Aquarius Games Inc. has finished a new video game, Triathlon Challenge. Management is now considering its marketing strategies. The following information is available: Anticipated sales price per unit ……………………………………………… $75 Variable cost per unit* …………………………………………………………… $45 Anticipated sales volume in units ……………………………………. 800,000 Production costs ………………………………………………………. $9,000,000 Anticipated advertising costs ……………………………………… $15,000,000 *The video game, packaging, and copying costs. Two managers, Haley Chipana and Dan Gillespie, had the following discussion of ways to increase the profitability of this new offering: Haley: I think we need to think of some way to increase our profitability. Do you have any ideas? Dan: Well, I think the best strategy would be to become aggressive on price Haley: How aggressive? Dan: If we drop the price to $60 per unit and maintain our advertising budget at $15,000,000, I think we will generate sales of 2,000,000 units. Haley: I think that’s the wrong way to go. You’re giving too much up on price. Instead, I think we need to follow an aggressive advertising strategy. Dan: How aggressive? Haley: If we increase our advertising to a total of $20,000,000, we should be able to increase sales volume to 1,200,000 units without any change in price. Dan: I don’t think that’s reasonable. We’ll never cover the increased advertising costs. Which strategy is best: Do nothing? Follow the advice of Dan Gillespie? Or follow Haley Chipana’s strategy
> Bank of America hired Atlantic Resource Management, LLC, to collect a debt from Michael Engler. Atlantic called Engler’s employer and asked his supervisor about the company’s policy concerning the execution of warrants. The caller then told the superviso
> How do courts interpret ambiguities in an insurance policy?
> What are the requirements for acquiring property by adverse possession?
> What are the three elements of a bailment?
> What are the necessary elements for an effective gift?
> Bernie sells his house to Consuela under a warranty deed. Later, Delmira appears, holding a better title to the house than Consuela has. Delmira wants Consuela off the property. What can Consuela do?
> Dave, an accountant, prepares a financial statement for Excel Company, a client, knowing that Excel will use the statement to obtain a loan from First National Bank. Dave makes negligent omissions in the statement that result in a loss to the bank. Can t
> FACTS Bridge Tower Dental, P.A., contracted with Meridian Computer Center, Inc., to develop a computer system for its dental practice. Bridge Tower then paid a computer consultant, Al Colson, to install the system and provide maintenance and support. In
> In early 2016, Bennett, Inc., offered a substantial number of new common shares to the public. Harvey Helms had a long-standing interest in Bennett because his grandfather had once been president of the company. On receiving Bennett’s prospectus, Helms w
> Why might an online executor need a copy of the deceased’s death certificate?
> How might a couple who enjoy purchasing virtual and digital goods together avoid property division issues in the event of a divorce?
> A McDonald’s Happy Meal® consists of an entrée, a small order of French fries, a small drink, and a toy. In the early 1990s, McDonald’s Corp. began to aim its Happy Meal marketing at children aged one to three. In 1995, McDonald’s began making nutritiona
> In June 2015, Bernard Ramish set up a $48,000 trust fund through West Plains Credit Union to provide tuition for his nephew, Nathan Covacek, to attend Tri-State Polytechnic Institute. The trust was established under Ramish’s control and went into effect
> Vern Shoepke bought a two-story home in Roche, Maine. The warranty deed did not specify what covenants would be included in the conveyance. The property was adjacent to a public park that included a popular Frisbee golf course. (Frisbee golf is a sport s
> Vanessa Denai owned forty acres of land in rural Louisiana. On the property were a 1,600-square-foot house and a metal barn. Denai met Lance Finney, who had been seeking a small plot of rural property to rent. After several meetings, Denai invited Finney
> Superior Wholesale Corporation planned to purchase Regal Furniture, Inc., and wished to determine Regal’s net worth. Superior hired Lynette Shuebke, of the accounting firm Shuebke Delgado, to review an audit that had been prepared by Norman Chase, the ac
> Residents of Lake Caliopa, Minnesota, began noticing an unusually high number of lung ailments among the local population. Several concerned citizens pooled their resources and commissioned a study to compare the frequency of these health conditions in L
> The Internet Corporation for Assigned Names and Numbers (ICANN) is a nonprofit entity that organizes Internet domain names. It is governed by a board of directors elected by various groups with commercial interests in the Internet. One of ICANN’s functio
> What are the four essential elements of a trust?
