You have been asked to attend the corporate meeting next

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Reference no: EM13355641

You have been asked to attend the corporate meeting next week to discuss the performance of your division. To help you prepare for the meeting, you requested the following information from the Chief Financial Officer.

Balance Sheet

 

A

B

C

D

E

1

Assets 

2008

 

 

 

2

Cash

$14,000

 

 

 

3

Short-term investments.

71,632

 

 

 

4

Accounts receivable

878,000

 

 

 

5

Inventories

1,716,480

 

 

 

6

   Total current assets

$2,680,112

 

 

 

7

Gross fixed assets

1,220,000

 

 

 

8

Less: accumulated depreciation

383,160

 

 

 

9

   Net fixed assets

$836,840

 

 

 

10

Total assets

$3,516,952

 

 

 

11

 

 

 

 

 

12

Liabilities and equity 

2008

 

 

 

13

Accounts payable

$359,800

 

 

 

14

Notes payable

300,000

 

 

 

15

Accruals

380,000

 

 

 

16

   Total current liabilities

$1,039,800

 

 

 

17

Long-term debt

500,000

 

 

 

18

Common stock (100,000 shares)

1,680,936

 

 

 

19

Retained earnings

296,216

 

 

 

20

   Total equity

$1,977,152

 

 

 

21

Total liabilities and equity

$3,516,592

 

 

 

22

 

 

 

 

 

23

 

2008

 

 

 

24

Sales

$7,035,600

 

 

 

25

Cost Of Goods Sold

5,800,000

 

 

 

26

Selling and Administrative Expenses

612,960

 

 

 

27

Depreciation

120,000

 

 

 

28

   Total Operating Costs

$6,532,960

 

 

 

29

   EBIT

$502,640

 

 

 

30

Interest Expense

80,000

 

 

 

31

   EBT

$422,640

 

 

 

32

Taxes (40%)

169,056

 

 

 

33

Net Income

$253,584

 

 

 

34

 

 

 

 

 

35

 

2008 

 

 

36

Stock Price

$6.00

 

 

37

Shares Outstanding

100,000

 

 

38

EPS

($0.95)

 

 

39

DPS

$0.11

 

 

40

Tax Rate

40%

 

 

41

Book Value Per Share

$7.91

 

 

42

Lease Payments

$40,000

 

 

43

 

 

 

 

44

Statement of retained earnings, 2008

 

 

 

45

Balance of retained earnings, 12/31/2007

$203,768

 

 

 

46

   add:  net income, 2008

($95,136)

 

 

 

47

   less: dividend paid, 2008

($11,000)

 

 

 

48

Balance of retained earnings, 12/31/2008

$97,632

 

 

 

49

 

 

 

 

 

50

Master Budget for 2008

 

 

 

51

Sales (350,000 units of A @ $15 and 350,000 units of B @ $5)

$7,000,000

 

 

 

52

Cost of goods sold

5,810,000

 

 

 

53

Contribution margin

$1,190,000

 

 

 

54

Selling and Administrative expenses

155,000

 

 

 

55

Operating income

$1,035,000

 

 

 

56

 

 

 

 

 

57

Standard variable manufacturing cost per unit:

 

 

58

 

Product A

Product B

59

Direct Materials

10 pieces @ $.50

$5.00 per unit

5 pounds @ $.30

$1.50 per unit

60

Direct Labor

1 hour  @ $3.00

$3.00 per unit

.3 hours @ $2.50

     .75 per unit

61

Variable overhead

1 hour @ $2.00

$2.00 per unit

.3 hours @ $2.50

     .75 per unit

62

Total

 

$10.00 per unit

 

$3.00 per unit

63

 

 

 

 

 

64

Actual variable manufacturing cost:

 

 

65

Product A

Materials

$2,519,000

(5,038,000 pieces)

 

66

 

Labor

1,509,000

(   503,000 hours)

 

67

 

Overhead

1,006,000

(   503,000 hours)

 

68

Product B

Materials

4,530,000

(3,020,000 pounds)

 

69

 

Labor

150,000

(  200,000 hours)

 

70

 

Overhead

150,000

(  200,000 hours)

 

71

Total

 

$9,864,000

 

 

Required:

A.  Identify and strengths and/or weakness you identified in your analysis.

B. Any recommendations you feel are warranted at this time.

Reference no: EM13355641

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