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##### . (TCO 10) Not all pricing methods apply to the ma...

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. (TCO 10) Not all pricing methods apply to the market place. In manufacturing it is common practice to determine the cost of a product as it moves through it transformation to a finished product. (1) Explain why a negotiated transfer price is required (10 points) and (2) provide an example of the application of a negotiated transfer price (10 points). (Points : 20) 2. (TCO 11) Terry LeMay is unclear as to the difference between the balance sheet of a merchandising company and a manufacturing company. (1) Describe and provide an example of a balance sheet of a merchandising company and (2) compare to an example of a balance sheet of a manufacturing company (10 points). (Points : 20) 3. (TCO 3) Internal Control Procedures are required to safeguard company assets and to ensure ethical operation of the business. (1) Explain how adequate records can satisfy the purpose of internal control (10 points) and (2) provide an example of how this control could be implemented (10 points). (Points : 20) 4. (TCO 7) To promote better management control of business centers financial responsibilities are assigned to managers. There are three basic types of responsibility centers. (1) Explain how a investment center operates (10 points) and (2) provide an example of its application in business. (10 points). (Points : 20) 5. (TCO 1) To evaluate the financial operation and health of a business ratio analysis is used. (1) Provide the formula for Working Capital and explain how it is computed (10 points) and (2) provide an example of how this ratio can be used in decision making in business (10 points). (Points : 20) The essay questions below required detailed answers. Read each question to understand the requirements. Notice that the questions may require computations and multiple-part answers, and they should include reference to where the answer was located. 1. (TCO 8) Planning for capital investments is an important function of management. You are responsible for considering purchasing a new exhibit. It would cost $136,000 and have an estimated useful life of 5 years. The salvage value is $70,000. It is expected to increase net annual cash flows by $25,000. The borrowing rate is 8%. The cost of capital is 10%. Calculate the net present value of this project. (1) Explain the pros and cons of using this method to evaluate a capital expenditure (10 points) and (2) show all computations required to arrive at the correct solution. (15 points). (Points : 25) 2. (TCO 6) To adequately plan for the success of the business a budget must be developed. (1) Indicate the benefits of budgeting (10 points) and (2) state the essentials of effective budgeting (15 points). Include textbook page references to identify where the correct answer was located. (Points : 25) 3. (TCO 4) Financial statement analysis is used by investors, creditors and managers of business to evaluate the operation and health of the business. This information is in part the basis for decision making. (1) Identify ratios used to evaluate the profitability of a company (10 points) and (2) provide an example of how the results of this analysis could be used to make business decisions. (15 points). (Points : 25) 4. (TCO 2) There are three different forms of business; sole-proprietor, partnership and corporation. (1) Explain why a corporation's separation of ownership and management may be a benefit (10 points) and (2) as a stockholder explain why preemption may be a benefit. (15 points). (Points : 25) 5. (TCO 5) Allgood Inc. has fixed costs of $480,000. It has a unit selling price of $6, unit variable cost of $4.50, and a target net income of $1,500,000. Compute the required sales in units to achieve its target net income. (1) Explain how the analysis is to be performed (10 points) and (2) Show all computations required to arrive at the correct answer. (20 points). (Points : 30) 6. (TCO 9) Barstock Manufacturing incurs costs of $7.50 ($4.50 variable and $3 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $5 per unit. If the order is accepted, Barstock will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Barstock will realize by buying the part. (1) Explain how the analysis is to be performed (10 points) and (2) Show all computations required to arrive at the correct answer. (20 points). (Points : 30)

Paper#8173 | Written in 18-Jul-2015

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