You have been asked to attend the corporate meeting next week to discuss the performance of your division. To help you prepare for the meeting, you requested the following information from the Chief Financial Officer.
Balance Sheet
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A
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B
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C
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D
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E
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1
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Assets
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2008
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2
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Cash
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$14,000
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3
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Short-term investments.
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71,632
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4
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Accounts receivable
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878,000
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5
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Inventories
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1,716,480
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6
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Total current assets
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$2,680,112
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7
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Gross fixed assets
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1,220,000
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8
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Less: accumulated depreciation
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383,160
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9
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Net fixed assets
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$836,840
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10
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Total assets
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$3,516,952
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11
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12
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Liabilities and equity
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2008
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13
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Accounts payable
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$359,800
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14
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Notes payable
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300,000
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|
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15
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Accruals
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380,000
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16
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Total current liabilities
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$1,039,800
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17
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Long-term debt
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500,000
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18
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Common stock (100,000 shares)
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1,680,936
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19
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Retained earnings
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296,216
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20
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Total equity
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$1,977,152
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21
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Total liabilities and equity
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$3,516,592
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22
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23
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2008
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24
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Sales
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$7,035,600
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25
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Cost Of Goods Sold
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5,800,000
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|
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26
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Selling and Administrative Expenses
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612,960
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27
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Depreciation
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120,000
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28
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Total Operating Costs
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$6,532,960
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|
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29
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EBIT
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$502,640
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|
30
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Interest Expense
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80,000
|
|
|
|
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31
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EBT
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$422,640
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|
|
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32
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Taxes (40%)
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169,056
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|
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33
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Net Income
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$253,584
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34
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|
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35
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|
2008
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|
|
36
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Stock Price
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$6.00
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37
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Shares Outstanding
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100,000
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38
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EPS
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($0.95)
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|
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39
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DPS
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$0.11
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40
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Tax Rate
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40%
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41
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Book Value Per Share
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$7.91
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42
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Lease Payments
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$40,000
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43
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44
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Statement of retained earnings, 2008
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45
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Balance of retained earnings, 12/31/2007
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$203,768
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46
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add: net income, 2008
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($95,136)
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47
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less: dividend paid, 2008
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($11,000)
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48
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Balance of retained earnings, 12/31/2008
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$97,632
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49
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|
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50
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Master Budget for 2008
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51
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Sales (350,000 units of A @ $15 and 350,000 units of B @ $5)
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$7,000,000
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52
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Cost of goods sold
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5,810,000
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53
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Contribution margin
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$1,190,000
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54
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Selling and Administrative expenses
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155,000
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|
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55
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Operating income
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$1,035,000
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56
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|
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57
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Standard variable manufacturing cost per unit:
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58
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Product A
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Product B
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59
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Direct Materials
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10 pieces @ $.50
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$5.00 per unit
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5 pounds @ $.30
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$1.50 per unit
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60
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Direct Labor
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1 hour @ $3.00
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$3.00 per unit
|
.3 hours @ $2.50
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.75 per unit
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61
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Variable overhead
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1 hour @ $2.00
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$2.00 per unit
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.3 hours @ $2.50
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.75 per unit
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62
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Total
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$10.00 per unit
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$3.00 per unit
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|
63
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|
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|
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64
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Actual variable manufacturing cost:
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65
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Product A
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Materials
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$2,519,000
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(5,038,000 pieces)
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|
|
66
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Labor
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1,509,000
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( 503,000 hours)
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|
|
67
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Overhead
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1,006,000
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( 503,000 hours)
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|
|
68
|
Product B
|
Materials
|
4,530,000
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(3,020,000 pounds)
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|
|
69
|
|
Labor
|
150,000
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( 200,000 hours)
|
|
|
70
|
|
Overhead
|
150,000
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( 200,000 hours)
|
|
|
71
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Total
|
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$9,864,000
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|
|
Required:
A. Identify and strengths and/or weakness you identified in your analysis.
B. Any recommendations you feel are warranted at this time.