Chapter 2: 13BP_a (page 148)
United Snack Company sells 50-pound bags of peanuts to university dormitories for \(20 a bag. The fixed costs of this operation are \)176,250, while the variable costs of peanuts are $0.15 per pound.
a. What is the break-even point in bags?
Break-even point in bags is 14,100 units.
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The Haines Corp. shows the following financial data for 20X1 and 20X2:
20X1 | 20X2 | |
Sales | \(3,230,000 | \)3,370,000 |
Cost of goods sold | 2,130,000 | 2,850,000 |
Gross profits | \(1,100,000 | \)520,000 |
Selling and administrative expenses | 298,000 | 227,000 |
Operating profits | \(802,000 | \)293,000 |
Interest expense | 47,200 | 51,600 |
Income before taxes | \(754,800 | \)241,400 |
Taxes (35%) | 264,180 | 84,490 |
Income after tax | \(490,620 | \)156,910 |
For each year, compute the following and indicate whether it is increasing or
decreasing profitability in 20X2 as indicated by the ratio:
a. Cost of goods sold to sales.
Assume the following data for Cable Corporation and Multi-Media Inc.
Capable corporation | Muli-media inc | |
Net income | \(31,200 | \)140,000 |
Sales | 317,000 | 2,700,000 |
Total assets | 402,000 | 965,000 |
Total debts | 163,000 | 542,000 |
Stockholder’s equity | 239,000 | 423,000 |
c. Discuss the factors from part b that added or detracted from one firm
having a higher return on stockholders’ equity than the other firm as
computed in part a.
A-Rod Fishing Supplies had sales of \(2,500,000 and cost of goods sold of \)1,710,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 6 percent of the total assets of $4,680,000. What was the firm’s operating profit?
What advantage does the fixed charge coverage ratio offer over simply using times interest earned?
Arrange the following items in proper balance sheet presentation:
Accumulated depreciation | \(309,000 |
Retained earnings | 187,000 |
Cash | 14,000 |
Bonds payable | 136,000 |
Accounts receivable | 54,000 |
Plant and equipment – original cost | 775,000 |
Accounts payable | 35,000 |
Allowance for bad debts | 9,000 |
Common stock, \)1 par, 100,000 share outstanding | 100,000 |
Inventory | 70,000 |
Preferred stock, $59 par, 1,000 share outstanding | 59,000 |
Marketable securities | 24,000 |
Investments | 20,000 |
Notes payable | 34,000 |
Capital paid in excess of par (common stock) | 88,000 |
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