accounting 590

Part 1

 

 

Factoring resource constraints into product mix decisions

 

 

 

Rose Incorporated manufactures two types of vases, small and large. The following per-unit data are available.

 

 

 

                                                                                        Small Vase         Large Vase

 

Sale price                                                                            $60                       $100

 

Variable costs                                                                   $35                         $60

 

Machine hours required for 1 vase                                1                              2

 

 

 

Total fixed costs are $600,000, and Rose Incorporated can sell a maximum of 25,000 units of each type of vase annually. Machine hour capacity is 50,000 hours per year.

 

 

 

a.       Determine the contribution margin per unit for each type of vase.

 

b.       Determine the contribution margin per machine hour for each type of vase.

 

c.        Determine the number of units of each style of vase that Rose Incorporated should produce to maximize operating income.

 

d.       What is the dollar amount of the maximum operating income as calculated in C above?

 

 

 

Part 2

 

 

Financial Statement Analysis

 

 

 

The following information relates to Harris Corporation.

 

 

 

Account

Current year

Prior year

Net sales (all credit)

$520,125

$499,500

Cost of goods sold

$375,960

$353,600

Gross profit

$144,165

$145,900

Income from operations

$ 95,500

$ 79,900

Interest expense

$ 23,500

$ 19,500

Net income

$ 57,600

$ 51,600

Cash

$ 30,600

$ 15,900

Accounts receivable, net

$ 33,800

$ 23,200

Inventory

$ 42,000

$ 30,300

Prepaid expenses

$ 2,000

$ 1,500

Total current assets

$ 108,400

$ 70,900

Total long-term assets

$ 62,000

$ 38,000

Total current liabilities

$ 46,000

$ 41,600

Total long-term liabilities

$ 20,000

$ 22,700

Common stock, no par,

3,000 shares, value $50/share

$ 30,000

$ 30,000

 

 


Required:

 

 

 

a.       What is the acid-test ratio for the current year?

 

b.       What is the inventory turnover for the current year?

 

c.        What is days’ sales in receivables for the current year?

 

d.       What is the book value per share of common stock for the current year?

 

e.        What is the price-earnings ratio for the current year?

 

f.         What is the rate of return on total assets for the current year?

 

g.       What is the times-interest-earned ratio for the current year?

 

h.       What is the current ratio for the current year?

 

 

 

 

 
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