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1)8- 6. The Burlington plant of Consumer Cosmetics is responsible for manufacturing all the lip gloss products that the company manufactures. In 2015...
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Assignment 1 - Questions.docx
1)8- 6. The Burlington plant of Consumer Cosmetics is responsible for manufacturing all
the lip gloss products that the company manufactures. In 2015 the plant had the
following budgeted and actual costs.
2015
Budget Raw materials
Direct labour
Manufacturing overhead
Distribution costs
Administration
Total
Production units 2015
Actual $ 100,000
250,000
400,000
100,000
150,000 10.0%
25.0%
40.0%
10.0%
15.0% $ 110,000
275,000
440,000
110,000
140,000 10.2%
25.6%
41.0%
10.2%
13.0% $1,000,000
850 kg 100.0% $1,075,000
935 kg 100.0% Required
(a) Head Office is complaining about cost over-runs. It says that all the
manufacturing costs are higher than the budget in both $ and %. As manager of
the plant, how would you respond to justify your position? (b) Ignoring price changes, etc., if you were told that the quantity to be manufactured
in 2016 would be 1,000 kg, prepare the budget for 2016. 2)9-2. You are the manager of Forest Products Inc. On January 1, you expect the following
balances.
Cash on hand
Accounts receivable
Inventory
Prepayments & deposits
Total current assets $ 9,000
100,000
40,000
1,000
$150,000 Current trade liabilities
Expected sales revenue for January
Expected cost of goods sold for January
Expected expenses for January (75,000 from December, 25000 from November) $ 75,000
$180,000
$120,000
$ 10,000 During January you expect to receive: All the $25,000 outstanding from November
$50,000 of the amount outstanding from December
50% of January’s sales revenue (the remainder being sold on credit) During January you expect to pay: $75,000 current trade liabilities
Inventory bought in January will be paid for in February
All the expenses, except $1,000 of depreciation and $200 expiration of
prepayments Required
Prepare a cash budget for January. 3)10-6.
You are given the following information for the Face-Care Products Division of
Cygnet Inc.:
Cygnet Inc.
Face-Care Products
Budgetary Control Report of January ($ millions)
Details
Total Face Care Product Market
Market share
Sales revenue
Variable costs
Raw materials
Direct labour
Overhead
Marketing
Fixed costs
Production
Marketing & administration
Total costs
Operating income Budget
$10,000
5%
$500
$ 80
150
50
20
$ 50
10 $300
60
$360 Actual
$12,500
4%
$500
$ 95
150
45
10
45
5 $140 $300
50
$350
$150 Required
(a) Is the Face-Care Products Division “in control” or “out of control”? (b) In any areas where the division has deviated from the original plan, identify which
managers should be held responsible. (c) How much operating income do you think the Face-Care Products Division
should have made in January? 4)2-11.
Gerry’s Superette had sales of $5,000,000 in the most recent year. Operating
expenses were $3,500,000. Interest and taxes totaled $500,000. Total liabilities were
$200,000, and owners’ equity was $800,000.
Required
Calculate the following:
(a) The return on assets (b) The return on owners’ equity 5)7- 1. Togo Co. has the following financial statements.
Togo Co.
Income Statement for the Year Sales revenue
Less: Cost of goods sold
Gross profit
Less: Operating expenses
Depreciation
Operating income
Less: Interest expense
Income taxes
Net income $18,000,000
12,000,000
$ 6,000,000
$3,700,000
500,000 4,200,000
$ 1,800,000 $ 100,000
800,000
$ 900,000
900,000 Togo Co.
Balance Sheet at the End of the Year
$1,000,000
Current assets: Cash
3,600,000
Accounts receivable
2,400,000
Inventory $7,000,000 $5,000,000
3,000,000 2,000,000 Long-term assets: At cost
Accumulated
depreciation
Total assets
Liabilities & Shareholders’ Equity
Current liabilities: Trade accounts payable
Other current liabilities
Long-term liabilities: Mortgage
Total liabilities
Shareholders’ Equity: Common shares
Retained earnings
Total liabilities & Shareholders’ Equity $ 9,000,000
$2,250,000
750,000 $1,500,000
3,000,000 $3,000,000
1,500,000
$4,500,000
4,500,000
$ 9,000,000 Required
Use the information in the financial statements to answer the following questions:
(a) Calculate the following ratios:
(i) return on sales ratio (as a %) (ii) return on assets ratio (as a %) (iii) return on equity ratio (as a %) (b) Based on these ratios, comment on the profitability of the company. (c) Calculate the following ratios: (i) the current ratio (ii) the quick ratio (d) Based on these ratios, comment on the liquidity of the company. (e) Calculate the following ratios:
(i) the gross profit to sales ratio (as a %) (ii) the ratio of operating expenses to sales (as a %) (iii) the operating income to sales ratio (as a %) (iv) the net income to sales ratio (as a %) (v) the interest cover ratio (vi) the dividend cover ratio (f) Based on these ratios, comment on the profitability of the company. (g) Cal0063ulate the following:
(i) the receivables turnover ratio (ii) the receivables collection period (iii) the inventory turnover ratio (iv) the inventory holding period (v) the total asset turnover ratio (h) Based on these ratios, comment on the efficiency of the company. (i) Assume Togo Co.’s share price is $100 per share, and there are 100,000 shares
in issue. Calculate the following: (j) (i) the dividend payout ratio (ii) the earnings per share (iii) the price to earnings ratio Based on these ratios, comment on the desirability of these shares as an
investment.

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