Reference no: EM13913031
Top managers of McDonough Products, Inc., have asked for your help in comparing the company s profit performance and financial position with the average for the industry. The accountant has given you the company s income statement and balance sheet and also the following data for the industry. The problem is that McDonough is in dollars and the Industry Average is in percentages. To complete the analysis you will need to convert McDonoughs dollar amounts to percentages.
McDonough Products, Inc.
Income Statement Compared with Industry Average
Year Ended December 31, 2010
McDonough "Industry Average"
Net sales................................. $700,000 100.0%
Cost of goods sold................ 490,000 57.3
Gross profit....................... 210,000 42.7
Operating expenses ..................... 175,000 29.4
Operating income.................... 35,000 13.3
Other expenses.............................. 7,000 2.5
Net income .............................. $28,000 10.8%
McDonough Products, Inc.
Balance Sheet Compared with Industry Average
December 31, 2010
McDonough "Industry Average"
Current assets........... $471,200 72.1%
Fixed assets, net ........... 114,700 19.0
Intangible assets, net ................. 21,080 4.8
Other assets................................. 13,020 4.1
Total ........................................ 620,000 100.0%
Current liabilities .......... 240,560 47.2%
Long-term liabilities ............ 135,160 21.0
Stockholders equity................. 244,280 31.8
Total ........................... $620,000 100.0%
Industry Average Current Ratio 1.53
Industry Average Total Debt to Total Assets 0.68
Requirements
1. Prepare a common-size income statement and balance sheet for McDonough Products. The first column of each statement should present McDonough Products common-size statement, and the second column should show the industry averages.
2. For the profitability analysis, compute McDonough Products (a) ratio of gross profit to net sales (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is McDonough Products profit performance better or worse than the average for the industry?
3. For the analysis of financial position, compute McDonough Products (a) Current ratio and (b) Debt ratio. Compare these ratios with the industry averages. Is McDonough Products financial position better or worse than the average for the industry?
|
How much will be allocated to finished goods inventory
: Before prorating the manufacturing overhead costs at the end of 2012, the Cost of Goods Sold and Finished Goods Inventory had applied overhead costs of $58,950 and $20,400 in them, respectively. There was no Work-in-Process at the beginning or end of..
|
|
Final slp assignment
: Final SLP assignment is going to provide you the opportunity to explore a challenge in the area of logistics. You have now gained an understanding of supply chains and issues that occur within a specific extended set of enterprises.
|
|
Your name is thom croft and you are a recently-promoted
: Your name is Thom Croft and you are a recently-promoted audit manager in Cup & Co, a firm of Chartered Certified Accountants. Richard Hill is a senior partner in the firm. You have just received the following email from him.
|
|
Compute the following ratios for gaines company
: Using the financial statements and additional information, compute the following ratios for Gaines Company for 2013. Show all computations.
|
|
Prepare a common-size income statement
: Prepare a common-size income statement and balance sheet for McDonough Products. The first column of each statement should present McDonough Products common-size statement, and the second column should show the industry averages.
|
|
Long life insurance has developed a linear
: Long Life Insurance has developed a linear model that it uses to determine the amount of term life insurance a family of four should have, based on the current age of the head of the household
|
|
Compute the mse and mad for each forecast
: Compute the MSE and MAD for each forecast. Does either forecast seem superior? Explain Compute MAPE for each forecast.
|
|
Which forecast appears to be more accurate
: Compute MAD for each set of forecasts. Given your results, which forecast appears to be more accurate? Explain.Compute the MSE for each set of forecasts. Given your results, which forecast appears to be more accurate?
|
|
Which of these two methods has the greater accuracy
: An analyst must decide between two different forecasting techniques for weekly sales of roller blades: a linear trend equation and the naive approach. which of these two methods has the greater accuracy if MAD and MSE are used?
|