Reference no: EM1360846

The following are summary financial data for Parker Enterprises, Inc., and Boulder, Inc., for three recent years:

Year 3 Year 2 Year 1
Net sales (in millions):
Parker Enterprises, Inc. . . . . . . . $ 3,700 $ 3,875 $ 3,882
Boulder, Inc. . . . . . . . . . . . . . .17,825 16,549 15,242
Net accounts receivable (in millions):
Parker Enterprises, Inc. . . . . . . . . . 1,400 1,800 1,725
Boulder, Inc. . . . . . . . . . . . . . . 5,525 5,800 6,205
1. Using the above data, compute the accounts receivable turnover and average collection period for each company for years 2 and 3.
2. Which company appears to have the better credit management policy?

Prepare a bank reconciliation for Eugene Company at January 31, 2006, using the information shown.
1. Cash per the accounting records at January 31 amounted to $145,604; the bank statement on this same date showed a balance of $129,004.
2. The canceled checks returned by the bank included a check written by the LeRoy Company for $3,528 that had been deducted from Eugene's account in error.
3. Deposits in transit as of January 31, 2006, amounted to $21,856.
4. The following amounts were adjustments to Eugene Company's account on the bank statement:
a. Service charges of $52.
b. An NSF check of $2,800.
c. Interest earned on the account, $80.
5. Checks written by Eugene Company that have not yet cleared the bank include four checks totaling $11,556.

Jerry Stone owns and operates a small beach shop in a mall on Sanibel Island, Florida. For the last six months, Jerry has had a display of sunglasses in the front window. Largely because of the display, Jerry has sold 100 pairs of sunglasses per month at an average cost of $26 and selling price of $50. The sales volume has doubled since the display was put in the window. One fourth of Jerry's storage space is occupied by 190 ice coolers. The coolers have not been selling as well as Jerry hoped, but he is convinced that a front window display of coolers would increase sales by 50%. The coolers cost Jerry a total of $2,280 and have been selling at a rate of 100 per month at $28 each.
1. Assuming that cost of goods sold is the only variable cost, compute the contribution margin per unit for sunglasses and ice coolers.
2. Compute the total contribution margins for both sunglasses and ice coolers assuming window displays and no window displays for both items.
3. What are the economic costs associated with keeping the sunglass display in the store window?
4. What are the economic costs associated with replacing the sunglass display with an ice cooler display?

Detienne Company manufactures and sells one product for $20 per unit. The unit contribution margin is 40% of the sales price, and fixed costs total $80,000.
1. Using the equation approach, compute:
a. The break-even point in sales dollars and units.
b. The sales volume (in units) needed to generate a profit of $40,000.
c. The break-even point (in units) if variable costs increase to 80% of the sales price and fixed costs increase to $100,000.
2. See if you can recompute the solutions to 1(a), 1(b), and 1(c) in one equation step using either the contribution margin ratio or the contribution margin dollars per unit.

The following information is for Bun MaScare Company:
Beginning raw materials inventory . . . . . . . . . . $ 25,000
Raw materials purchased . . . . . . . . . . . . . . . . 110,000
Ending raw materials inventory . . . . . . . . . . . . . 15,000
Manufacturing overhead (actual) . . . . . . . . . . . . 300,000
Beginning work-in-process inventory . . . . . . . . . . 50,000
Ending work-in-process inventory . . . . . . . . . . . . 40,000
Direct labor costs . . . . . . . . . . . . . . . . . . 90,000
Beginning finished goods inventory . . . . . . . . . . 200,000
Ending finished goods inventory . . . . . . . . . . . .270,000
Overapplied manufacturing overhead . . . . . . . . . . 15,000
Required:
Compute the following (assume 365 days in a year):
1. Inventory turnover for raw materials inventory.
2. Days' supply of raw materials inventory.
3. Inventory turnover for work-in-process inventory.
4. Days of manufacturing represented by work-in-process inventory.
5. Inventory turnover for finished goods inventory.
6. Days' sales in finished goods inventory.
7. Interpretive Question: What conclusions can you draw from your inventory turnover calculations?