Review the Communication Competency feature on “Maureen Chiquet, Global CEO, Chanel

S.A.” In addition to active listening, what other attributes of the communication competency
appear to be illustrated in this feature?

Sustainable development is discussed as an application of stakeholder responsibility. Think of an

organization for which you have worked (or currently work). In what ways did it implement or
fail to implement sustainable development initiatives?

1. Using the Big Five personality dimensions (see Chapter 3), describe John Mackey’s
personality. How does his personality impact his running of Whole Foods? 2. What is motivating
John Mackey? 3. Using the dimensions of authentic leadership, describe Mackey’s lead

Do manufacturers of products for children have special obligations to consumers and society? If
so, what are these responsibilities? Mattel, Inc. is a world leader in the design, manufacture, and
marketing of family products. Well-known for toy brands such as Barbie, Fisher-Price, Disney,
Hot Wheels, Matchbox, Tyco, Ca

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Do you think that Starbucks has grown rapidly because of its ethical and socially responsible
activities or because it provides products and an environment that customers want? Starbucks
was founded in 1971 by three partners in Seattle’s renowned open-air Pike Place Market and
was named after the first mate in Herman

What are the similarities and differences between the professional standards principle and the
distributive justice principle?

What effect does organizational structure and compensation have on ethical behavior among
chief executives at ARC? The American Red Cross (ARC) is an independent organization,
supported by public financial donations and volunteerism. Its mission is to “provide relief to
victims of disasters and help people prevent, p

How effective has Mattel been at encouraging ethical and legal conduct by its manufacturers?
What changes and additions would you make to the company’s Global Manufacturing
Principles? Mattel, Inc. is a world leader in the design, manufacture, and marketing of family
products. Well-known for toy brands such as Barbie

What could AIG have done differently to prevent its failure and subsequent bailout? When
American International Group (AIG) collapsed in September 2008 and was subsequently saved
by a government bailout, it became one of the most controversial players in the 2008–2009
financial crises. The corporate culture at AIG ha

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Do you believe that Bernard Madoff worked alone, or do you think he had help in creating and
sustaining his Ponzi scheme? Would this represent a conflict of interest? The fraud perpetrated
by Bernard Madoff that was discovered in December 2008 was what is known as a Ponzi
scheme. A Ponzi scheme works similarly to a pyr

1. Chapter 13 opened with definitions of conflict and conflict management and a discussion of
desirable and destructive conflict. Apply those definitions and discussions to this film sequence.
Draw examples from the sequence. 2. Which conflict levels shown in Figure 13.1 appear in this
sequence? Give examples for the l

How did the corporate culture of Enron contribute to its bankruptcy? Once upon a time, there
was a gleaming headquarters office tower in Houston, with a giant tilted “E” in front,
slowly revolving in the Texas sun. Enron’s “E” suggested to Chinese feng shui
practitioner Meihwa Lin a model of instability, whic

1. What approach to organizational change does the ROWE program illustrate? 2. Identify some
resistances, both organizational and individual, that the ROWE program had to overcome. 3.
What sources of stress are apparent in this case?

1. Review the “Contingencies of Reinforcement” section in this chapter. Identify examples

of antecedent, behavior, and consequence in Part I of the film sequence. 2. This chapter defined
reinforcement as “a behavioral contingency that increases the frequency of a particular
behavior that it follows.” Which type

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Review the Change Competency feature on “Indra Nooyi Leads Change at PepsiCo.”
Which attributes of the change competency are illustrated in this feature?

1. This chapter opens with the observation, “Leadership is future oriented. It involves
influencing people to move from where they are (here) to some new place (there).” Does this
film sequence provide examples of these aspects of leadership? 2. The chapter discussed the
authentic leadership model. Which aspects of

Home Depot can sell 1,000 units per year at a price of $750 per unit. It estimates that it could sell
1,100 units per year if it dropped the price to $700, and that it would sell only 900 units if it
raised the price to $800 per unit. a. What is Home Depot's EOQ assuming that the quantity
discounts are available and th

How would you assess Generation Y individuals as a group with respect to their general pattern
of ethical behaviors and decision making within the work environment? Explain. If a
generalization is possible, what is your overall assessment? Explain.
What aspect of your life or role that you play reflects some or all of the variables that go into
creating the state of blur? Explain.

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1. What are William Hundert’s ethical values? 2. What are Sedgewick Bell’s ethical
values? 3. What consequences do you predict for Sedgewick Bell because of his ethical values?
MINI CASE William Hundert (Kevin Kline), a professor at the exclusive Saint Benedict’s
Academy for Boys, believes in teac

Does Monsanto maintain an ethical culture that can effectively respond to various stakeholders?
The original Monsanto was very different from the current company. It was started by John F.
Queeny in 1901 in St. Louis and was named after his wife, Olga Monsanto Queeny. The
company started making artificial food additive

1. This chapter defined motivation as a set of internal or external forces that focus a person on
specific, goal directed behavior. Does Mike Winchell show the characteristics of this definition
early in the scene? Do you expect him to show any of the characteristics after the scene ends and
he returns to the team? 2.

1. How did did Dennis Kozlowski have the opportunity to steal $137 million in unauthorized
bonuses? 2. Why is Kozlowski, now a prisoner for a long time, unrepentant about his conduct as
CEO of Tyco? On September 12, 2002, national television showcased Tyco International’s
former chief executive officer (CEO) L. Denni

1. What goal is Gracie’s dad trying to set for her? Does she appear to accept the goal? 2. This
chapter described ability and goal commitment as moderators of the relationship between goals
and performance. What is Gracie’s level on each of those moderators? MINI CASE The
setting is 1978 South Orang

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Do you believe the BP code of conduct and ethics initiatives will prevent future misconduct? BP,
formerly British Petroleum and the Anglo-Persian Oil Company, has experienced a lot of ups
and downs over its hundred-year history—from nearly bankrupting its founder William
D’Arcy to becoming one of the world’s larg

1. What were Baker’s intentions in the conversation with Rennalls? Were they fulfilled or
not, and why? 2. Was Baker alert to nonverbal signals? What did both Baker and Rennalls
communicate to one another by nonverbal means? 3. How did Baker’s view of himself affect
the impression he formed of Rennalls? 4. What kin

Discuss the ethical issues that caused the downfall of Countrywide Financial. Not too long ago,
Countrywide Financial seemed to have everything going for it. Co-founded in part by Angelo
Mozilo in 1969, it had become the largest provider of home loans in the United States within a
few decades. By the early 2000s, one i

1. Assess the degree of certainty or uncertainty that Kit and Ace face in this decision. What
factors set the degree of certainty or uncertainty? 2. “The Bird Problem” presents examples
of bounded rationality discussed early in Chapter 14. What features of their problem fit different
aspects of bounded rationality?

