Homework answers / question archive / Question 1) The following for 2021 and 2020 is presented for BuyRite:                                                                                                                                     December 31 Assets                                                                                                                      2021                       2020 Current assets:     Cash   $ 42,000   $ 54,000 Accounts receivable    580,000    445,000 Inventory 5,010,000 4,950,000 Prepaid expenses      84,000      79,000 Total current assets 5,716,000 5,528,000 Building and equipment, net 1,097,000 1,095,000 Total assets 6,813,000 6,623,000 Liabilities and Stockholder’s Equity Current liabilities:     Accounts payable    $ 605,000 $ 628,000 Bank loan payable       679,000    625,000 Other accrued payables       215,000    315,000 Total current liabilities    1,499,000 1,568,000 Long-term debt    1,729,000 1,791,000 Total liabilities    3,228,000 3,359,000 Stockholders’ equity: Common stock   1,307,000   1,307,000 Retained stock   2,278,000   1,957,000 Total stockholders’ equity   3,585,000   3,264,000 Total liabilities and stockholders’ equity $6,813,000 $6,623,000   There were 100,000 shares of common stock outstanding throughout both 2020 and 2021 Additional information follows:   2021 2020 Market price per share at the end of year $ 134 $ 110 Net income for the year 815,000 639,000 Cost of goods sold for the year 2,900,000 2,700,000 Net sales of the year 5,568,000 5,253,000   a

Question 1) The following for 2021 and 2020 is presented for BuyRite:                                                                                                                                     December 31 Assets                                                                                                                      2021                       2020 Current assets:     Cash   $ 42,000   $ 54,000 Accounts receivable    580,000    445,000 Inventory 5,010,000 4,950,000 Prepaid expenses      84,000      79,000 Total current assets 5,716,000 5,528,000 Building and equipment, net 1,097,000 1,095,000 Total assets 6,813,000 6,623,000 Liabilities and Stockholder’s Equity Current liabilities:     Accounts payable    $ 605,000 $ 628,000 Bank loan payable       679,000    625,000 Other accrued payables       215,000    315,000 Total current liabilities    1,499,000 1,568,000 Long-term debt    1,729,000 1,791,000 Total liabilities    3,228,000 3,359,000 Stockholders’ equity: Common stock   1,307,000   1,307,000 Retained stock   2,278,000   1,957,000 Total stockholders’ equity   3,585,000   3,264,000 Total liabilities and stockholders’ equity $6,813,000 $6,623,000   There were 100,000 shares of common stock outstanding throughout both 2020 and 2021 Additional information follows:   2021 2020 Market price per share at the end of year $ 134 $ 110 Net income for the year 815,000 639,000 Cost of goods sold for the year 2,900,000 2,700,000 Net sales of the year 5,568,000 5,253,000   a

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Question 1) The following for 2021 and 2020 is presented for BuyRite:

December 31 Assets                                                                                                                      2021                       2020
Current assets:
Cash	$ 42,000	$ 54,000
Accounts receivable	580,000	445,000
Inventory	5,010,000	4,950,000
Prepaid expenses	84,000	79,000
Total current assets	5,716,000	5,528,000
Building and equipment, net	1,097,000	1,095,000
Total assets	6,813,000	6,623,000
Liabilities and Stockholder’s Equity
Current liabilities:
Accounts payable	$ 605,000	$ 628,000
Bank loan payable	679,000	625,000
Other accrued payables	215,000	315,000
Total current liabilities	1,499,000	1,568,000
Long-term debt	1,729,000	1,791,000
Total liabilities	3,228,000	3,359,000
Stockholders’ equity:
Common stock	1,307,000	1,307,000
Retained stock	2,278,000	1,957,000
Total stockholders’ equity	3,585,000	3,264,000
Total liabilities and stockholders’ equity	$6,813,000	$6,623,000

 

There were 100,000 shares of common stock outstanding throughout both 2020 and 2021 Additional information follows:

	2021	2020
Market price per share at the end of year	$ 134	$ 110
Net income for the year	815,000	639,000
Cost of goods sold for the year	2,900,000	2,700,000
Net sales of the year	5,568,000	5,253,000

 

a. Calculate the 1) current ratio, 2) acid-test ratio, and the 3) debt-to-equity ratio for the 2020 and 2021. Calculate to three significant digits.

b. The company intends to apply for a loan. What concerns might the loan officer have about lending to the company?

Question 2) Freet Inc. preparing its cash budget for November. The budgeted beginning cash balance is $11,000. Budgeted cash receipts total $126,000 and budgeted cash disbursements total $130,000. The desired ending cash balance is $20,000. The company can borrow up to $170,000 at any time from a local bank, with interest not due until the following month.

Required:

Prepare the company’s cash budget for November in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance.

Question 3) Falsetta Corporation makes three products that use the current constraint, which is a particular type of machine. Date concerning those products appear below:

	ZA	JK	DH
Selling price per unit……	$402.67	$462.82	$374.06
Variable cost per unit…..	$307.53	$344.56	$285.56
Time on the constraint (minutes)….	6.70	7.30	5.90

  

Required:

a. Rank the products in order of their current profitability from the most profitable to the least profitable. In other words, rank the products in the order in which they should be emphasized. Show your work!

b. Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource?

Question 4) Mark Stevens is considering opening a hobby and craft store. He would invest $50,000 to purchase equipment and furnishings and another $100,000 for inventories and other working capital needs. Rent on the building used by the business will be $25,000 per year. In addition to building rent, other annual cash outflows for operating costs will amount to $44,000. Mark estimates that the annual cash inflow from the business will amount to $100,000. Mark plans to operate the business for only six years. He estimate that the equipment and furnishings could be sold at that time for about 10% of its original cost. Mark’s discount rate is 6%. All cash flows, except for the initial investment, would occur at the ends of the years.

Required:

Compute the net present value of this investment.

Question 5) Disc Buddy, Inc. produces flash drives. The selling price is $8 per drive. The variable cost of production is $2.40 per unit and the fixed cost per month is $3,600.

a. Calculate the contribution margin associated with each flash drive.

b. In August, the company sold 200 meters flash drives than planned. What is the expected effect on profit of selling the additional drives?

c. Calculate the contribution margin ration associated with one flash drive.

d. In October, the company had sales that were $2,400 higher than planned. What is the expected effect on profit related to the additional sales?

Question 6) Data concerning Ulwelling Corporation’s single product appear below:

	Per Unit	Percent of sales
Selling price	$170	100%
Variable expenses	51	30%
Contribution margin	$119	70%

 

Fixed expenses are $753,000 per month. The company is currently selling 8,000 units per month.

Required:

The marketing manager would like to introduce sales commissions as an incentive for the sales staff.

The marketing manager has proposed a commission of $11 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $73,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 300 units. What should be the overall effect on the company's monthly net operating income of this change? Show your work!