Friday, September 2, 2011

Accounting

Problems

1. Break-even analysis (LO2) Shock Electronics sells portable heaters for $25 per unit, and the variable cost to produce them is $17. Mr. Amps estimates that the fixed costs are 96,000.

a. Compute the break-even point in units.

b. Fill in the table below (in dollars) to illustrate that break-even point been achieved.

5-1. Solution:

Shock Electronics Corporation

a. BE= FC/P-VC BE=96,000 = 12,000 units

25-17

b. Sales……………………….$300,000

-Fixed costs………………… 204,000

-Total variable costs………… 96,000

Net profit (loss)……………….. 0

6. Break-even analysis (LO2) Jay Linoleum Company has fixed costs of $70,000. Its product currently sells for $4 per unit and has variable costs per unit of $2.60. Mr. Thomas, the head of manufacturing, proposes to buy new equipment that will cost $300,000 and drive up fixed cost to $105,000. Although the price will remain at $4 per unit the increased automation will reduce variable costs per unit to $2.25.

As a result of Thomas’s suggestion will the break-even point go up or down? Compute necessary numbers.

BE1= 70,000/1.4 BE2= 105,000/1.75

BE1=50,000 BE2=60,000

The break-even point will increase by 10,000 units.

10. Degree of leverage (LO2 & 5) The Sterling Tire Company’s income statement for 2010 is as follows:

STERLING TIRE COMPANY Income Statement For the Year Ended December 31, 2010
Sales (20,000 skates @ $60 each).................................	$1,200,000
Less: Variable costs (20,000 skates at $30)...................	600,000
Fixed costs................................................................	400,000
Earnings before interest and taxes (EBIT)....................	200,000
Interest expense.............................................................	50,000
Earnings before taxes (EBT).........................................	150,000
Income tax expense (30%)............................................	45,000
Earnings after taxes (EAT)............................................	$ 105,000

Given this income statement, compute the following:

a. Degree of operating leverage.

b. Degree of financial leverage.

c. Degree of combined leverage.

d. Break-even point in units (number of skates).

5-10. Solution:

STERLING TIRE COMPANY

Q =20,000, P = $60, VC = $30, FC = $400,000, I = $50,000

a. DOL= 20,000(60-30) = 3

20,000(60-30)-400,000

b. DFL= 200,000 = 1.33

200,000-50,000

c. DCL= 20,000(60-30) = 4

20,000(60-30)-400,000-50,000

d. BE= 400,000 = 13,333.33

60-30

26. Operating leverage and ratios (LO6)

26. Solution

Sales (1,000,000 @ $5 each)…………………….. 5,000,000

-Fixed costs…………………………………………1,500,000

–variable costs (1,000,000 @ $3 each)……………..3,000,000

Operating income…………………………………... 500,000

Earnings before interest taxes………………………. 500,000

Interest………………………………………………. 32,000

Earnings before taxes.................................................. 468,000

Taxes (40%)…………………………………………. 187,200

Earnings after taxes………………………………….. 280,800

Shares……………………………………………….. 60,000

Earnings per share…………………………………… 4.68

b. Sales (1,400,000 @ $4.50 each)………………… 6,300,000

-Fixed costs…………………………………………1,500,000

–variable costs (1,400,000 @ $3 each)……………..4,200,000

Operating income…………………………………... 600,000

Earnings before interest taxes………………………. 600,000

Interest………………………………………………. 45,000

Earnings before taxes.................................................. 555,000

Taxes (40%)…………………………………………. 222,000

Earnings after taxes………………………………….. 333,000

Shares……………………………………………….. 50,000

Earnings per share…………………………………… 6.66

c. Sales (1,400,000 @ $4.50 each)………………… 6,300,000

-Fixed costs…………………………………………1,725,000

–variable costs (1,400,000 @ $3 each)……………..4,200,000

Operating income…………………………………... 375,000

Earnings before interest taxes………………………. 375,000

Interest………………………………………………. 45,000

Earnings before taxes.................................................. 330,000

Taxes (40%)…………………………………………. 132,000

Earnings after taxes………………………………….. 198,000

Shares……………………………………………….. 50,000

Earnings per share…………………………………… 3.96

Accounting

Chapter 7

Problems

2. Cost-benefit analysis of cash management (LO2) Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by one and one-half days. Furthermore the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without offending suppliers. The bank has a remote disbursement center in Florida.

a. If Neon Light Company has $2 million per day in collections and $1 million per day in disbursements, how many dollars will the cash management system free up?

b. If Neon Light Company can earn 9 percent per annum on freed-up funds, how much will the income be?

c. If the total cost of the new system is 375,000, should it be implemented?