Discuss the ethical conduct of AIG executives, and how a stronger ethics program might help the
company to strengthen the ethics of its corporate culture. When American International Group
(AIG) collapsed in September 2008 and was subsequently saved by a government bailout, it
became one of the most controversial playe

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Some segments of society vigorously contend that companies that sell alcoholic beverages and
tobacco products cannot be socially responsible organizations because of the nature of their
primary products. Do you believe that New Belgium Brewing Company’s actions and
initiatives are indicative of an ethical and sociall

Why did Nike fail to address corporate social responsibility earlier? Phil Knight and his
University of Oregon track coach Bill Bowerman founded Blue Ribbon Sports, later renamed
Nike, in 1964. The idea, born as a result of a paper written by Knight during his Stanford MBA
program, was to import athletic shoes from Jap

How did (or does) an organization for which you have worked (or do work) compare with the
policies, practices, and goals of Verizon’s workplace diversity as presented in the Diversity
Competency feature? Give specific comparisons of similarities and/or differences.

Review the Self Competency feature on “Indra Nooyi’s Development Journey.” Which
attributes of the self competency are illustrated in this feature?

Review the Ethics Competency feature entitled “Robert A. Eckert, Chairman and CEO,
Mattel, Inc.” Which attributes of the ethics competency are illustrated in this feature?

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Review the Across Cultures Competency feature on “Carlos Ghosn, CEO, Nissan-
Renault.” Which attributes of the across cultures competency are illustrated in this feature?

1. Which key attributes of the diversity competency are illustrated in this case? Give a specific
example of each attribute identified. 2. Which key attributes of the self competency are
illustrated by Chris Tserng in this case? Give a specific example of each attribute identified. 3.
Which key attributes of the change
What are the problems that Wal-Mart has faced, and what has the company done to address
them? Wal-Mart Stores, Inc., is an icon of American business. From small-town business to
multinational, from hugely controversial to a leader in renewable energy, Wal-Mart has long
been a lightning rod for news and criticism. With

What are the ethical issues involved in the Madoff case? The fraud perpetrated by Bernard
Madoff that was discovered in December 2008 was what is known as a Ponzi scheme. A Ponzi
scheme works similarly to a pyramid scheme. Madoff took money from new investors to pay
earnings for existing customers, without ever actuall

1. This chapter defined a group as any number of people with shared goals who communicate
with each other and few enough to communicate person to person. Does this film sequence have
examples of each part of that definition? Identify specific moments that fit the definition. 2.
Review the “Stages of Team Development

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What should be done to help ensure that Ponzi schemes like this one do not happen in the future?
The fraud perpetrated by Bernard Madoff that was discovered in December 2008 was what is
known as a Ponzi scheme. A Ponzi scheme works similarly to a pyramid scheme. Madoff took
money from new investors to pay earnings for

1. Which Big Five personality traits best describe Daphne? Give examples of behavior from the
film scene to support your observations. 2. Which Big Five personality traits best describe
Millie? Give examples of behavior from the film scene to support your observations. 3. Review
the discussion of locus of control in th

What environmental issues does the New Belgium Brewing Company work to address? How has
NBB taken a strategic approach to addressing these issues? Why do you think the company has
chosen to focus on environmental issues? Although most of the companies frequently cited as
examples of ethical and socially responsible fir

Is Home Depot’s recessionary strategy of eliminating debt and halting growth a wise one?
What would you recommend to the CEO? When Bernie Marcus and Arthur Blank opened the
first Home Depot store in Atlanta in 1979, they forever changed the hardware and home-
improvement retailing industry. Marcus and Blank envisioned

Review the Diversity Competency feature on “Aetna’s Diverse Discoveries Program.”

Which attributes of the diversity competency are illustrated in this feature?

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1. One might say that there was a “personality” clash between Knowlton and Fester. What
personality model could you use to describe the clash? 2. What leadership style did Knowlton
need from Dr. Jerrold after Fester arrived? Did he receive this? Explain. 3. Was Knowlton’s
team eff

Are subprime loans an unethical financial instrument, or are they ethical but misused in a way
that created ethical issues? Not too long ago, Countrywide Financial seemed to have everything
going for it. Co-founded in part by Angelo Mozilo in 1969, it had become the largest provider of
home loans in the United States w

How do you think re-privatizing the company will help PETCO’s performance? Or do you
think it could hurt the company overall? PETCO Animal Supplies Inc., one of the nation’s
largest pet supply specialty retailers, boasts over 950 stores nationwide. Its pet-related products
include food, supplies, grooming supplies,

1. What evidence is there that Andersen’s corporate culture contributed to its downfall? 2.
Describe the legal and ethical issues surrounding Andersen’s auditing of companies accused
of accounting improprieties. Arthur Andersen LLP was founded in Chicago in 1913 by Arthur
Andersen and partner Clarence DeLany. Over

Review the Teams Competency feature on “Grant Reid, President, Mars Drinks.” Which
attributes of the teams competency are illustrated in this feature?