> What is an insurable interest? When must an insurable interest exist?
> What are the duties of the landlord and the tenant with respect to the use and maintenance of leased property?
> What is an easement? What are three ways in which an easement can be created?
> Maria Ochoa receives two new credit cards on May 1. She has solicited one of them from Midtown Department Store, and the other arrives unsolicited from High-Flying Airlines. During the month of May, Ochoa makes numerous credit-card purchases from Midtown
> What is the difference between a joint tenancy and a tenancy in common?
> What is a fixture, and how does it relate to real property rights?
> What standard of care applies to common carriers?
> What are the basic duties of a bailee?
> What is real property? What is personal property?
> What crimes might an accountant commit under the Internal Revenue Code?
> How might an accountant violate federal securities laws?
> What are the rules concerning an auditor’s liability to third parties?
> What is contained in an environmental impact statement, and who must file one?
> What are the four major provisions of the Clayton Act, and what types of activities do these provisions prohibit?
> Fruitade, Inc., is a processor of a soft drink called Freshen Up. Fruitade uses returnable bottles, which it cleans with a special acid to allow for further beverage processing. The acid is diluted with water and then allowed to pass into a navigable str
> An agreement that is blatantly and substantially anticompetitive is deemed a per se violation of Section 1 of the Sherman Act. Under what rule is an agreement analyzed if it appears to be anticompetitive but is not a per se violation? In making this anal
> Wiring used by the Appliance Division of Kaufman Manufacturing is currently purchased from outside suppliers at a cost of $25 per unit. However, the same materials are available from the Electronic Division. The Electronic Division has unused capacity an
> Based on the data in Exercise 14-10, assume that management has established a 10% minimum acceptable rate of return for invested assets. a. Determine the residual income for each division. b. Which division has the most residual income? Data from Exerci
> A summary of the time tickets for January is as follows: a. Determine the amounts of factory labor costs transferred to Work in Process and Factory Overhead for January. b. Illustrate the effect on the accounts and financial statements of the factory l
> The operating income and the amount of invested assets in each division of Otte Industries are as follows: a. Compute the return on investment for each division. b. Which division is the most profitable per dollar invested? Operating Income Investe
> The production supervisor of the Machining Department for Lei Company agreed to the following monthly static budget for the upcoming year: The actual amount spent and the actual units produced in the first three months in the Machining Department were
> Fuller Enterprises uses flexible budgets that are based on the following data: Prepare a flexible selling and administrative expenses budget for July for sales volumes of $600,000, $800,000, and $1,000,000. (Use Exhibit 5
> Model 99 Hotels is considering the construction of a new hotel for $80 million. The expected life of the hotel is 20 years with no residual value. The hotel is expected to earn revenues of $15 million per year. Total expenses, including straight-line dep
> On Time Delivery Inc. is considering the purchase of an additional delivery truck for $85,000 on January 1, 20Y4. The truck is expected to have a five-year life with an expected residual value of $8,000 at the end of five years. The expected additional rev
> The following data are accumulated by Wocester Hat Company in evaluating the purchase of $250,000 of equipment, having a four-year useful life with no residual value. a. Assuming that the desired rate of return is 10%, determine the net present value f
> Bliss Beauty Products is considering an investment in one of two new product lines. The investment required for either product line is $2,800,000. The net cash flows associated with each product are shown below. a. Recommend a product of
> Wyoming Woodworks is evaluating two capital investment proposals for a retail outlet store, each requiring an investment of $1,000,000 and each with a five-year life and expected total net cash flows of $1,250,000. Location 1 is expected to provide equal a
> Daffodil Inc. is planning to invest in manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 120,000 units at $9 each. The new manufacturing equipment will cost $320,000, have a 10-year
> Arrowhead Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications product. The product is expected to generate additional annual sales of 24,000 units at $400 per unit. The equipment has a cost of $27,0
> Buscho Industries is considering one of two investment options. Option 1 is a $45,000 investment in new blending equipment that is expected to produce equal annual cash flows of $18,000 for each of eight years. Option 2 is a $17,000 investment in a new co
> Healey Development Company has two competing projects: an office building and a condominium complex. Both projects have an initial investment of $2,000,000. The net cash flows estimated for the two projects are as follows:
