February, what was the cost of goods sold? (Assume FIFO inventory;accounting.);Cost of goods sold;$;Worksheet;2.;Difficulty: Basic;Learning Objective: 04-02 The three financial statements for;forecasting are the pro forma income statement, the cash;budget, and the pro forma balance sheet.;award;1.00 point;Convex Mechanical Supplies produces a product with the following costs as of July 1, 2012;Material;Labor;Overhead;$5;3;2;$ 10;Beginning inventory at these costs on July 1 was 11,500 units. From July 1 to December 1, Convex;produced 26,000 units. These units had a material cost of $7 per unit. The costs for labor and overhead;were the same. Convex uses FIFO inventory accounting.;a. Assuming that Convex sold 28,000 units during the last six months of the year at $14 each, what would;gross profit be?;Gross profit;$;b. What is the value of ending inventory?;Ending inventory;$;View Hint #1;Worksheet;3.;Difficulty: Intermediate;Learning Objective: 04-02 The three financial statements for;forecasting are the pro forma income statement, the cash;budget, and the pro forma balance sheet.;award;1.00 point;The Bradley Corporation produces a product with the following costs as of July 1, 2014;Material;Labor;Overhead;$ 4 per unit;2 per unit;2 per unit;Beginning inventory at these costs on July 1 was 3,150 units. From July 1 to December 1, 2014;Bradley produced 12,300 units. These units had a material cost of $4, labor of $6, and overhead of $3 per;unit. Bradley uses LIFO inventory accounting.;a. Assuming that Bradley sold 13,600 units during the last six months of the year at $18 each, what is its;gross profit?;Gross profit;$;b. What is the value of ending inventory?;Ending inventory;$;View Hint #1;Learning Objective: 04-02 The three financial statements for;http://ezto.mheducation.com/hm.tpx;Page 1 of 10;Assignment Print View;10/25/14, 7:45 PM;Worksheet;4.;Difficulty: Intermediate;forecasting are the pro forma income statement, the cash;budget, and the pro forma balance sheet.;award;3.00 points;Watts Lighting Stores made the following sales projection for the next six months. All sales are credit sales.;March;April;May;$ 38,000;44,000;33,000;June;$ 42,000;July;50,000;August 52,000;Sales in January and February were $41,000 and $40,000, respectively.;Experience has shown that of total sales, 10 percent are uncollectible, 35 percent are collected in the;month of sale, 45 percent are collected in the following month, and 10 percent are collected two months;after sale.;a. Prepare a monthly cash receipts schedule for the firm for March through August.;$;$;Total cash receipts;$;$;$;$;$;$;$;$;Credit sales;Collections;In month of sale;One month after sale;Two months after sale;February;Watt's Lighting Stores;Cash Receipts Schedule;March;April;$;$;$;January;$;$;$;$;May;June;July;b. Of the sales expected to be made during the six months from March through August, how much will still;be uncollected at the end of August? How much of the uncollected amount does the firm actually expect;to collect? (Leave no cells blank - be certain to enter "0" wherever required.);Month of sale;August;July;June;May;April;March;Sales;$;Watts Lighting Stores;Cash Receipts Schedule;Uncollected %;Uncollected $;%;$;Totals;Expect to collect %;%;$;Expect to collect $;$;$;View Hint #1;Worksheet;5.;Difficulty: Intermediate;Learning Objective: 04-02 The three financial statements for;forecasting are the pro forma income statement, the cash;budget, and the pro forma balance sheet.;award;4.00 points;The Volt Battery Company has forecast its sales in units as follows;January;February;March;April;3,000 May;2,850 June;2,800 July;3,300;3,550;3,700;3,400;Volt Battery always keeps an ending inventory equal to 120% of the next months expected sales. The;ending inventory for December (Januarys beginning inventory) is 3,160 units, which is consistent with this;policy.;Materials cost $13 per unit and are paid for in the month after purchase. Labor cost is $6 per unit and is;paid in the month the cost is incurred. Overhead costs are $17,000 per month. Interest of $10,200 is;scheduled to be paid in March, and employee bonuses of $15,400 will be paid in June.;a. Prepare a monthly production schedule for January through June. (Negative amounts should be;indicated by a minus sign.);Volt Battery Company;http://ezto.mheducation.com/hm.tpx;Page 2 of 10;Assignment Print View;10/25/14, 7:45 PM;January;February;Production Schedule;March;April;May;June;July;Projected unit sales;Desired ending inventory;Total units required;Beginning inventory;Units to be produced;b. Prepare a monthly summary of cash payments for January through June. Volt produced 2,800 units in;December.;December;Units produced;Payments;Material cost;Labor cost;Overhead cost;Interest;Employee bonuses;Total cash payments;Summary Of Cash Payments;February;March;January;April;May;June;$;$;$;$;$;$;$;$;$;$;$;$;View Hint #1;Worksheet;6.;Learning Objective: 04-02 The three financial statements for;forecasting are the pro forma income statement, the cash;budget, and the pro forma balance sheet.;Difficulty: Intermediate;award;5.00 points;Harrys Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a;bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable;three-month financial plan for January through March. The following are actual and forecasted sales;figures;Actual;Forecast;Additional Information;November $ 340,000 January;$ 560,000 April forecast;$ 480,000;December;500,000 February;600,000;March;490,000;Of the firms sales, 35 percent are for cash and the remaining 65 percent are on credit. Of credit sales, 20;percent are paid in the month after sale and 80 percent are paid in the second month after the sale.;Materials cost 30 percent of sales and are purchased and received each month in an amount sufficient to;cover the following months expected sales. Materials are paid for in the month after they are received.;Labor expense is 40 percent of sales and is paid for in the month of sales. Selling and administrative;expense is 15 percent of sales and is also paid in the month of sales. Overhead expense is $35,000 in cash;per month.;Depreciation expense is $11,400 per month. Taxes of $9,400 will be paid in January, and dividends of;$9,000 will be paid in March. Cash at the beginning of January is $108,000, and the minimum desired cash;balance is $103,000.;a. Prepare a schedule of monthly cash receipts for January, February, and March.;Sales;Credit sales;Collections;Cash sales;One month after sale;Two months after sale;Harrys Carryout Stores;Cash Receipts Schedule;November;December;$;$;$;January;$;$;$;$;$;Total cash receipts;February;$;March;$;$;b. Prepare a schedule of monthly cash payments for January, February, and March.;Payments for purchases;Labor expense;Selling and administrative;Overhead;http://ezto.mheducation.com/hm.tpx;Harrys Carryout Stores;Cash Payments Schedule;January;$;February;$;March;$;Page 3 of 10;Assignment Print View;10/25/14, 7:45 PM;Taxes;Dividends;Total cash payments;$;$;$;c. Prepare a monthly cash budget with borrowings and repayments for January, February, and March.;(Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be;indicated by a minus sign. Assume the January beginning loan balance is $0.);December;Total cash receipts;Total cash payments;Harrys Carryout Stores;Cash Budget;January;$;February;$;$;March;Net cash flow;Beginning cash balance;$;$;$;Cumulative cash balance;Monthly loan (repayment);$;$;$;Ending cash balance;$;$;$;$;$;$;Cumulative loan balance;$;Worksheet;7.;Learning Objective: 04-02 The three financial statements for;forecasting are the pro forma income statement, the cash;budget, and the pro forma balance sheet.;Difficulty: Challenge;award;1.00 point;The Manning Company has financial statements as shown next, which are representative of the companys;historical average.;The firm is expecting a 25 percent increase in sales next year, and management is concerned about the;companys need for external funds. The increase in sales is expected to be carried out without any;expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among;liabilities, only current liabilities vary