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1. Assess the leadership behaviors of both Major Sinclair and Michael Canaris. Which leadership
traits described in this chapter appear in their behavior? 2. Apply the behavioral model of
leadership to Sinclair and Canaris’s behavior. Draw specific examples from the film
sequence. 3. Analyze this film sequence using

1. Organization members will unconsciously behave according to organizational cultural values.

Which cultural values appear in this sequence? 2. Shared behaviors are another level of
organizational culture. You also can infer these shared behaviors from the behavior of
organizational members. Which shared behaviors app

1. Evaluate Nike’s response to societal and consumer concerns about its contract
manufacturing. 2. What are the challenges facing Nike in the future? Phil Knight and his
University of Oregon track coach Bill Bowerman founded Blue Ribbon Sports, later renamed
Nike, in 1964. The idea, born as a result of a paper writt

Did Enron’s bankers, auditors, and attorneys contribute to Enron’s demise? If so, what
was their contribution? Once upon a time, there was a gleaming headquarters office tower in
Houston, with a giant tilted “E” in front, slowly revolving in the Texas sun. Enron’s
“E” suggested to Chinese feng shui practi
On the basis of Home Depot's response to environmentalist issues, describe the attributes (power,
legitimacy, urgency) of this stakeholder. Assess the company's strategy and performance with
environmental and employee stakeholders. When Bernie Marcus and Arthur Blank opened the
first Home Depot store in Atlanta in 1979

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1. This chapter described an interpersonal communication model (see Figure 9.1). What
examples from this film sequence represent each part of the model? 2. Assess the effectiveness
of this communication event. How do you expect team members and the assistant coaches to
react in the second half of the game? 3. Do any in

What role do you think the personal morals of a CEO plays in the handling of an organization's
ethical problems? The response must be a minimum of 150 words.

Analyze BP’s efforts to improve sustainability. Do you think they are sufficient, or does the
company need to do more? BP, formerly British Petroleum and the Anglo-Persian Oil Company,
has experienced a lot of ups and downs over its hundred-year history—from nearly bankrupting
its founder William D’Arcy to becomi

1. What competencies are illustrated in the case? 2. Using the Communication Inventory
presented as an Experiential Exercise with Chapter 9, evaluate Valdez’ communication
effectiveness. In what area(s) does she excel? 3. Is Valdez an effective team leader? MINI CASE
Yolanda Valdez, senior vice presid

Do you think Wal-Mart is doing enough to become more sustainable? Wal-Mart Stores, Inc., is
an icon of American business. From small-town business to multinational, from hugely
controversial to a leader in renewable energy, Wal-Mart has long been a lightning rod for news
and criticism. With 2008 sales of over $405.6 bi

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1. What conflict management styles are evidenced in this case? 2. How would you characterize
Hammer’s leadership style? 3. What type of change approach was used by Hammer? Was it
successful? MINI CASE General Hospital was founded in 1968 as a nonprofit community
hospital in the Northeast. In 1981, the

1. Review the text section titled “Perceptual Process,” especially Figure 4.1. Apply each
step to this scene to develop your perception of each person. 2. This chapter’s section titled
“Perceptual Selection” described some external and internal factors that people use in
forming their perceptions. Which facto

Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been
experiencing losses on its bilge pump product line for several years. The most recent quarterly
contribution format income statement for the bilge pump product line follows: Required: Would
you recommend that the bilge pump product li

In each of the cases below, assume that Division X has a product that can be sold either to
outside customers or to Division Y of the same company for use in its production process. The
managers of the divisions are evaluated based on their divisional profits. Required: 1. Refer to
the data in case A above. Assume

To what extent is Mattel responsible for issues related to its production of toys in China? How
might Mattel have avoided these issues? Mattel, Inc. is a world leader in the design,
manufacture, and marketing of family products. Well-known for toy brands such as Barbie,
Fisher-Price, Disney, Hot Wheels, Matchbox, Tyco,

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Should pet supply companies like PETCO be held responsible for the conditions at pet breeders
and suppliers? How do you think exposés on poor breeder conditions have affected
PETCO’s reputation? PETCO Animal Supplies Inc., one of the nation’s largest pet
supply specialty retailers, boasts over 950 stores nationwid

How can the provisions of the Sarbanes–Oxley Act help minimize the likelihood of auditors
failing to identify accounting irregularities? Arthur Andersen LLP was founded in Chicago in
1913 by Arthur Andersen and partner Clarence DeLany. Over a span of nearly 90 years, the
Chicago accounting firm would become known as

Come-Clean Corporation produces a variety of cleaning compounds and solutions for both
industrial and household use. While most of its products are processed independently, a few are
related, such as the company’s Grit 337 and its Sparkle silver polish. Grit 337 is a coarse
cleaning powder with many industrial uses.

Silven Industries, which manufactures and sells a highly successful line of summer lotions and
insect repellents, has decided to diversify in order to stabilize sales throughout the year. A
natural area for the company to consider is the production of winter lotions and creams to
prevent dry and chapped skin. After con

The Matchless Dating Service has made an investment in video and recording equipment that
costs $106,700. The equipment is expected to generate cash inflows of $20,000 per year.
Required: How many years will the equipment have to be used to provide the company with a
10% rate of return on its investment?

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Kristen Lu purchased a used automobile for $8,000 at the beginning of last year and incurred the
following operating costs: The variable operating cost consists of gasoline, oil, tires,
maintenance, and repairs. Kristen estimates that, at her current rate of usage, the car will have
zero resale value in five years, so

In my opinion, we ought to stop making our own drums and accept that outside supplier’s
offer:” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a
price of 18 florins per drum, we would be paying 5 forms less than it costs us to manufacture the
drums in our own plant. (The currency i

Refer to Exhibit 14—4. Is the return on this investment proposal exactly 14%, more than 14%,
or less than 14%? Explain.

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the
company can produce and sell 30,000 Rets per year. Costs associated with this level of
production and sales are given below: The Rets normally sell for $50 each. Fixed manufacturing
overhead is constant at $270,000 per yea

The management of Unter Corporation, an architectural design firm, is considering an

investment with the following cash flows: Required: 1. Determine the payback period of the
investment. 2. Would the payback period be affected if the cash inflow in the last year were
several times aslarge?