7-2. Solution:

Beth’s Society Clothiers, Inc.

a. $2,000,000 daily collections × 1.5 days speed up =

$3,000,000 additional collections

$1,000,000 daily disbursements ×.5 days slow down =

$500,000 delayed disbursements

$3,000,000 additional collections

$,500,000 delayed disbursements

$3,500,000 freed-up funds

b. $3,500,000 freed-up funds

x 9% interest rate

$ 315,000 interest on freed-up cash

c. No. The income of 315,000 is 60,000 less than the cost of 375,000.

5. Average collection period (LO4) Sander’s Prime Time Company has annual credit sales of $1,800,000 and accounts receivable of $210,000. Compute the value of the average collection period.

7-5. Solution:

Sander’s Prime Time Company

Daily Credit Sales = 1,800,000/360 = 5,000

Average collection period= 210,000 = 42 days

5,000

12. Economic ordering quantity (LO5) Midwest Tires has expected sales of 12,000 tires this year, an ordering cost of $6 per order, and carrying costs of $1.60 per tire.

a. What is the economic ordering quantity?

b. How many orders will be placed during the year?

c. What will the average inventory be?

7-12. Solution:

Fisk Corp.

a. EOQ= 2SO/C = 2(12,000)(6) /1.60 = 300

b. 12,000 units/300 units = 40 orders

c. EOQ/2 = 300/2 = 150 units (average inventory)

17. Credit policy decision ( LO4) Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $100,000 if credit is extended to these new customers. Of the new accounts receivable generated, 10% will prove to be uncollectible. Additional collection costs will be 3% of sales, and production and selling costs will be 79% of sales. The firm is in the 40% tax bracket.

a. Compute the incremental income after taxes.

b. What will Johnson’s incremental return on sales be if these new credit customers are accepted?

c. If the receivable turnover ratio is 6 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson’s incremental return on new average investment be?

7-17. Solution:

Johnson Electronics

a..... Added sales.............................................................. $ 100,000

Accounts uncollectible (10% of new sales)........... – 10,000

Annual incremental revenue................................... $ 90,000

Collection costs (3% of new sales)......................... – 3,000

Production and selling costs

(79% of new sales) – 79,000

Annual income before taxes.................................... $ 8,000

Taxes (40%)............................................................. – 3,200

Incremental income after taxes............................... $ 4,800

b. Return on Sales = 4,800/100,000 = 4.8%

c. Accounts receivable = Sales = $100,000 = $16,666.67

Turnover 6

4,800/ 16,666.67 = 28.8%

Early American History U.S. Constitution

Name

School

History 121

June 20, 2011

The United States Constitution came about after the war of revolution. The Articles of Confederation were the first form of government established in America. The articles were flawed because they created a weak federal government. The articles made it difficult to raise a national army for defense also made it hard to collect taxes. The Constitution was debated in secret, the two main plans that come out are the Virginia and New Jersey plans. The Virginia plan called for a central government with three branches and a bicameral legislature. The New Jersey plan called for a unicameral assembly with one vote per state.

The two main groups of the time were the Anti-Federalists and the Federalists. Anti-Federalists wanted a weak Federal government, while the Federalists wanted a stronger federal government. The Anti-Federalists argued that a strong federal government will become corrupt and will eventually restrict the freedom of the citizens. The Federalists said a strong federal government is needed in order to protect the states help with diplomacy and trade. Most Americans were skeptical of a strong Federal government because they had just fought a war against a country with a similar system. During the time most Americans did not see themselves as Americans they saw themselves as members of their home state.

The Constitution was adopted with the first ten amendments to the Constitution in order to quiet the concerns of the people over the role of the federal government. Even today people argue over the role of the federal government. People who desire freedom and achieve it will always live in fear of it being taken away, so the concerns over the role of government will never be adequately resolved.

Slaves, Native Americans, women had little to gain from the creation of America. The founding fathers did not include any language that would allow women to become active in the government many felt it was not a women’s place. The issue of slavery was debated some wanted to end slavery, but the southern states whose economy was based on slavery pushed back and the issued was eventually dropped. Native Americans were not really even considered at all most considered the natives as an obstacle to overcome to move westward. Men who did not own land were unhappy with not being given access to government. After the American government was formed men who did not own land were eventually given access to the government.

The formation of the American government was much more difficult then is normally assumed by the general public. There were very different and passionate views that could have lead to a very different America then the one we currently enjoy. Today we think our passionate views and infighting will eventually tear us apart, but since the very beginning that is what has made American the country it is.