directly with sales.;Income Statement;Sales;Expenses;$ 220,000;171,200;Earnings before interest and taxes $ 48,800;Interest;7,200;Earnings before taxes;Taxes;$ 41,600;15,200;Earnings after taxes;$ 26,400;Dividends;$;9,240;Cash;Accounts receivable;Inventory;Balance Sheet;Liabilities and Stockholders' Equity;$ 8,000 Accounts payable;$ 29,000;61,000 Accrued wages;2,600;85,000 Accrued taxes;3,600;Current assets;$154,000;Assets;Fixed assets;82,000;Current liabilities;$ 35,200;Notes payable;7,200;Long-term debt;Common stock;Retained earnings;Total assets;$236,000;16,000;122,000;55,600;Total liabilities and;stockholders' equity;$236,000;Using the percent-of-sales method, determine whether the company has external financing needs, or a;surplus of funds. (Hint: A profit margin and payout ratio must be found from the income statement.) (Do not;round intermediate calculations. Input the amount as a positive value.);The firm;(Click to select);$;in (Click to select).;View Hint #1;Worksheet;http://ezto.mheducation.com/hm.tpx;Difficulty: Challenge;Learning Objective: 04-03 The percent-of-sales method may;also be used for forecasting on a less precise basis.;Page 4 of 10;Assignment Print View;8.;10/25/14, 7:45 PM;award;1.00 point;The Hartnett Corporation manufactures baseball bats with Pudge Rodriguezs autograph stamped on them.;Each bat sells for $39 and has a variable cost of $21. There are $32,940 in fixed costs involved in the;production process.;a. Compute the break-even point in units.;Break-even point;units;b. Find the sales (in units) needed to earn a profit of $18,270.;Sales quantity needed;units;View Hint #1;Worksheet;9.;Difficulty: Basic;Learning Objective: 05-02 Break-even analysis allows the firm;to determine the magnitude of operations necessary to avoid;loss.;award;1.00 point;Eaton Tool Company has fixed costs of $366,600, sells its units for $84, and has variable costs of $45 per;unit.;a. Compute the break-even point. (Round your answer to the nearest whole number.);Break-even point;units;b. Ms. Eaton comes up with a new plan to cut fixed costs to $290,000. However, more labor will now be;required, which will increase variable costs per unit to $48. The sales price will remain at $84. What is;the new break-even point? (Round your answer to the nearest whole number.);New break-even point;units;c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the;old plan)?;Profitability will be more;Profitability will be less;View Hint #1;Worksheet;10.;Difficulty: Basic;Learning Objective: 05-02 Break-even analysis allows the firm;to determine the magnitude of operations necessary to avoid;loss.;award;2.00 points;Healthy Foods Inc. sells 50-pound bags of grapes to the military for $10 a bag. The fixed costs of this;operation are $90,000, while the variable costs of grapes are $.10 per pound.;a. What is the break-even point in bags? (Round your answer to 2 decimal places.);Break-even point;bags;b. Calculate the profit or loss (EBIT) on 10,000 bags and on 35,000 bags. (Input all amounts as positive;values. Round your answers to the nearest whole number.);Bags;Profit/Loss;10,000;(Click to select);$;Amount;35,000;(Click to select);$;c. What is the degree of operating leverage at 24,000 bags and at 35,000 bags? (Round your answers to;2 decimal places.);Bags;24,000;35,000;Degree of;Operating Leverage;d. If Healthy Foods has an annual interest expense of $15,000, calculate the degree of financial leverage;at both 24,000 and 35,000 bags. (Round your answers to 2 decimal places.);http://ezto.mheducation.com/hm.tpx;Page 5 of 10;Assignment Print View;10/25/14, 7:45 PM;Degree of;Financial Leverage;Bags;24,000;35,000;e. What is the degree of combined leverage at both 24,000 and 35,000 bags? (Round your answers to 2;decimal places.);Degree of;Combined Leverage;Bags;24,000;35,000;rev: 02_24_2014_QC_45739, 07_14_2014_QC_51398, 07_17_2014_QC_51398;View Hint #1;Worksheet;Difficulty: Intermediate;11.;Learning Objective: 05-02 Break-even analysis allows the firm;to determine the magnitude of operations necessary to avoid;loss.;Learning