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Saxon Products, Inc., is investigating the purchase of a robot for use on the company’s
assembly line. Selected data relating to the robot are provided below: Engineering studies
suggest that use of the robot will result in a savings of 25,000 direct labor- hours each year. The
labor rate is $16 per hour. Also, the

The Midtown Cafeteria employs five people to operate antiquated dishwashing equipment. The
cost of wages for these people and for maintenance of the equipment is $85,000 per year.
Management is considering the purchase of a single, highly automated dishwashing machine that
would cost $140,000 and have a useful life of

Julie has just retired. Her company’s retirement program has two options as to how
retirement benefits can be received. Under the first option, Julie would receive a lump sum of
$150,000 immediately as her full retirement benefit. Under the second option, she would receive
$14,000 each year for 20 years plus a lump-s

What is the major criticism of the payback and simple rate of return methods of making capital
budgeting decisions?

Konig Enterprises, Ltd., owns and operates three restaurants in Vancouver, B.C. The company
allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars.
During 2008, the fixed administrative expenses totaled $2,000,000. These expenses were
allocated as follows: During 2009

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Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the
production of various paper goods. Revenue and costs associated with a ton of pulp follow:
Hrubec Products has just acquired a small company that manufactures paper cartons. This
company will be treated as a division of Hrubec

Julia Vanfleet is professor of mathematics. She has received a $225,000 inheritance from her
father’s estate, and she is anxious to invest it between now and the time she retires in 12
years. Professor Vanfleet is considering two alternatives for investing her inheritance.
Alternative 1. Corporate bonds can be pur

Weller Industries is a decentralized organization with six divisions. The company’s

Electrical Division produces a variety of electrical items, including an X52 electrical fitting. The
Electrical Division (which is operating at capacity) sells this fitting to its regular customers for
$7.50 each; the fitting has a va

Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as
gifts to members of a wedding party. The normal selling price of a gold bracelet is $189.95 and
its unit product cost is $149.00 as shown below: Most of the manufacturing overhead is fixed
and unaffected by variations in

Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore
from the company’s mine to its two steel mills—the Northern Plant and the Southern Plant.
Budgeted costs for the Transport Services Department total $350,000 per year, consisting of
$0.25 per ton variable cost and $300,000 f

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“I’m not sure we should lay out $500,000 for that automated welding machine,” said
Jim Alder, president of the Superior Equipment Company. “That’s a lot of money, and it
would cost us $80,000 for software and installation, and another $3,000 every month just to
maintain the thing. In addition, the manufacture

Oxford Company has limited funds available for investment and must ration the funds among
four competing projects. Selected information on the four projects follows: The net present
values above have been computed using a 10% discount rate. The company wants your
assistance in determining which project to accept first

Top-Quality Stores, Inc., owns a nationwide chain of supermarkets. The company is going to
open another store soon, and a suitable building site has been located in an attractive and rapidly
growing area. In discussing how the company can acquire the desired building and other
facilities needed to open the new store, S

Matheson Electronics has just developed a new electronic device which, when mounted on an
automobile, will tell the driver how many miles the automobile is traveling per gallon of
gasoline. The company is anxious to begin production of the new device. To this end, marketing
and cost studies have been made to determine

Benoit Company produces three products, A, B, and C. Data concerning the three products
follows (per unit): Demand for the company’s products is very strong, with far more orders
each month than the company can produce with the available raw materials. The same material is
used in each product. The material costs $3

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Raul Martinas, professor of languages at Eastern University, owns a small office building
adjacent to the university campus. He acquired the property 10 years ago at a total cost of
$530,000—$50,000 for the land and $480,000 for the building. He has just received an offer
from a realty company that wants to purchase

The questions in this exercise are based on FedEx Corporation. To answer the questions you will
need to download FedEx’s Form 10-K for the fiscal year ended May 31, 2005 at
www.sec.gov/edgar/searchedgar/companysearch.html. Once at this website, input CIK code
1048911 and hit enter. In the gray box on the right-hand s

Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the
rate of return that she is earning. For example, three years ago she paid $13,000 for 200 shares of
Malti Company’s common stock. She received a $420 cash dividend on the stock at the end
of each year for three years. At the

Music Teachers, Inc., is an educational association for music teachers that has 20,000 members.
The association operates from a central headquarters but has local membership chapters
throughout the United States. Monthly meetings are held by the local chapters to discuss recent
developments on topics of interest to mus

Clark received $175,000 from her mother’s estate. She placed the funds into the hands of a
broker, who purchased the following securities on Linda’s behalf: (a) Common stock was
purchased at a cost of $95,000. The stock paid no dividends, but it was sold for $160,000 at the
end of three years. (b) Preferred stock

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Dorsey Company manufactures three products from a common input in a joint processing
operation. Joint processing costs up to the split-off point total $350,000 per quarter. The
company allocates these costs to the joint products on the basis of their relative sales value at the
split-off point. Unit selling prices and

Lukow Products is investigating the purchase of a piece of automated equipment that will save
$400,000 each year in direct labor and inventory carrying costs. This equipment costs
$2,500,000 and is expected to have a 15-year useful life with no salvage value. The
company’s required rate of return is 20% on all equipm

Jackson County Senior Services is a nonprofit organization devoted to providing essential

services to seniors who live in their own homes within the Jackson County area. Three services
are provided for seniors—home nursing, meals on wheels, and housekeeping. In the home
nursing program, nurses visit seniors on a regu

They is interest paid on amounts borrowed from banks and other lenders considered to be an
operating activity while the amounts borrowed are financing activities?

Westwood Furniture Company is considering the purchase of two different items of equipment,
as described below: Machine A A compacting machine has just come onto the market that would
permit Westwood Furniture Company to compress sawdust into various shelving products. At
present the sawdust is disposed of as a waste p

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Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented
absorption costing income statement for the company for the last quarter is given below: The
North Store has consistently shown losses over the past two years. For this reason, management
is giving consideration to closing the stor

(Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat Packers is a
major processor of beef and other meat products. The company has a large amount of T-bone
steak on hand, and it is trying to decide whether to sell the T-bone steaks as they are initially cut
or to process them further into fi

Annual cash inflows that will arise from two competing investment projects are given below:
The discount rate is 18%. Required: Compute the present value of the cash inflows for
eachinvestment.