Thursday, September 1, 2011

Leadership Reflection Paper

Running head: LEADERSHIP REFLECTION

Leadership Reflection Paper

Name

School

Leadership is an important part of the business world. If there is no one to take charge the organization would soon fall apart. Being a leader is not easy. Many people are thrust into leadership roles and are either incapable of leading or are too inexperienced to lead. In my life, I have met people who were not ready to lead and how they acted has influenced how I view leadership. Just being in a leadership position does not make a person a leader; a leader has to inspire the people with either personal skills or knowledge.

In the Marine Corps, a corporal is a squad lead. He is in charge of a group of lower- ranking Marines. During my first year in the Marine Corps, I attended the promotion ceremony of a person being promoted to the rank of corporal. This person had been a critic of the people that were a higher rank then he. He often complained about the pointless tasks they had us do and the total lack of respect they showed to the lower ranks. After obtaining some level of authority his attitude toward his now fellow non-commissioned officers was very different. He would yell and scream at the smallest incident. He took the power he had and let it go straight to his head to the point where the people that were under him would go out of their way to make him look bad. This event taught me that being a leader means working with your subordinates and not taking your position so seriously that you make them resent you.

Near the end of my military career, I witnessed another promotion. This time it was a corporal that would be in charge of me and the other Marines in the platoon. Before being promoted, the Marine was often late to daily formations and he did not know how to do his job at all. Even though he had been in the military a few years, he still acted like a civilian, almost as if he still did not understand the Marine Corps culture. Things did not change after this man was promoted; he still did not know how to do the jobs in the warehouse and we all knew it. Since all his subordinates knew he was in over his head, we would often disrespect him in front of higher ranking Marines. He was often pulled to the side by his superiors because he had made a mistake on some paper work. When he was asked a question, it was always “I do not know” or” go ask the sergeant”. His inability to run the warehouse became so obvious that our sergeant stopped going to the corporal when something needed to be done. The sergeant had known me for years and he knew I could do my job and I could get my peers to work harder than the corporal ever could so he started to give me the tasks that needed to be accomplished. A few times, confided in me that I would have made a much better non-commissioned officer. This event not only gave me practical experience in leading people but it also taught me that to be a good leader, you must have confidence in your abilities and decisions as well as a superior knowledge of the job. The people that work under and over you can tell if you are ineffective as a leader.

Being a leader is about respecting the people under you and knowing their jobs as well as your own. But do not ever think you may know more than they do just because you are the one in charge. Learning from failure, both yours and someone else’s offers some of the best examples of what makes or breaks a leader. A person who remembers having to follow under a weak leader and is able to identify what made that person wrong to lead has the potential to use that experience to his or her advantage. A leader is someone people want to follow and not someone people have to follow. A person can be in charge and still not be a leader. It is important to always remember that when in a position of authority. Respect and knowledge are two of the most vital elements a leader must acquire. Understand that if you respect your people and have the knowledge required to be in your position, then leadership will happen naturally. A good leader does not force people to perform; a good leader creates an environment where they want to perform.

Corporate Strategy Before During A Recession

Running head: CORPORATE STRATEGY

Corporate Strategy Before During A Recession

Name

School

During tough economic times managers execute different plans to help their company survive the downturn and become more profitable in the future. But few managers are able to create a strategy that helps them become the leaders in their industry. Recessions create an opportunity for mangers to take their company to new heights but few are able too. “Research shows that 9% of companies come out of a recession stronger than ever” (Gulati, Nohria, & Wohlgezogen, 2010, p. 63). By applying certain strategy’s during an economic downturn managers can make their company stronger than ever.

Gulati et al. (2010) classify companies and management strategies into four types the Prevention, Promotion, Pragmatic & Progressive (p. 64). Managers that focus on prevention try to cut costs as much as possible while also trying to reduce risk. The promotion focus is more optimistic they acquire assets at lower prices and try to reach new customers. When a manager tries to use a little of both strategies they are using the pragmatic approach. A company is progressive when it is able to strike that perfect balance between protection and growth.

The prevention focus is the most common seen during a recession managers try to cut the budget on everything within the company and begin growing the amount of cash in their accounts. The reason this approach is so common is because it is a safe way to survive a recession. But the consequences after a recover has begun make them underperform their competitors. “In 2000 Sony cut its workforce by 11% its research and development (R&D) costs by 12% and its capital expenditures by 23%” (Gulati et al., 2010 p. 65). “The company was able to increase its profit margin from 8% to 12% but its sales growth dropped from 11% before the recession to 1% after” (Gulati et al., 2010 p. 65).

