Reference no: EM13905225

1. Laser Tex Inc. manufactures low-end computer components within a relevant range of 100,000 to 140,000 disks per year.  Within this range, the following partially completed manufacturing cost schedule has been prepared:

 

Requirements

Complete the cost schedule, identifying each cost by the appropriate letter (a) through (o).

Note:

Show computations for each of the items from letter (a) through (o).

2. Logan Company's budgeted sales and direct materials purchases are as follows: 

 Logan's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Hagen's purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase.

 Requirements:

(a) Prepare a schedule of expected collections from customers for March.

(b) Prepare a schedule of expected payments for direct materials for March.

 3. Based on the following information, what would be the ending balance in the Retained Earnings account, assuming all accounts have a normal balance?

4.Stratton Testing is considering investing in a new testing device. It has two options: Option A would have an initial lower cost but would require a significant expenditure for rebuilding after 5 years. Option B would require no rebuilding expenditure, but its maintenance costs would be higher. Since the option B machine is of initial higher quality, it is expected to have a salvage value at the end of its useful life. The following estimates were provided. The company’s cost of capital is 9%.  

 Requirements

(a) Compute net present value, and

(b) Internal rate of return for each option.

5. Three years ago, Amy Blodgett and her brother-in-law Dennis Torres opened Megamart Department Store. For the first 2 years, business was good, but the following condensed income statement results for 2012 were disappointing.

Amy believes the problem lies in the relatively low gross profit rate of 20%. Dennis believes the problem is that operating expenses are too high. Amy thinks the gross profit rate can be improved by making two changes:

(1) Increase average selling prices by 15%; this increase is expected to lower sales volume so that total sales dollars will increase only 4%.

(2) Buy merchandise in larger quantities and take all purchase discounts; these changes are expected to increase the gross profit rate from 20% to 25%. Amy does not anticipate that these changes will have any effect on operating expenses.

Dennis thinks expenses can be cut by making these two changes:

(1) Cut 2012 sales salaries of $60,000 in half and give sales personnel a commission of 2% of net sales.

(2) Reduce store deliveries to one day per week rather than twice a week; this change will reduce 2012 delivery expenses of $40,000 by 40%. Dennis feels that these changes will not have any effect on net sales.

Amy and Dennis come to you for help in deciding the best way to improve net income.

Requirements

(a) Prepare a condensed income statement for 2013 assuming Amy’s changes are implemented and Dennis’s ideas are adopted.

(b) What is your recommendation to Amy and Dennis?

(c) Prepare a condensed income statement for 2013 assuming both sets of proposed changes are made.

(d) Discuss the impact that other factors might have. For example, would increasing the quantity of inventory increase costs? Would a salary cut affect employee morale? Would decreased morale affect sales? Would decreased store deliveries decrease customer satisfaction? What other suggestions might be considered?