Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 4, Problem 17PC
a.
To determine
Compute the inventory turnover ratio for three years.
b.
To determine
Explain the reason for the differences in the inventory turnover ratio between the two firms.
c.
To determine
Explain the reason for the changes in the inventory turnover ratio during these three periods
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Campbell Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an
inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues
and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is
between 35,000 and 68,000 units per year.
Revenue (37,000 units x $9.00)
Unit-level variable costs
Materials cost (37,000 × $2.00)
Labor cost (37,000 × $1.00)
Manufacturing overhead (37,000 × $0.70)
Shipping and handling (37,000 × $0.34)
Sales commissions (37,000 × $1.00)
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Fixed expenses
Advertising costs
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Allocated company-wide facility-level expenses
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(74,000)
(37,000)
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(12,580)
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a. A large discount store has approached the owner of Campbell about buying 6,000 calculators. It would replace…
Vernon Corporation makes and sells state-of-the art electronics products. One of its segments produces the math machine, an in expensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expnses associated with the segment's operating activities. The relevant range for the production and sale of the range for the production and sale of the calculators is between 33,000 and 71,000 units per year.
Revenue (47,000 unitsx9.00) $423,000
Unit-level variable costs
Materials cost (47,000x$2.00) ($94,000)
labor cost (47,000x1.00) ($47,000)
manufacturing overhead (47,000x $0.20) ($9,400)
shipping and handling (47,000x $0.24) ($11,280)
Sales commissions (47,000x$2.00) ($94,000)
contribution margin $167,320
Fixed expenses
Advertising costs ($30,000)
Salary of production supervisor ($66,000)
Allocated company-wide facility-level expenses ($82,000)
Net loss ($10,680)
Required
A) A large discount store has approached the…
QT, Inc. and Elppa Computers, Inc. compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions): QT ElppaSales $56,940 $120,357Cost of goods sold 44,754 92,385Inventory, beginning of period 1,382 6,317Inventory, end of period 1,404 7,490a. Determine for both companies (1) the inventory turnover and (2) the…
Chapter 4 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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