Focusing on growth in a recession sounds like a great idea the cost of assets and equipment are usually very low and advertising your product may now cost less. But being too focused on growth can hurt a company after a Recession. The managers that want to remain positive don’t always look at the negative side of the recession where some cost may have to be cut or a change in consumer trends which may not blend well with the plan to grow the company. The consumer may want to save money and the company is selling products at pre-recession prices with increased options. Gulati at el (2010) describes Hewlett-Packard (HP) as a company that remained overly optimistic during the 2000 recession they increased R&D by 9% and acquired Compaq for $25 billion despite these moves after the recession HP had profits of 8.4% below Dell’s 9.3% and IBM’s 16.8% (p. 66).

Using a little from both the prevention and promotion strategies works the best for companies to prepare for the post-recession environment. The unfortunate reality is just combining two strategies anyway they feel does not create a strong company. Gulati et al. (2010) observes that companies that focus on operational efficiency as well as market development and asset investment usually show the best results after the recession. (p. 67) Reducing employees is another option that is available to managers when in a recession but reducing the number of people you employee can hurt employee morale and make the company slow to take advantage of the economic recovery it may also increase cost due to rehiring. “Only 23% of progressive enterprises cut staff- whereas 56% of prevention focused companies do- and they lay off far fewer people” (Gulati, et al., 2010 p. 67). ‘‘In 2000 Office Depot… cut 6% of its work force but it couldn’t reduce operating cost significantly’’ (Gulati, et al., 2010 p. 67). “By contrast Staples closed down some underperforming facilities but increased its workforce by 10% during the recession, mainly to support the high-end product categories and services it introduced” (Gulati, et al., 2010 p. 68). “Its sales doubled, from $7.1 billion in 1997 to $14.6 billion in 2003, while Office Depot’s rose by about 50% from $8.7 billion to $13.4 billion” (Gulati, et al., 2010 p. 68). “On average, Staples was about 30% more profitable than its archrival in the three years after that recession” (Gulati, et al., 2010 p. 68).

Looking at historical data from companies that outpreformed there rivials after a recession helps managers develop a strategy that could help their company weather downturns in the economy. Companies can learn from the past that cutting the workforce isn not usually the best option because it can make the company slow to gain ground during the recovery. But reduceing their operating costs by making their process more efficent yelds the best results and the savings continue after the recession has ended. Investing in assets and growing their market share when applied with a level head can help the company improve profits during and after the recession. Being to pessimistic or optimastic is dangerous for managers they need to look at the situation for what it is and develop a plan to save money and plan for the future. Every situation is different a manager can not be focused on one strategy for all situations being flexable is the most important skill for management to have no matter what the economic outlook is.

Bibliography

Gulati, R., Nohria, N., & Wohlgezogen, F. (2010). Roaring Out of Recession. Retrieved from Harvard Business Review: <Ahref="http://proxy.ohiolink.edu:9099/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=48219382&site=ehost-live">Roaring Out of Recession.</A>

Decline of U.S. labor unions

Name

March 23, 2010

Bus 101

The article is about the decline of the labor unions in the United States. In 1983 20.1% of wage and salaried workers belonged to unions in 2009 only 12.3% are in unions. Labor unions also show trends that mirror the changes in the U.S. workforce as a whole they are getting older and more diverse. Labors unions are not as popular as they once were with the U.S. workforce during a Gallup poll only forty-eight percent of people polled approved of labor unions which is the lost percentage ever. Also 51% of those polled believe unions mostly hut the economy and 39% believe they mostly help. People also do not believe unions are needed to protect them. Fewer people are in unions and most are satisfied with their job which could cause people to see unions as less necessary.

The growing number of people who view unions as unnecessary could help make it much easier for companies to keep labor unions out of their business. As union members start to get older and retire and younger workers that are less likely to be loyal to a labor union start to enter into the workforce it creates an opportunity for managers to push labor unions out of their business making running the business easier and saving money. In the United States there is a greater focus on highly skilled workers and labor unions are needed less because these individuals can work out deals for benefits and compensation with the company directly. As America moves farther away from low skill labor the role that labor unions will play will also decrease. As labor unions become weaker managers may see opportunities in new markets that they were previously afraid to enter because the union held so much influence in the area.

Nation In Full Review

Running head: NATION IN FULL

Nation In Full Review

Name

School

American society is changing people are moving into different parts of the country to find work. The population of the United States of America is getting older as the baby boomers get closer to retirement. There is also the very hot topic of immigration into the United States that has the potential to change the American demographic. American business will have to adapt to these changes in order to remain viable for the future.

In America there is a shift from the Northeast and Midwest to the South and West. “Between 1990 and 2000, all five of the fastest-growing states were out West: Nevada (66 percent), Arizona (40 percent), Colorado (31 percent), Utah (30 percent), and Idaho (29 percent)’’ (Brush, 2006, p. 49). A lower cost of living and immigration as well as recreational activities are some of the reasons for the migration. One of the challenges that arise from the migration of people is providing housing for all the new arrivals. There is also concern about attracting solid jobs. The head of Boise, Idaho’s economic development Jeffrey Jones said “I do have some worries that we’re an economy of people building houses for people building houses” (Brush, 2006, p. 50).

The United States is getting older. By 2030 the median age for the U.S. is expected to be 39 today it stands at 36.5. One reason for the increase in the median age is that the baby boomer generation is getting closer to retirement. As baby boomers grow older they remain active in the community. They work part-time, start businesses or help out in the community by volunteering. An opportunity that is being created by aging baby boomers is the need for more services that appeal to senior citizens. The health care industry is growing because there will be a need for more medical professionals as the population ages. There is also the expansion of the financial industry as more baby boomers get ready to retire they will seek out the advice of financial planners. As America ages Social Security and Medicare will become strained requiring changes to the system that could affect many generations of Americans in the future.

America likes to promote its self as the ‘melting pot’ the term would imply that Americans are willing to except new groups of immigrants onto their shores. This however has never been the truth every major group immigrating into America has been met with fierce opposition. The debate about the Mexican immigration is no different. In Fort Wayne, Indiana 76% of the residents think there should be a fence along the Mexican border (Brush, 2006, p. 54). Mexicans make up the largest number of immigrants coming into the United States. “In Fort Wayne, nearly 80 percent of Hispanics are Mexican” (Brush, 2006, p. 53). Immigrants are arriving in large numbers and their effect on American culture will be interesting to observe.

In business the only thing that is certain is that change will occur. To be successful in business there must be a strategy to adapt to the changes for future growth as well as keeping a watchful eye on the present. The state-to-state migration of the population of the United States presents a business leader with opportunities that can help the business succeed. As the population of an area increases elected officials become pressured to find jobs for the new residents. This creates competition for jobs between local and state governments which could result in tax benefits to companies that move into one area over another. As people move businesses will follow their customers this has the potential benefit of finding a new market for a product or service that may not have been thought of before. As a population shifts from one part of the country to another businesses have the added advantage of finding different backgrounds and skills which help the company become more diverse which leads to growth. Moving to a state or city with a lower cost of living and possibly lower taxes can become a huge cost savings for a business.

Business can rest easy knowing that even though many baby boomers are getting ready to retire they are not ready to exit out of American society. Baby boomers have been working a long time and have acquired enough experience to help businesses organize and prepare for the future. The experience that comes with years of being in the working world is almost priceless it is something that cannot be taught. The aging baby boomers will require services that younger generations do not have an immediate need for. Hospitals, nursing homes and funeral homes are rapidly expanding fields because supply just cannot keep up with demand. The baby boomers health and eventual passing are not the only opportunities that are possible with a large number of retired people. Having fun during retirement is a dream that nearly every person in the United States thinks about with a large group of retired men and women out in the public there will be a demand for recreation. The baby boomers will create many opportunities for American business many of them haven’t even been thought of yet.

Immigration presents difficult challenges for businesses due to the heated debate a business must walk a thin line between bring in this new group of customers and being careful not to harm the relationships with current ones. Business leaders also must be very aware of the various cultures and histories of the newly arrived Americans. Attempting to advertise to groups of immigrants in an attempt to establish a relationship without understanding their culture could back fire if the advertisement is seen as offensive. New immigrants many never have seen or heard of a company’s product before and if that group’s first experience is a bad one it is possible to lose a customer before ever getting one. A company needs to play it safe when trying to create a customer relationship with newly arrived people.

Business leaders have to keep up to date on changes within American society because if they don’t they will quickly find themselves out of date with no new customers entering their market. Advertisement is a vital part of any business and to be able to effectively advertise a company must understand who the potential customer is and try to meet there needs. Understanding changing demographics is important to all businesses without understanding what is changing a company can’t prepare for the future.

References

Brush, S. (2006). A Nation in Full. U.S. New & World Report , 48-56.