Fraser Company will need a new warehouse in five years. The warehouse will cost $500,000 to
build. Required: What lump-sum amount should the company invest now to have the $500,000
available at the end of the five-year period? Assume that the company can invest money at: 1.
Ten percent. 2. Fourteen percent.

Reliable Waste Systems provides a solid waste collection service in a large metropolitan area.
The company is considering the purchase of several new trucks to replace an equal number of
old trucks now in use. The new trucks would cost $650,000, but they would require only one
operator per truck (compared to two operat

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Windhoek Mines, Ltd., of Namibia, is contemplating the purchase of equipment to exploit a

mineral deposit on land to which the company has mineral rights. An engineering and cost
analysis has been made, and it is expected that the following cash flows would be associated
with opening and operating a mine in the area:

Korvanis Corporation operates a Medical Services Department for its employees. Charges to the
company’s operating departments for the variable costs of the Medical Services Department
are based on the actual number of employees in each department. Charges for the fixed costs of
the Medical Services Department are bas

What is meant by the term time value of money?

Dwyer Company is considering two investment projects. Relevant cost and cash flow
information on the two projects is given below: The trucks would have a $15,000 salvage value
in nine years. For tax purposes, the company computes depreciation deductions assuming zero
salvage value and uses straight-line depreciatio

Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense
frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following
information relating to the franchise: a. A suitable location in a large shopping mall can be rented
for $3,500 per month. b. Remo

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What are cash equivalents, and why are they included with cash on a statement of cash flows?

Consider each part below independently. Ignore income taxes. 1. Preston Company’s
required rate of return is 14% on all investments. The company can purchase a new machine at a
cost of $84,900. The new machine would generate cash inflows of $15,000 per year and have a
12-year useful life with no salvage value. Compu

Solve each of the following parts independently: 1. Neal company would to initiate a
managements development program for its executives. The program would cost $100,000 per
year to operate. What would be the after-tax cost of the program if the company’s income tax
rate is 30%/ 2. Smerk’s Department Store has rear

In eight years, Kent Duncan will retire. He is exploring the possibility of opening a self-service
car wash. The car wash could be managed in the free time he has available from his regular
occupation, and it could be closed easily when he retires. After careful study, Mr. Duncan has
determined the following: (a) A bu
Wendell’s Donut Shoppe is investigating the purchase of a new $18,600 donut-making
machine. The new machine would permit the company to reduce the amount of part-time help
needed, at a cost savings of $3,800 per year. In addition, the new machine would allow the
company to produce one new style of donut, resulting in

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Bed & Bath, a retailing company, has two departments, Hardware and Linens. The
company’s most recent monthly contribution format income statement follows: A study
indicates that $340,000 of the fixed expenses being charged to Linens are sunk costs or allocated
costs that will continue even if the Linens Department i

Alpha and Beta are divisions within the same company. The managers of both divisions are
evaluated based on their own division’s return on investment (ROI). Assume the following
information relative to the two divisions: Managers are free to decide if they will participate in
any internal transfers. All transfer

The management of Ballard MicroBrew is considering the purchase of an automated bottling

machine for $120,000. The machine would replace art old piece of equipment that costs $30,000
per year to operate. The new machine would cost $12,000 per year to operate. The old machine
currently in use could be sold now for a scr

What are the three major sections on a statement of cash flows, and what are the general rules
that determine the transactions that should be included in each section?

Labeau Products, Ltd., of Perth, Australia, has $35,000 to invest. The company is trying to
decide between two alternative uses for the funds as follows: The company’s discount rate is
18%. Required: (Ignore income taxes.) Which alternative would you recommend that the
company accept? Show all computations using the

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The Riteway Ad Agency provides cars for its sales staff. In the past, the company has always
purchased its cars from a dealer and then sold the cars after three years of use. The
company’s present fleet of cars is three years old and will be sold very shortly. To provide a
replacement fleet, the company is considerin

A piece of laborsaving equipment has just come onto the market that Mitsui Electronics, Ltd.,
could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment
follow (currency is in thousands of yen, denoted by ¥): Required: (Ignore income taxes.) 1.
Compute the payback period for the

The management of Revco Products is exploring four different investment opportunities.

Information on the four projects under study follows: The company’s required rate of return
is 10%; thus, a 10% discount rate has been used in the present value computations above.
Limited funds are available for investment, so th

Hollings Company sells and delivers office furniture in the Rocky Mountain area. The costs
associated with the acquisition and annual operation of a delivery trucks are given below:
Required: 1. Assume that Hollings Company has purchased one truck that has been driven
50,000 miles during the first year. Compute the a

The management of Kunkel Company is considering the purchase of a $40,000 machine that
would reduce operating costs by $7,000 per year. At the end of the machine’s eight-year
useful life, it will have zero scrap value. The company’s required rate of return is 12%.
Required: (Ignore income taxes.) 1. Determine the

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The Cambro Foundation, a nonprofit organization, is planning to invest $104,950 in a project

that will last for three years. The project will produce net cash inflows as follows: Required:
(Ignore income taxes.) Assuming that the project will yield exactly a 12% rate of return, what is
the expected net cash inflow for

What is the purpose of a statement of cash flows?

The Elberta Fruit Farm of Ontario has always hired transient workers to pick its annual cherry
crop. Francie Wright, the farm manager, has just received information on a cherry picking
machine that is being purchased by many fruit farms. The machine is a motorized device that
shakes the cherry tree, causing the cherrie

Bill has just returned from a duck hunting trip. He has brought home eight ducks. Bill’s
friend, John, disapproves of duck hunting, and to discourage Bill from further hunting, John has
presented him with the following cost estimate per duck: Required: 1. Assuming that the duck
hunting trip Bill has just completed

How is the project profitability index computed, and what does it measure?