Objective: 05-05 Combined leverage takes into;account both the use of fixed assets and debt.;award;2.00 points;International Data Systems information on revenue and costs is only relevant up to a sales volume of;114,000 units. After 114,000 units, the market becomes saturated and the price per unit falls from $14.00 to;$8.80. Also, there are cost overruns at a production volume of over 114,000 units, and variable cost per unit;goes up from $7.00 to $7.25. Fixed costs remain the same at $64,000.;a. Compute operating income at 114,000 units.;Operating income;$;b. Compute operating income at 214,000 units.;Operating income;$;View Hint #1;Worksheet;12.;Learning Objective: 05-02 Break-even analysis allows the firm;to determine the magnitude of operations necessary to avoid;loss.;Difficulty: Intermediate;award;2.00 points;Lenows Drug Stores and Halls Pharmaceuticals are competitors in the discount drug chain store business.;The separate capital structures for Lenow and Hall are presented next.;Lenow;Debt @ 9%;Common stock, $10 par;$ 160,000;320,000;Hall;Debt @ 9%;Common stock, $10 par;$ 320,000;160,000;Total;Common shares;$ 480,000;32,000;Total;Common shares;$ 480,000;16,000;a. Complete the following table given earnings before interest and taxes of $20,000, $43,200, and;$61,000. Assume the tax rate is 20 percent. (Leave no cells blank - be certain to enter "0";wherever required. Negative amounts should be indicated by a minus sign. Round your;answers to 2 decimal places.);EBIT;Total assets;EBIT/TA;Lenow EPS;Hall EPS;What is the relationship between the EPS;of the two firms?;$ 20,000;$480,000;%;$;$;(Click to select);$ 43,200;$480,000;%;$;$;(Click to select);$61,000;$480,000;%;$;$;(Click to select);b-1. What is the EBIT/TA rate when the firm's have equal EPS?;EBIT/TA rate;%;b-2. What is the cost of debt?;Cost of debt;%;b-3. State the relationship between earnings per share and the level of EBIT.;http://ezto.mheducation.com/hm.tpx;Page 6 of 10;Assignment Print View;10/25/14, 7:45 PM;EPS is unaffected by financial leverage when the pre-tax return on assets (EBIT/TA);(Click to select);the cost of debt.;c. If the cost of debt went up to 11 percent and all other factors remained equal, what would be the;break-even level for EBIT?;$;Break-even level;View Hint #1;Worksheet;13.;Difficulty: Intermediate;Learning Objective: 05-04 Financial leverage shows how much;debt the firm employs in its capital structure.;award;2.00 points;Sterling Optical and Royal Optical both make glass frames and each is able to generate earnings before;interest and taxes of $111,600. The separate capital structures for Sterling and Royal are shown next;Sterling;Debt @ 9%;Common stock, $5 par;$ 744,000;496,000;Royal;Debt @ 9%;Common stock, $5 par;$ 248,000;992,000;Total;Common shares;$1,240,000;99,200;Total;Common shares;$ 1,240,000;198,400;a. Compute earnings per share for both firms. Assume a 30 percent tax rate. (Round your answers to 2;decimal places.);Sterling;Royal;Earnings Per Share;$;$;b. In part a, you should have gotten the same answer for both companies earnings per share. Assuming a;P/E ratio of 22 for each company, what would its stock price be? (Do not round intermediate;calculations. Round your answer to 2 decimal places.);Stock price;$;c. Now as part of your analysis, assume the P/E ratio would be 16 for the riskier company in terms of;heavy debt utilization in the capital structure and 25 for the less risky company. What would the stock;prices for the two firms be under these assumptions? (Note: Although interest rates also would likely be;different based on risk, we will hold them constant for ease of analysis.) (Do not round intermediate;calculations. Round your answer to 2 decimal places.);Sterling;Royal;Stock price;$;$;View Hint #1;Worksheet;14.;Learning Objective: 05-04 Financial leverage shows how much;debt the firm employs in its capital structure.;Difficulty: Challenge;award;3.00 points;Dickinson Company has $11,820,000 million in assets. Currently half of these assets are financed with;long-term debt at 9.1 percent