> Fire proofing Solutions Inc. is considering the purchase of automated machinery that is expected to have a useful life of eight years and no residual value. The average rate of return on the average investment has been computed to be 15%, and the cash pay
> Sager Industries is considering an investment in equipment that will replace direct labor. The equipment has a cost of $1,200,000 with a $300,000 residual value and a 10-year life. The equipment will replace three employees who has an average total wages
> Wisconsin Healthcare Corp. is proposing to spend $3,810,000 on a project that has estimated net cash flows of $620,000 for each of the 10 years. a. Compute the net present value, using a rate of return of 12%. Use the table of present values of an annuity
> Strahn Foods Inc. is considering two possible investments: a delivery truck or a bagging machine. The delivery truck would cost $65,970 and could be used to deliver an additional 90,000 bags of taquitos chips per year. Each bag of chips can be sold for a
> The Canyons Resort, a Utah ski resort, announced a $400 million expansion of lodging properties, lifts, and terrain. Assume that this investment is estimated to produce $79.7 million in equal annual cash flows for each of the ï¬&#
> The plant manager of Jurassic Industries is considering the purchase of new automated assembly equipment. The new equipment will cost $2,375,000. The manager believes that the new investment will result in direct labor savings of $500,000 per year for 10
> Southwest Transportation Inc. is considering a distribution facility at a cost of $10,000,000. The facility has an estimated life of 10 years and a $2,000,000 residual value. It is expected to provide yearly net cash flows of $2,500,000. The company’s min
> Ball Sports Inc. is considering an investment in one of two machines. The stitching machine will increase productivity from sewing 300 baseballs per hour to stitching 360 per hour. The contribution margin is $0.30 per baseball. Assume that any increased
> Montana Grill has computed the net present value for capital expenditures for the Billings and Great Falls locations using the net present value method. Relevant data related to the computation are as follows: a. Determine the present value index for
> “Every airline has what is called a break-even load factor. That is, the percentage of seats the airline (flies) that it must sell to cover its costs. Since revenue and costs vary from one airline to another, so does the break-even f actor. . . . Overall,
> Carnival Corporation has recently placed into service some of the largest cruise ships in the world. One of these ships can hold up to 3,600 passengers and cost $750 million to build. Assume the following additional information: • There will be 300 cruis
> Osborne Excavation Company is planning an investment of $315,000 for a bulldozer. The bulldozer is expected to operate for 1,850 hours per year for five years. Customers will be charged $140 per hour for bulldozer work. The bulldozer operator costs $37 pe
> The following data are accumulated by McDermott Motors Inc. evaluating two competing capital investment proposals: Determine the expected average rate of return for each proposal. Testing Equipment Diagnostic Software $150,000 5 years $5,000 Amount
> On-Demand Sports Co. operates two divisions—the Action Sports Division and the Team Sports Division. The following income and expense accounts were provided as of November 30, 20Y1, the end of the current fiscal year, after all adjustments, including thos
> Panda Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: The service department charge rate for the service department cos
> Power Sports Company has two divisions, Wholesale and Retail, and two corporate service departments, Tech Support and Accounts Payable. The corporate expenses for the year ended December 31, 20Y7, are as follows: Tech Support Department â€&br
> Harris Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table i
> Millennium Printers Inc. manufactures color laser printers. Model L-1819 presently sells for $200 and has a total product cost of $160, as follows: Direct materials …………………………… $ 40 Direct labor …………………………………… 80 Factory overhead …………………………. 40 Total
> Toyota Motor Corporation (TM) uses target costing. Assume that Toyota marketing personnel estimate that the competitive, average selling price for the Rav4 in the upcoming model year will need to be $25,000. Assume further that the Rav4’s total unit cost
> Based on the data presented in Exercise 12-15, assume that Willis Products Inc. uses the variable cost concept of applying the cost-plus approach to product pricing. a. Determine the variable costs and the cost amount per unit for the production and sale
> Phil Fritz is a financial consultant to Magna Properties Inc., a real estate syndicate. Magna Properties Inc. finances and develops commercial real estate (office buildings). The completed projects are then sold as limited partnership interests to individu
> Based on the data presented in Exercise 12-15, assume that Willis Products Inc. uses the product cost concept of applying the cost-plus approach to product pricing. a. Determine the total manufacturing costs and the cost amount per unit for the productio
> Willis Products Inc. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 200,000 units of medical tablets are as follows: Willis Products desires a profit equal to a 20% rate of return o
