Essay, Finance and Accounting:
Vitalite, Inc., produces a number of products, including a body-wrap kit. Standard variable costs relating to a single kit are given below:
1. What was the total standard cost of the materials used during August?
2. How many yards of material are required at standard per kit?
3. What was the materials price variance for August if there were no beginning or ending inventories of materials?
4. What is the standard direct labor rate per hour?
5. What was the labor rate variance for August? The labor efficiency variance?
6. What was the variable overhead rate variance for August? The variable overhead efficiency variance?
7. Complete the standard cost card for one kit shown at the beginning of the problem.
Please use this attached spreadsheet to help you work through this problem:
DISCUSSION 5 TEMPLATE.xlsx
6. Thrifty Markets, Inc., operates three stores in a large metropolitan area. The company’s segmented absorption costing income statements for the last quarter is given below:
Management is very concerned about the Downtown Store’s inability to show a profit and consideration is being given to closing the store. The company has asked you to make a recommendation as to what course of action should be taken. The following additional information is available about the store:
a. The manger of the store has been with the company for many years; he would be retained and transferred to another position in the company if the store were closed. His salary is $6,000 per month, or $18,000 per quarter. If the store were not closed, a new employee would be hired to fill the other position at a salary of $5,000 per month.
b. The lease on the building housing the Downtown Store can be broken with no penalty.
c. The fixtures being used in the Downtown Store would be transferred to the other two stores if the Downtown Store were closed.
d. The compnay’s employment taxes are 12% of salaries
e. A single crew serves all three stores. One delivery person could be discharged if the Downtown Store were closed; this person’s salary amounts to $7,000 per quarter. The delivery equipment would be distributed to other stores. The equipment does not wear out through us, but it dies eventually become obsolete.
f. One-third of the Downtown Store’s insurance relates to its fixtures.
g. The general office salaries and other expenses relate to the general management of Thrifty Markets, Inc. The employee in the general office who is responsible for the Downtown Store would be discharged if the store were closed. This employee’s compensation amounts to $8,000 per quarter
Required:
1. Prepare a schedule showing the change in revenues and expenses and the impact on the overall company net operating income that would result if the Downtown Store were closed.
2. Based on your computations in (1) above, what recommendation would you make to the management of Thrifty markets, inc.?
3. Assume that if the Downtown Store were closed, sales in the uptown Store would increase by $200,000 per quarter due to loyal customers shifting their buying to the Uptown Store. The uptown Store has ample capacity to handle the increased sales, and its gross margin is 43% of sales. What effect would these factors have on your recommendation concerning the Downtown Store? Show Computations.
PLEASE USE THE ATTACHED TEMPLATE TO ASSIST YOU WITH COMPLETING THIS DISCUSSION
DISCUSSION 6 TEMPLATE.xlsx
7. Let’s use this forum to work on the CT seven assignment together. Please ask questions and ask for hints. I have attached a spreadsheet to help you work through this assignment. CT 7 Template(2).xlsx
Once you’ve completed the spreadsheet, please post it and answer the following questions:
What are the cash flows for each year?
How does depreciation affect the net present value calculation?
What are the present value amounts for each year?
What is the net present value for the project?
Is the project a “go” or a “no”?
8. Assume as the manager of a company you are presented with the company’s financial statements. What broad steps would you take to analyze the financial statements? Will you calculate any ratios? If yes, please explain which ones, why you would select those particular ratios, how you will undertake the calculations, and how you will interpret and use the resulting numbers.