and half with common stock having a par value of $8. Ms. Smith, VicePresident of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more;equity (E). The company earns a return on assets before interest and taxes of 9.1 percent. The tax rate is;40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable.;Under Plan D, a $2,955,000 million long-term bond would be sold at an interest rate of 11.1 percent and;369,375 shares of stock would be purchased in the market at $8 per share and retired.;Under Plan E, 369,375 shares of stock would be sold at $8 per share and the $2,955,000 in proceeds;would be used to reduce long-term debt.;a. How would each of these plans affect earnings per share? Consider the current plan and the two new;plans. (Round your answers to 2 decimal places.);Earnings per share;Current Plan;$;Plan D;$;Plan E;$;b-1. Compute the earnings per share if return on assets fell to 4.55 percent. (Leave no cells blank - be;certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign.;Round your answers to 2 decimal places.);Current Plan;Earnings per share;http://ezto.mheducation.com/hm.tpx;$;Plan D;$;Plan E;$;Page 7 of 10;Assignment Print View;10/25/14, 7:45 PM;b-2. Which plan would be most favorable if return on assets fell to 4.55 percent? Consider the current plan;and the two new plans.;Plan D;Plan E;Current Plan;b-3. Compute the earnings per share if return on assets increased to 14.1 percent. (Round your answers;to 2 decimal places.);Current Plan;$;Earnings per share;Plan D;$;Plan E;$;b-4. Which plan would be most favorable if return on assets increased to 14.1 percent? Consider the;current plan and the two new plans.;Plan E;Current Plan;Plan D;c-1. If the market price for common stock rose to $12 before the restructuring, compute the earnings per;share. Continue to assume that $2,955,000 million in debt will be used to retire stock in Plan D and;$2,955,000 million of new equity will be sold to retire debt in Plan E. Also assume that return on assets;is 9.1 percent. (Round your answers to 2 decimal places.);Current Plan;$;Earnings per share;Plan D;$;Plan E;$;c-2. If the market price for common stock rose to $12 before the restructuring, which plan would then be;most attractive?;Plan D;Current Plan;Plan E;rev: 02_26_2014_QC_45248;View Hint #1;Worksheet;15.;Difficulty: Challenge;Learning Objective: 05-06 By increasing leverage, the firm;increases its profit potential, but also its risk of failure.;award;3.00 points;The Lopez-Portillo Company has $11.9 million in assets, 70 percent financed by debt, and 30 percent;financed by common stock. The interest rate on the debt is 13 percent and the par value of the stock is $10;per share. President Lopez-Portillo is considering two financing plans for an expansion to $24.5 million in;assets.;Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 16;percent! Under Plan B, only new common stock at $10 per share will be issued. The tax rate is 30 percent.;a. If EBIT is 14 percent on total assets, compute earnings per share (EPS) before the expansion and under;the two alternatives. (Round your answers to 2 decimal places.);Current;Plan A;Plan B;Earnings Per Share;$;$;$;b. What is the degree of financial leverage under each of the three plans? (Round your answers to 2;decimal places.);Degree Of;Financial Leverage;Current;Plan A;Plan B;c. If stock could be sold at $20 per share due to increased expectations for the firms sales and earnings;what impact would this have on earnings per share for the two expansion alternatives? Compute;earnings per share for each. (Round your answers to 2 decimal places.);Plan A;Plan B;Earnings Per Share;$;$;View Hint #1;http://ezto.mheducation.com/hm.tpx;Page 8 of 10;Assignment Print View;10/25/14, 7:45 PM;Worksheet;16.;Difficulty: Challenge;Learning Objective: 05-06 By increasing leverage, the firm;increases its profit potential, but also its risk of failure.;award;4.00 points;Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as;follows;Sales;Variable costs (50% of sales);Fixed costs;$ 6,700,000;3,350,000;1,970,000;Earnings