ACT 5060 - Accounting for Decision Makers Mid-Term Exam
Question 1 -
a) How would a financial analyst prepare a vertical analysis of the income statement?
b) What are some things a financial analyst can learn about a firm by performing a vertical analysis of the income statement?
Question 2 -
a) How would a financial analyst prepare a vertical analysis of the balance sheet?
b) What are some things a financial analyst can learn about a firm by performing a vertical analysis of the balance sheet?
Question 3 - How can a financial analyst assess a firm's solvency? As part of your answer, describe ratios that would be helpful and things that the analyst should be looking for in performing the analysis.
Question 4 - How can a financial analyst use a firm's days to sell ratio, days to collect ratio, and asset turnover ratio to assess a firm's management efficiency? As part of your answer, you should give the formula for each ratio and say how it relates to management efficiency.
Question 5 - In analyzing a firm's ratios over a four-year period, you observe that the firm's gross margin percentage has steadily increased. Over the same period, its operating margin percentage has also steadily increased, but at a slower rate than the gross margin percentage. How would you interpret this? Be specific in your response.
Question 6 - The ABC Company manufactures widgets. It competes and plans to grow by selling high-quality widgets at low prices and by delivering them to customers quickly. There are many other companies in the industry producing similar widgets. ABC believes it needs to continuously improve its manufacturing and delivery processes and that having satisfied employees are both critical to its long-term success. List and justify eight metrics (2 in each of the Balanced Scorecard perspectives) that you believe ABC should include in its Balanced Scorecard.
Question 7 - The following is budgeted information for the Connor Corporation:
| |
Product XYZ
|
Product ABC
|
|
Annual production & sales
|
20,000
|
30,000
|
|
Projected selling price
|
$50.00
|
$30.00
|
| |
|
|
|
Production Cost Information
|
|
|
|
Parts (per unit)
|
$10.00
|
$6.00
|
|
Direct Labor (per unit)
|
$18.50
|
$10.00
|
|
Supplies (per unit)
|
$4.00
|
$4.00
|
Additional information:
- Fixed manufacturing overhead costs are budgeted to be $80,000.
- Selling & administrative costs (a mixed cost) are budgeted to be $120,000. The variable component is $1 per unit.
Assuming the budgeted sales mix remains intact, how many units of each product does Connor need to sell in order to break even?
Question 8 - The following per unit information is based on expected production (capacity) and sales of 10,000 units:
|
Selling price
|
$75
|
|
Variable cost of goods sold
|
$23
|
|
Fixed cost of goods sold
|
$16
|
|
Gross Profit
|
$36
|
|
|
|
|
Variable selling & administrative
|
$10
|
|
Fixed selling & administrative
|
$5
|
|
Operating Income
|
$21
|
a) How many units need to be sold to break-even?
b) How many units need to be sold to earn operating income of $42,000?
Question 9 - What is an opportunity cost? Give an example of one. How can an opportunity cost impact the decision to accept a special order?
The cost of an alternative that must be forgone in order to pursue a certain action, an example of this are the benefits you could have received by taking an alternative action. The impact of opportunity cost for accepting special orders can affect the production cost, due to the fact that you adding additional cost and products.
Question 10 - List and describe 3 ways in which management accounting differs from financial accounting.