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Barlow Company manufactures three products: A, B, and C. The selling price, variable costs,
and contribution margin for one unit of each product follow: The same raw material is used in all
three products. Barlow Company has only 5,000 pounds of raw material on hand and will not be
able to obtain any more of it for se

What is meant by the term payback period? How is the payback period determined? How can the
payback method be useful?
Division A manufactures electronic circuit boards. The boards can be sold either to Division of
the same company or to outside customers. Last year, the following activity occurred Division A:
Sales to Division B were at the same price as sales to outside customers. The circuit boards
purchased by Division B were u

Han Products manufactures 30,000 units of part S-6 each year for use on its production line. At
this level of activity, the cost per unit for part S-6 is as follows: An outside supplier has offered
to sell 30,000 units of part S-6 each year to Han Products for $21 per part. If Han Products
accepts this offer, the faci

Sako Company’s Audio Division produces a speaker that is used by manufacturers of various
audio products. Sales and cost data on the speaker follow: Sako Company has a Hi-Fi Division
that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers
per year. It has received a quote o

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Birch Company normally produces and sells 30,000 units of RG-6 each month. RG-6 is a small
electrical relay used as a component part in the automotive industry. The selling price is $22 per
unit, variable costs are $14 per unit, fixed manufacturing overhead costs total $150,000 per
month, and fixed selling costs total

Petit Industries has $100,000 to invest. The company is trying to decide between two alternative
uses of the funds. The alternatives are: The working capital needed for project B will be released
at the end of six years for investment elsewhere. Pent Industries’ discount rate is 14%.
Required: (Ignore income taxes.)

For many years Futura Company has purchased the starters that it installs in its standard line of
farm tractors. Due to a reduction in output, the company has idle capacity that could be used to
produce the starters. The chief engineer has recommended against this move, however, pointing
out that the cost to produce th

The questions in this exercise are based on the Nordstrom, Inc., 2004 annual report at
phx.corporate-ir.netlphoemx.zhtml?c=93295&p=irol-reportsAnnual. You do not need to print the
annual report in order to answer the questions. Required: 1. What is Nordstrom’s strategy for
success in the marketplace? Does the c

Andretti Company has a single product called a Dak. The company normally produces and sells
60.000 Daks each year at a selling price of $32 per unit. The company’s unit costs at this
level of activity are given below: A number of questions relating to the production and sale of
Daks follow. Each question is independ

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Information on four investment proposals is given below: Required: 1. Compute the project
profitability index for each investment proposal. 2. Rank the proposals in terms ofpreference.

Sharkey’s Fun Center contains a number of electronic games as well as a miniature golf
course and various rides located outside the building. Paul Sharkey, the owner, would like to
construct a water slide on one portion of his property. Mr. Sharkey has gathered the following
information about the slide: (a) Water sl

Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the
company’s performance, consideration is being given to dropping several flights that appear
to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482)
is as follows: The following ad

Losses have been incurred at Millard Corporation for some time. In an effort to isolate the
problem and improve the company’s performance, management has requested that the
monthly income statement be segmented by sales region. The company’s first effort at
preparing a segmented statement is given below. This state

Stavos Company’s Cabinet Division manufactures a standard cabinet for television sets. The
cost per cabinet is: Part of the Cabinet Division’s output is sold to outside manufacturers of
television sets and part is sold to Stavos Company’s Quark Division, which produces a TV
set under its own name. The Cabinet

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What is meant by the term discounting?

Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare and processing
costs total $60,000 per ton, one-fourth of which is allocated to product thousand units of product
X15 are produced from each ton of clypton. The units can at the split-off point for $9 each, or
processed further at a total

The Diamond Freight Company has been offered a seven-year contract to haul munitions for the
government. Since this contract would represent new business, the company would have to
purchase several new heavy-duty trucks at a cost of $350,000 if the contract were accepted.
Other data relating to the contract follow:

“In my opinion, a tanning salon would be a natural addition to our spa and very popular with
our customers,” said Stacey Winder, manager of the Lifeline Spa. “Our figures show that
we could remodel the building next door to our spa and install all of the necessary equipment for
$330,000. I have contacted tanning

The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike,
and a racing bike. Data on sales and expenses for the past quarter follow: Management is
concerned about the continued losses shown by the racing bikes and wants a recommendation as
to whether or not the line should be discont

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Kingsley Products, Ltd., is using a model 400 shaping machine to make one of its products. The
company is expecting to have a large increase in demand for the product and is anxious to
expand its productive capacity. Two possibilities are under consideration: Alternative 1.
Purchase another model 400 shaping machine to

Basic present Values Concepts In three years, when he is discharged from the Air Force, Steve
wants to buy an $8,000 power boar.Required:What lump-sum amount must Steve invest now to
have the $8,000 at the end of three years if he can invest money at:1. Ten percent?2.
Fourteenpercent?

The Fore Corporation is an integrated food processing company that has operations in over two
dozen countries. Fore’s corporate headquarters is in Chicago, and the company’s
executives frequently travel to visit Fore’s foreign and domestic facilities. Fore has a fleet of
aircraft that consists of two business jet

The Sweetwater Candy Company would like to buy a new machine that would automatically
“dip” chocolates. The dipping operation is currently done largely by hand. The machine the
company is considering costs $120,000. The manufacturer estimates that the machine would be
usable for 12 years but would require the repla

Delta Company produces a single product. The cost of producing and selling a single unit of this
product at the company’s normal activity level of 60,000 units per year is: The normal
selling price is $21 per unit. The company’s capacity is 75,000 units per year. An order has
been received from a mail-order house

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Nick’s Novelties, Inc., is considering the purchase of electronic pinball machines to place in
amusement houses. The machines would cost a total of $300,000, have an eight-year useful life,
and have a total salvage value of $20,000. The company estimates that annual revenues and
expenses associated with the machines

Haglund Department Store is located in the downtown area of a small city. While the store had
been profitable for many years, it is facing increasing competition from large national chains that
have set up stores on the outskirts of the city. Recently the downtown area has been undergoing
revitalization, and the owners

What is the difference between capital budgeting screening decisions and capital budgeting
preference decisions?
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company
has always produced all of the necessary parts for its engines, including all of the carburetors. An
outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $35
per unit. To evaluate th

The Atlantic Medical Clinic can purchase a new computer system that will save $7,000 annually
in billing costs. The computer system will last for eight years and have no salvage value.
Required: Up to how much should the Atlantic Medical Clinic be willing to pay for the new
computer system if the clinic’s required ra

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As the discount rate increases, the present value of a given future cash flow also increases. Do
you agree? Explain.