> Miramar Tire and Rubber Company has capacity to produce 250,000 tires. Miramar presently produces and sells 200,000 tires for the North American market at a price of $40 per tire. Miramar is evaluating a special order from a South American automobile com
> Palomar Battery Company expects to operate at 75% of full capacity during April. The total manufacturing costs for April for the production of 60,000 batteries are budgeted as follows: Direct materials ………………………………. $ 75,000 Direct labor ………………………………………
> Madison Industries Inc. has an annual plant capacity of 800,000 units, and current production is 650,000 units. Monthly fixed costs are $1,200,000 and variable costs are $36 per unit. The present selling price is $50 per unit. The company received an offe
> Bozeman Coffee Company produces Columbian coffee in batches of 10,000 pounds. The standard quantity of materials required in the process is 10,000 pounds, which cost $3.50 per pound. Columbian coffee can be sold without further processing for $8.00 per p
> Lone Wolf Technologies Inc. assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $75,000, the accumulated depreciation is $30,000, its remaining useful life is eight years, and
> Creekside Products Inc. is considering replacing an old piece of machinery, which cost $315,000 and has $130,000 of accumulated depreciation to date, with a new machine that costs $275,000. The old machine could be sold for $140,000. The annual variable
> Wisconsin Arts of Milwaukee employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, and other publications for the productions. The pages are delivered to an outside company for printing. The company is cons
> Watts Technologies Company has been purchasing carrying cases for its portable tablets at a delivered cost of $6.50 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 60% of dire
> Warm Space Inc. manufactures electric space heaters. While the CEO, Gwen Willis, is visiting the production facility, the following conversation takes place with the plant manager, Tyra Chastain: Gwen: As I walk around the facility, I can’t help noticing
> On the basis of the following data, the general manager of Sandals Industries Inc. decided to discontinue Children’s Sandals because it reduced operating income by $65,000. What is the flaw in this decision? SANDALS
> The Charles Schwab Corporation (SCHW) is one of the more innovative brokerage and financial service companies in the United States. The company provided information about its major business segments as follows (in millions) for a recent ye
> The condensed product-line income statement for Dinner Ware Company is as follows: Fixed costs are 40% of the cost of goods sold and 18% of the selling and administrative expenses. Dinner Ware assumes that fixed costs would not be significantly affecte
> A condensed income statement by product line for Garcia Beverages Inc. indicated the following for Melon Cola for the past year: Sales ……………………………………. $ 3,750,000 Cost of goods sold …………………. (2,250,000) Gross profit …………………………. $ 1,500,000 Operating exp
> Orwell Industries is considering selling excess machinery with a book value of $300,000 (original cost of $950,000 less accumulated depreciation of $650,000) for $145,000 less a 5% brokerage commission. Alternatively, the machinery can be leased out for
> A new assistant controller recently said: “All the assembly workers in this plant are covered by union contracts, so there should be no labor variances.” Was the controller’s remark correct? Discuss.
> a. What are the two variances between the actual cost and the standard cost for direct materials? b. Discuss some possible causes of these variances.
> Monsanto Company, a large chemical and fibers company, invested $37 million in state-of-the-art systems to improve process control, laboratory automation, and local area network (LAN) communications. The investment was not justified merely on cost saving
> The reliability of cost-volume-profit (CVP) analysis depends on several key assumptions. What are those primary assumptions?
> Two projects have an identical net present value of $360,000. Are both projects equal in desirability?
> With a group of students, visit a local copy and graphics shop or a take-out pizza restaurant. As you observe the operation, consider the costs associated with running the business. As a group, identify as many costs as you can and classify them accordin
> Why might the use of the cash payback period for analyzing the financial performance of theatrical releases from a motion picture production studio be used over the net present value method?
> Why should the production requirements set forth in the production budget be carefully coordinated with the sales budget?
> How does the target cost concept differ from cost plus approaches?
> The returns on investment for Shear Co.’s three divisions, North, South, and Midwest are 38%, 30%, and 22%, respectively. In expanding operations, which of Shear Co.’s divisions should be given priority? Explain.
> What is the major shortcoming of using operating income as a performance measure for investment centers?
> Under what circumstances would a static budget be appropriate?
> Many fast-food restaurant chains, such as McDonald’s, occasionally discontinue restaurants in their system. What are some financial considerations in deciding to eliminate a store?
