Solved by verified expert :The
short answer questions below required detailed answers. Read each question to
understand the requirements. Notice that the questions may require computations
and multiple-part answers, and they should include reference to where the
answer was located.
1.(TCO 10) Not all pricing methods apply to
the market place. In manufacturing it is common practice to determine
the cost of a product as it moves through it transformation to a finished
product. (1) Explain how a transfer price could be used to make other
financial decisions (10 points) and (2) provide an example of the
application of transfer price data (10 points). (Points : 20)
2.(TCO 11) Terry LeMay is unclear as to the
difference between the income statement of a merchandising company and a
manufacturing company. (1) Describe and provide an example of an
income statement of a merchandising company and (2) compare to an example
of an income statement of a manufacturing company (10 points). (Points :
20)
3.(TCO 3) Internal Control Procedures are
required to safeguard company assets and to ensure ethical operation of the
business. (1) Explain how proper approvals can satisfy the purpose of
internal control (10 points) and (2) provide an example of how this control
could be implemented (10 points). (Points : 20)
4.(TCO 7) To promote better management control
of business centers financial responsibilities are assigned to managers.
There are three basic types of responsibility centers. (1) Explain
how a investment center operates (10 points) and (2) provide an example of
its application in business. (10 points). (Points : 20)
.
5.(TCO 1) To evaluate the financial operation
and health of a business ratio analysis is used. (1) Provide the formula
for Current Ratio and explain how it is computed (10 points) and (2)
provide an example of how this ratio can be used in decision making in
business (10 points). (Points : 20)
Part 2
The
essay questions below required detailed answers. Read each question to
understand the requirements. Notice that the questions may require computations
and multiple-part answers, and they should include reference to where the
answer was located.
1.(TCO 8) Planning for capital
investments is an important function of management. You are
responsible for considering purchasing new equipment for $450,000. It
is expected that the equipment will produce net annual cash flows of
$55,000 over its 10-year useful life. Annual depreciation will be
$45,000. Compute the cash payback period. (1) Explain the pros
and cons of using this method to evaluate a capital expenditure (10 points)
and (2) show all computations required to arrive at the correct
solution. (15 points). (Points : 25)
Answer:
2.(TCO 6) To adequately plan for the success
of the business a budget must be developed. (1) Indicate the benefits
of budgeting (10 points) and (2) state the essentials of effective
budgeting (15 points). Include textbook page references to identify
where the correct answer was located. (Points : 25)
Answer:
3.(TCO 4) Financial statement analysis is used
by investors, creditors and managers of business to evaluate the operation
and health of the business. This information is in part the basis for
decision making. (1) Identify ratios use to evaluate the ability to
pay current and long-term liabilities (10 points) and (2) provide an
example of how the results of this analysis could be used to make business
decisions. (15 points). (Points : 25)
4.(TCO 2) There are three different forms of
business; sole-proprietor, partnership and corporation. (1) Explain
why a corporation’s taxation may not be considered a positive (10 points)
and (2) as a stockholder explain why a stockholder would want to own common
stock. (15 points). (Points : 25)
5.(TCO 5) Allgood Inc. has fixed costs of
$480,000. It has a unit selling price of $6, unit variable cost of
$4.50, and a target net income of $1,500,000. Compute the required
sales in units to achieve its target net income. (1) Explain how the
analysis is to be performed (10 points) and (2) Show all computations
required to arrive at the correct answer. (20 points). (Points : 30)
6.(TCO 9) Warsaw Products has a factory
machine with a book value of $90,000 and a remaining useful life of 4
years. A new machine is available at a cost of $250,000. This
machine will have a 4-year useful life with no salvage value. The new
machine will lower annual variable manufacturing costs from $600,000 to
$500,000. Prepare an analysis showing whether the old machine should
be replaced or retained. (1) Explain how the analysis is to be
performed (10 points) and (2) Show all computations required to arrive at
the correct answer. (20 points). (Points : 30)
