Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

FASTPACK Manufacturing produces filament packaging tape. In 2009, FASTPACK produced and sold 15 million rolls of tape. The company has recently expanded its capacity, so it now can produce up to 30 million rolls per year. FASTPACK's accounting records show the following results from 2009:
Sale price per roll $ 3.00
Variable manufacturing costs per roll $ 2.00
Variable marketing and administrative costs per roll $ 0.50
Total fixed manufacturing overhead costs $ 8,400,000.00
Total fixed marketing and administrative costs $ 1,100,000.00
Sales 15 million rolls
Production 15 million rolls


There were no beginning or ending inventories in 2009.
In January 2010, FASTPACK hired a new president, Kevin McDaniel. McDaniel has a one-year contract that specifies he will be paid 10% of FASTPACK's 2010 absorption costing operating income, instead of a salary. In 2010, McDaniel must make two major decisions:
*** Should FASTPACK undertake a major advertising campaign? This campaign would raise sales to 24 million rolls. This is the maximum level of sales FASTPACK can expect to make in the near future. The ad campaign would add an additional $2.3 million in fixed marketing and administrative costs. Without the campaign, sales will be 15 million rolls.
*** How many rolls of tape will FASTPACK produce?
At the end of the year, FASTPACK Manufacturing's Board of Directors will evaluate McDaniel's performance and decide whether to offer him a contract for the following year.


Requirements:
Within your group, form two subgroups. The first subgroup assumes the role of Kevin McDaniel, FASTPACK Manufacturing's new president. The second subgroup assumes the role of FASTPACK Manufacturing's Board of Directors. McDaniel will meet with the Board of Directors shortly after the end of 2010 to decide whether he will remain at FASTPACK. Most of your effort should be devoted to advance preparation for this meeting. Each subgroup should meet separately to prepare for the meeting between the Board and McDaniel.
(Hint : Keep computations other than per-unit amounts in millions)
Kevin McDaniel should:
1. compute FASTPACK Manufacturing's 2009 operating income.
2. decide whether to adopt the advertising campaign. Prepare a memo to the Board of Directors describeing this decision. Give this memo to the Board of Directors as soon as possible (before the joint meeting).
3. assume FASTPACK adopts the advertising campaign. Decide how many rolls of tape to produce in 2010.
4. (given the response to requirement 3) prepare an absorption costing income statement for the year ended December 31, 2010, ending with operating income before bonus. Then compute the bonus separately. The variable cost per unit and the total fixed costs (with the exception of the advertising campaign) remain the same as in 2009. Give this income statement and bonus computation to the Board of Directors as sson as possible (before the meeting with the Board).
5. decide whether he wishes to remain at FASTPACK for another year. He currently has an offer from another company. The contract with the other company is identical to the one he currently has with FASTPACK - he will be paid 10% of absorption costing operating income instead of a salary.

The Board of Directors should:
1. compute FASTPACK's 2009 operating income.
2. determine whether FASTPACK should adapt the advertising campaign.
3. determine how many rolls of tape FASTPACK should produce in 2010.
4. evaluate MCDaniel's performance, based on his decisions and the information he provided the Board. (Hint: You may want to prepare a variable costing income statement.)
5. evaluate the contract's bonus provision. Is the Board satisfied with this provision? If so, describe why. If not, recommend how it should e changed.

After McDaniel has given the Board his memo and income statement, and after the Board has had a chance to evaluate McDaniel's performance, McDaniel and the Board should meet. The purpose of the meeting is to decide whether it is in their mutual interest for McDaniel to remain with FASTPACK, and if so, the terms of the contract FASTPACK will offer McDaniel.

 

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M946430

Have any Question? 


Related Questions in Accounting Basics

Infrastructure and gasb statement1 answer the following

Infrastructure and GASB Statement 1. Answer the following questions with regard to infrastructure: A) What is infrastructure? B) What are two methods that might be used to record infrastructure expense from year to year? ...

Essay question internal accountingone to two pages single

Essay Question Internal Accounting One to two pages (single spaced, Times New Roman 12 font) discussion. Clear and well-argued showing depth of knowledge and understanding of the concepts. Check grammar and spelling. Que ...

Assignmentmemos are one-page 750 word minimum single-spaced

Assignment Memos are one-page (750 word minimum) single-spaced essays (no more than 10 font) and are due in the morning on Blackboard before we discuss assigned readings (a physical copy should also be brought to class). ...

Individual research papercompany case study assignmentthis

Individual Research Paper Company Case Study Assignment This assignment has a number of learning objectives, sources, and opportunities: 1. You will explore financial performance and investor information available fromva ...

Question 1 tonys textile company sells shirts for men and

Question 1: Tony's Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows: Men's Boy's Selling Price $28.80 Selling Price $24.00 Variable Cost $20.40 Va ...

Accounting essaywrite a 700- to 1050-word summary of the

Accounting Essay Write a 700- to 1,050-word summary of the team's discussion about IFRS versus GAAP, based on your team collaborative discussions. The summary should be structured in a subject-by-subject format. An intro ...

Question 1 owners of business firms are the only people who

Question 1 Owners of business firms are the only people who need accounting information. Question 2  Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote oper ...

Gasbvisit the website of the governmental accounting

G.A.S.B Visit the website of the Governmental Accounting Standards Board (G.A.S.B.) at http://gasb.org. Review the website to learn about the organization, its act ivies, and its goals. Review one or more of the "Plain-L ...

Problem 1 mat Problem 1 Mat. Date Rate(%) 1/15/2017 0.5 4/15/2017 0.6 7/15/2017 0.75

Problem 1 Mat. Date Rate(%) 1/15/2017 0.5 4/15/2017 0.6 7/15/2017 0.75 10/15/2017 1.0 1/15/2018 1.25 4/15/2018 1.5 7/15/2018 1.75 10/15/2018 2.0 1/15/2019 2.1 4/15/2019 2.2 7/15/2019 2.3 10/15/2019 2.4 Table 1: Continuou ...

Business assignmentthe comany i have choosen is upsresearch

Business Assignment The comany i have choosen is UPS. Research a company that interests you from the Fortune 500. (A list will be provided). Analyze what they do. What business are they in? What industry? How have they b ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro