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Use the following information to answer the next five questions: A small business called The Grandmother Calendar Company began selling personalized photo calendar kits. The kits were a hit, and sales soon sharply exceeded
15. Cash Flow What are some actions a small company like The Grandmother Calendar Company can take (besides expansion of capacity) if it finds itself in a situation in which growth in sales outstrips production?
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- Bannister Company, an electronics firm, buys circuit boards and manually inserts various electronic devices into the printed circuit board. Bannister sells its products to original equipment manufacturers. Profits for the last two years have been less than expected. Mandy Confer, owner of Bannister, was convinced that her firm needed to adopt a revenue growth and cost reduction strategy to increase overall profits. After a careful review of her firms condition, Mandy realized that the main obstacle for increasing revenues and reducing costs was the high defect rate of her products (a 6 percent reject rate). She was certain that revenues would grow if the defect rate was reduced dramatically. Costs would also decline as there would be fewer rejects and less rework. By decreasing the defect rate, customer satisfaction would increase, causing, in turn, an increase in market share. Mandy also felt that the following actions were needed to help ensure the success of the revenue growth and cost reduction strategy: a. Improve the soldering capabilities by sending employees to an outside course. b. Redesign the insertion process to eliminate some of the common mistakes. c. Improve the procurement process by selecting suppliers that provide higher-quality circuit boards. Required: 1. State the revenue growth and cost reduction strategy using a series of cause-and-effect relationships expressed as if-then statements. 2. Illustrate the strategy using a strategy map. 3. Explain how the revenue growth strategy can be tested. In your explanation, discuss the role of lead and lag measures, targets, and double-loop feedback.arrow_forwardMorgan Williams Ltd (MWL) is a long-established department store in central Wellington and was for many years highly profitable. One way in which it rewarded its directors was to employ their children, who were students, over the summer break. The company paid these student-employees wages far in excess of market rates. In recent years, MWL became heavily reliant on cruise ship passengers to maintain its business. Due to the Covid 19 pandemic, the last cruise ship visited in March 2020. MWL was slow to develop an online presence. Also, many people, whose offices are in central Wellington, started to work from home. By June 2020, MWL’s sales were down by 90%, and by September 2020, MWL was in serious financial difficulty. December is usually MWL’s best month for sales, but December 2020 was a disaster and the company started to lay off staff. In March 2021, MWL failed to pay its GST and other tax liabilities. Southpac, the company’s bank, threatened to seize MWL’s stock, in terms of a…arrow_forwardKrall Company recently had a computer malfunction and lost a portion of its accounting records. The company has reconstructed some of its financial performance measurements including components of the return on investment calculations. 1. Help Krall rebuild its information database by completing the following table: Note: Round your intermediate calculations to 2 decimal places. Round your final answers to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.). Return on Investment Profit Margin Investment Turnover Operating Income Sales Revenue Average Invested Assets $51,000.00 $709,000.00 $1,420,000.00 4.06% 9.90% 0.41 $105,128.10 $2,590,000.00 24.14% 14.20% 1.70 $3,043,000.00 11.205 5.09% 2.20 $519,000.00arrow_forward
- You are a financial adviser with a client in the wholesale produce business that just completed its first year of operations. Due to weather conditions, the cost of acquiring produce to resell has escalated during the latter part of this period. Your client, Javonte Gish, mentions that because her business sells perishable goods, she has striven to maintain a FIFO flow of goods. Although sales are good, the increasing cost of inventory has put the business in a tight cash position. Gish has expressed concern regarding the ability of the business to meet income tax obligations. Required Prepare a memorandum that identifies, explains, and justifies the inventory method you recommend that Ms. Gish adopt.arrow_forwardEthics Case Electronics, Inc. is a high-volume, wholesale merchandising company. Most of its inventory turns over four or five times a year. The company has had 50 units of a particular brand of computers on hand for over a year. These computers have not sold and probably will not sell unless they are discounted 60 to 70%. The accountant is carrying them on the books at cost and intends to recognize the loss when they are sold. This way, she can avoid a significant write-down in inventory on the current year’s financial statements. 1. Is the accountant correct in her treatment of the inventory? Why or why not? 2. If the computers cost $1,000 each and their market value is 40% of their cost, journalize the entry necessary for the write-down. 3. In groups of three or four, make a list of reasons why inventories of electronic equipment might have to be written down.arrow_forwardThom Lutz started a retail clothing business two years ago. Lutz’s first year was very successful, but sales dropped 50 percent in the second year. A friend who is a business consultant analyzed Lutz’s business and came up with two basic reasons for the decline in sales: (1) Lutz has been placing orders late in each season, and (2) shipments of clothing have been arriving late and in poor condition. What measures can Lutz take to improve his business and persuade customers to return?arrow_forward
- Joseph manages an electronics store where customers can purchase phones, tablets, or accessories for their technology needs. He is trying to plan for future profitability and came upon a break-even number (80 units in monthly sales) that his predecessor, Annie, had calculated. Unfortunately, Joseph found no other supporting calculations or details to determine how many of those units were phones, tablets, and accessories. needs Realizing that he needs as much cost, volume, and revenue information as possible, Joseph dug up the following information for the store. Selling price Variable cost/unit Other monthly fixed store costs: Phones Tablets Accessories $870 $510 $110 435 306 22 Salaries $7,788 Rent 4,700 Depreciation 2,700 Maintenance 1,100 Insurance 800 Utilities 600arrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardMuscat Tubes Manufacturing LLC is a manufacturer of television picture tubes. The company must keep various types of materials on hand for the manufacturing process. The store manager is having difficulty keeping track of all the inventory. When compared to last year, the amount of material lost has increased, which is a source of concern for the store manager. He wishes to employ an effective tool for controlling material loss. While exploring, he came across the concept of ABC analysis, which is used by many MNCs around the world. Because he has no background in costing, he is unable to grasp the concept. He asked you to explain the following because you are the company's cost accounting executive: Working/Application of ABC analysis?arrow_forward
- Krall Company recently had a computer malfunction and lost a portion of its accounting records. The company has reconstructed some of its financial performance measurements including components of the return on investment calculations. Required: Help Krall rebuild its information database by completing the following table: Note: Round your intermediate calculations to 2 decimal places. Round your final answers to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.). Return on Investment % % % 12.10 % Profit Margin 11.10 % 15.30 % Investment Turnover 0.45 1.30 2.65 Operating Income $ 35,000.00 $ 126,873.00 $ Sales Revenue 711,000.00 2,262,000.00 517,000.00 Average Invested Assets 1,480,000.00 2,540,000.00arrow_forwardTwo years ago the manager of a large department store purchased new bar code scanners costing $39,000. A salesperson recently tried to sell the manager a new computer-integrated checkout system for the store. Thenew system would save the store a substantial amount of money each year. The recently purchased scanners could be sold in the secondhand market for $19,000. The store manager refused to listen to the salesperson,saying, “I just bought those scanners. I can’t get rid of them until I get my money’s worth out of them.” (a) What type of cost is the cost of purchasing the old bar code scanners? (b) What common behavioral tendencyis the manager exhibiting?arrow_forwardDiane Dennison is a financial analyst working for a large chain of discount retail stores. Her company is looking at the possibility of replacing the existing fluorescent lights in all of its stores with LED lights. The main advantage of making this switch is that the LED lights are much more efficient and cost less to operate. In addition, LED lights last much longer and will have to be replaced after ten years, whereas the existing lights have to be replaced after five years. Of course, making this change will require a large investment to purchase new LED lights and to pay for the labor of switching out tens of thousands of bulbs. Diane plans to use a 10-year horizon to analyze this proposal, figuring that changes to lighting technology will eventually make this investment obsolete. Diane's friend and coworker, David, has analyzed another energy-saving investment opportunity that involves replacing outdoor lighting with solar-powered fixtures in a few of the company's…arrow_forward
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