The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the
state’s newest millionaire. By choosing the six winning numbers on last week’s state
lottery, Mr. Ormsby has won the week’s grand prize totaling $1.6 million. The State Lottery
Commission has indicated that Mr. Ormsby will

Henrie’s Drapery Service is investigating the purchase of a new machine for cleaning and
blocking drapes. The machine would cost $130,400, including freight and installation.
Henrie’s has estimated that the new machine would increase the company’s cash inflows,
net of expenses, by 525,000 per year. The machine wo

Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The
truck is worn out and must be either overhauled or replaced with a new truck. The company has
assembled the following information. (Panama uses the U.S. dollar as its currency): If the
company keeps and overhauls its pre

Selected financial data from the June 30 year-end statements of Safford Company are given
Total assets at the beginning of the year were $3,000,000; total stockholders’ equity was
$2,200,000. There has been no change in preferred stock during the year. The company’s tax
rate is 30%. Required: Compute the return on

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Refer to the data for Hanna Company in Exercise 15—2. The company’s income statement
for the year appears below: Required: Using the direct method (and the data from Exercise
15—2), convert the company’s income statement to a cashbasis.

What costs should be covered by the selling price of a new product?

The questions in this exercise are based on Target Corporation. To answer the questions, you
will need to download Target’s 2004 annual report (the company’s fiscal year ended on
January 29, 2005) at investors.target.com/. You do not need to print the annual report to answer
the questions. Required: Prepare a five-

Explain how the cost of capital serves as a screening tool when using (a) The net present value
method and (b) The internal rate of return method.

What behavioral problems are associated with setting a budget too loosely?

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Refer to the financial statements for Castile Products, inc., in Exercise 16-7. In addition to the
data in these statements, assume that Castile Products, Inc., paid dividends of $2.10 per share
during the year. Also assume that the company’s common stock had a market price of $42 at
the end of the year and there was

Why should the timing of direct materials purchases be closely coordinated with the production
budget?

Assume that a company repays a $300,000 loan from its bank and then later in the same year
borrows $500,000. What amount(s) would appear on the statement of cash flows?

Would a sale of equipment for cash be considered a financing activity or an investing activity?
Why?

How does a schedule of collections from sales assist in preparing the cash budget?

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Apex Company prepared the statement of cash flows for the current year that is shown below:
Required: Compute Apex Company’s free cash flow for the currentyear.

How should the relative profitability of products be determined in a volume trade-off decision?

Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and
campers. The following information is available about the new product: a. An investment of
$1,350,000 will be necessary to carry inventories and accounts receivable and to purchase some
new equipment needed in the manufact

MidWest Amusements is in the process of reviewing 10 proposals for new rides at its theme
parks in cities scattered throughout the American heartland. The company’s only
experienced safety engineer must carefully review plans and monitor the construction of all new
rides. However, she is only available to work on new

Luxus Baking Company has developed a reputation for producing superb, one-of-a-kind
wedding cakes in addition to its normal fare of breads and pastries. While the wedding cake
business is a major moneymaker, it creates some problems for the bakery’s owner, Kari
Therau, particularly in June. The company’s reputation

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Mary Walker, president of Rusco Products, considers $14,000 to be the minimum cash balance
for operating purposes. As can be seen from the following statements, only $8,000 in cash was
available at the end of 2009. Since the company reported a large net income for the year, and
also issued both bonds and common stock,

If a stock’s market value exceeds its book value, then the stock is overpriced. Do you agree?
Explain.

In practice, many organizations measure the relative profitability of their segments by dividing
the segments’ margins by their revenues. The segment margin for this purpose is the
segment’s revenue less its fully allocated costs—including allocations of fixed common
costs. For example, a hospital might compute t

Venice InLine, Inc., was founded by Russ Perez to produce a specialized in-line skate he had
designed for doing aerial tricks. Up to this point, Russ has financed the company with his own
sayings and with cash generated by his business. However, Russ now faces a cash crisis. In the
year just ended, an acute shortage of

Martin Company is considering the introduction of a new product. To determine a selling price,
the company has gathered the following information: Required: The company uses the
absorption costing approach to cost-plus pricing. 1. Compute the markup required to achieve the
desired ROI. 2. Compute the selling price per

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Sammamish Brick, Inc., manufactures bricks using clay deposits on the company’s property.
Raw clays are blended and then extruded into molds to form unfired bricks. The unfired bricks
are then stacked onto movable metal platforms and rolled into the kiln where they are fired until
dry. The dried bricks are then packa

Below are listed the changes in Yoric Company’s balance sheet accounts for the past year:
The following additional information is available about last year’s activities: Net income for
the year was $_______?_______. The company sold equipment during the year for $15,000. The
equipment originally cost $50,000 and i

Refer to the financial statement data for Lydex Company given in Problem 16—14. Required:
For both this year and last year: Present the balance sheet in common-size format. Present the
income statement in common-size format down through net income. Comment on the results of
your analysis.
Refer to the data in Exercise 16—2 for Weller Corporation. Required: Compute the following
financial data for short-term creditors for this year: 1. Working capital. 2. Current ratio. 3. Acid-
test ratio. 4. Accounts receivable turnover, (Assume that all sales are on account.) 5. Average
collection period. 6.

