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MBA 560 Module 6, 7 and 8 Problems (Financial and Managerial Accounting)




Question;Module 6Problem 1. The following information is for a product manufactured and sold by RiveraCorporation:Sales price per unit, $30Variable cost per unit, $20Total fixed costs, $200,000Last year, Rivera earned a profit of $60,000Required:1) How many units did Rivera sell last year?2) Rivera's managers are considering decreasing the sales price to $28 in an effort to increasemarket share. Also, the company wants a profit of $80,000. How many units would it have to sellat the lower selling price to achieve this target?Problem 2. The management accountant at Melrose, Inc. provided the following estimated costsfor producing 5,000 units of a specialty product manufactured by the firm:The company believes that direct labor hours are the most appropriate cost driver for assigningoverhead costs to its product.Required:1) Compute the predetermined overhead rate for this company.2) Compute the specialty product's total estimated cost per unit.3) Why do firms assign overhead costs using a predetermined overhead rate instead of assigningactual costs?Module 7Problem 1. Ortiz Manufacturing is considering developing and marketing one of two newproducts, A and B. It has accumulated the following information about the two products:Required:1) Which of these items are relevant to Ortiz's decision about which of these products it willlaunch?Problem 2. Mae Lee owns a small retail store in Cairo, Georgia. The following summaryinformation regarding expectations for the month of January is provided: As of December 31there is $500 in the bank and the balance in accounts receivable is $2,500. Budgeted cash andcredit sales for January are $3,000 and $2,000, respectively. Ninety percent of credit sales arecollected in the month of sale and the remainder is collected in the following month. Mae'ssuppliers do not extend credit. Cash payments for January are expected to be $12,000. Mae has aline of credit that enables the store to borrow funds on demand. However, funds must beborrowed on the first day of the month and interest paid in cash on the last day of the month.Mae desires to maintain a $500 cash balance before consideration is given to the payment ofinterest. Mae's bank charges annual interest of 12% per year.Required:1) Compute the amount of funds that needs to be borrowed.2) Compute the amount of interest expense that will appear on the January 31 pro forma incomestatement.Module 8Problem 1. Creighton Company's balance sheet and income statement are provided below:Required:1) Compute the margin, turnover, and return on investment for Creighton Company.2) What is the advantage of expanding the ROI formula to measure margin and turnoverseparately?Problem 2. Delta Company is evaluating two different capital investments, Project X and Y.Either X or Y would cost $100,000, and the company cannot afford to do both. The companyexpects that Project X would provide net cash inflows of $30,000 per year for 5 years. ForProject Y, the net cash inflows are expected to be as follows:Delta's cost of capital is 12%Required:1) Calculate the present value index for Project X and for Project Y.2) Indicate whether each of the projects is an acceptable investment.3) Which of the two projects should Delta implement?


Paper#45928 | Written in 18-Jul-2015

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