before interest and taxes (EBIT);Interest (10% cost);$ 1,380,000;540,000;Earnings before taxes (EBT);Tax (40%);$;840,000;336,000;Earnings after taxes (EAT);$;504,000;Shares of common stock;Earnings per share;$;370,000;1.36;The company is currently financed with 50 percent debt and 50 percent equity (common stock, par value;of $10). In order to expand the facilities, Mr. Delsing estimates a need for $3.7 million in additional;financing. His investment banker has laid out three plans for him to consider;1.Sell $3.7 million of debt at 13 percent.;2.Sell $3.7 million of common stock at $20 per share.;3.Sell $1.85 million of debt at 12 percent and $1.85 million of common stock at $25 per share.;Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to;$2,470,000 per year. Delsing is not sure how much this expansion will add to sales, but he estimates that;sales will rise by $1.85 million per year for the next five years.;Delsing is interested in a thorough analysis of his expansion plans and methods of financing.He would;like you to analyze the following;a.;The break-even point for operating expenses before and after expansion (in sales dollars). (Enter;your answers in dollars not in millions, i.e, $1,234,567.);Before expansion;After expansion;b.;Break-Even Point;$;$;The degree of operating leverage before and after expansion. Assume sales of $6.7 million before;expansion and $7.7 million after expansion. Use the formula: DOL = (S TVC) / (S TVC FC).;(Round your answers to 2 decimal places.);Degree of;Operating Leverage;Before expansion;After expansion;c-1. The degree of financial leverage before expansion. (Round your answers to 2 decimal places.);Degree of financial leverage;c-2. The degree of financial leverage for all three methods after expansion. Assume sales of $7.7 million;for this question. (Round your answers to 2 decimal places.);Degree of;Financial Leverage;100% Debt;100% Equity;50% Debt & 50% Equity;d.;Compute EPS under all three methods of financing the expansion at $7.7 million in sales (first year);and $10.6 million in sales (last year).(Round your answers to 2 decimal places.);http://ezto.mheducation.com/hm.tpx;Page 9 of 10;Assignment Print View;100% Debt;100% Equity;50% Debt & 50% Equity;10/25/14, 7:45 PM;Earnings per share;First year;Last year;$;$;View Hint #1;Worksheet;Difficulty: Challenge;17.;Learning Objective: 05-02 Break-even analysis allows the firm;to determine the magnitude of operations necessary to avoid;loss.;Learning Objective: 05-03 Operating leverage indicates the;extent fixed assets (plants and equipment) are utilized by the;firm;Learning Objective: 05-04 Financial leverage shows how much;debt the firm employs in its capital structure.;award;2.00 points;Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of brick for the;homebuilding industry. Their financial information is as follows;Sinclair;Capital Structure;Debt @ 11%;Common stock, $10 per share;$;Boswell;720,000;480,000;0;$ 1,200,000;$ 1,200,000;$ 1,200,000;48,000;120,000;Operating Plan;Sales (52,000 units at $20 each);Variable costs;Fixed costs;$ 1,040,000;832,000;0;$ 1,040,000;520,000;302,000;Earnings before interest and taxes (EBIT);$;$;Total;Common shares;208,000;218,000;The variable costs for Sinclair are $16 per unit compared to $10 per unit for Boswell.;a. If you combine Sinclairs capital structure with Boswells operating plan, what is the degree of combined;leverage? (Round your answer to 2 decimal places.);Degree of combined leverage;b. If you combine Boswells capital structure with Sinclairs operating plan, what is the degree of combined;leverage? (Round your answer to the nearest whole number.);Degree of combined leverage;c. In part b, if sales double, by what percentage will EPS increase? (Round your answer to the nearest;whole percent.);EPS will increase by;%;View Hint #1;Worksheet;http://ezto.mheducation.com/hm.tpx;Difficulty: Challenge;Learning Objective: 05-05 Combined leverage takes into;account both the use of fixed assets and debt.;Page 10 of 10

 

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