What is meant by the term financial leverage?

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You have just been hired as a loan officer at Slippery Rock State Bank. Your supervisor has
given you a file containing a request from Lydex Company, a manufacturer of safety helmets.
For a $3,000,000, five-year loan. Financial statement data on the company for the last two years
Follow: Helen McGuire, who just a yea

Rotorua Products, Ltd., of New Zealand markets agricultural products for the burgeoning Asian
consumer market. The company’s current assets, current liabilities, and sales have been
reported as follows over the last five years (Year 5 is the most recent year): $NZ stands for New
Zealand dollars. Required: Express al

The president of a plastics company was quoted in a business journal as stating, “We
haven’t had a dollar of interest-paying debt in over 10 years. Not many companies can say
that” As a stockholder in this company, how would you feel about its policy of not taking on
debt?

A business executive once stated, “Depreciation is one of our biggest sources of cash.” Do
you agree that depreciation is a source of cash? Explain.

What assumption does the absorption costing approach make about how consumers react to
prices?

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Shimada Products Corporation of Japan is anxious to enter the electronic calculator market.
Management believes that in order to be competitive in world markets, the price of the electronic
calculator that the company is developing cannot exceed $15. Shimada’s required rate of
return is 12% on all investments. An inv

What is target costing? How do target costs enter into the pricing decision?

Give an example of budgetary slack.

Why should the production requirements set forth in the production budget be carefully
coordinated with the sales budget?
At the beginning of the period, the Assembly Department budgeted direct labor of $186,000 and
property tax of $15,000 for 12,000 hours of production. The department actually completed
13,400 hours of production. Determine the budget for the department, assuming that it uses
flexible budgeting.

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What is meant by the dividend yield on a common stock investment?

The questions in this exercise are based on Netflix, Inc. To answer the questions you will need to
download Netilix’s Form 10-K for the year ended December 31, 2005 at
www.sec.gov/edgar!searchedgar/companysearch.html. Once at this website, input CIK code
1065280 and hit enter. In the gray box on the right-hand side o

Below are transactions that took place in Placid Company during the past year: Equipment was
purchased. A cash dividend was declared and paid. Accounts receivable decreased. Short-term
investments were purchased. Equipment was sold. Preferred stock was sold to investors. A stock
dividend was declared and issued. Intere

Would you expect a company in a rapidly growing technological industry to have a high or low
dividend payout ratio?

National Restaurant Supply, Inc., sells restaurant equipment and supplies throughout most of the
United States. Management is considering adding a machine that makes sorbet to its line of ice
cream making machines. Management will negotiate the price of the sorbet machine with its
Swedish manufacturer. Management of Na

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Why aren’t transactions involving accounts payable considered to be financing activities?

Maria Lorenzi owns an ice cream stand that she operates during the summer months in West
Yellowstone, Montana. Her store caters primarily to tourists passing through town on their way
to Yellowstone National Park. Maria is unsure of how she should price her ice cream cones and
has experimented with two prices in succes

Which product should have a larger markup over variable cost, a product whose demand is
elastic or a product whose demand is inelastic?

Soft Glow Candle Co. projected sales of 78,000 candles for 2010. The estimated January 1,
2010, inventory is 3,600 units, and the desired December 31, 2010, inventory is 4,500 units.
What is the budgeted production (in units) for 2010?

Comparative financial statement data for Carmono Company follow: For 2009, the company
reported net income as follows: Dividends of $14 were declared and paid during 2009. Required:
1. Using the indirect method, prepare a statement of cash flows for 2009. 2. Compute
Carmono’s free cash flow for2009.

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Paul Ward is interested in the stock of Pecunious Products, Inc. Before purchasing the stock,
Ward would like your help in analyzing the data that are available to him as follows: Mr. Ward
would like answers to a number of questions about the trend of events in Pecunious Products,
Inc., over the last three years. His q

Wiley Company’s income statement for Year 2 follows: The company’s selling and
administrative expense for Year 2 includes $7,500 of depreciation expense. Selected balance
sheet accounts for Wiley at the end of Years 1 and 2 are as follows: Required: Using the direct
method, convert the company’s income statemen

What are the three major objectives of budgeting?

Comparative financial statements for Weller Corporation for the fiscal year ending December 31
appear below. The company did not issue any new common or preferred stock during the year. A
total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable
was 12%, the income tax rate was 40%

According to the economists’ approach to setting prices, the profit-maximizing price should
depend on what two factors?

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Incomplete financial statements for Pepper Industries follow: The following additional
information is available about the company: All sales during the year were on account. There
was no change in the number of shares of common stock outstanding during the year. The
interest expense on the income statement relates to

Refer to the data in Exercise 16—2 for Weller Corporation. Required: Compute the following
financial ratios for long-term creditors for this year: 1. Times interest earned ratio. 2. Debt-to-
equity ratio.

What information is needed to measure the relative profitability of a product?

Refer to the financial statement data for Weaver Company in Problem 15—8. Required: Using
the direct method, adjust the company’s income statement for 2009 to a cash basis. Using the
information obtained in (1) above, along with an analysis of the remaining balance sheet
accounts, prepare a statement of cash flows

When the absorption costing approach to cost-plus pricing is used, what is the markup supposed
to cover?
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Refer to the financial statement data for Joyner Company in Problem 15—9. Sam Conway,
president of the company, considers $15,000 to be the minimum cash balance for operating
purposes. As can be seen from the balance sheet data, only $4,000 in cash was available at the
end of the current year. The sharp decline is pu

South Seas Products, Inc., has designed a new surfboard to replace its old surfboard line.
Because of the unique design of the new surfboard, the company anticipates that it will be able to
sell all the boards that it can produce. On this basis, the following incomplete budgeted income
statement for the first year of a

Give an example of how the capital expenditures budget affects other operating budgets

If an asset is sold at a gain, why is the gain deducted from net income when computing the net
cash provided by operating activities under the indirect method?

Changes in various accounts and gains and losses on the sale of assets during the year for Argon
Company are given below: Required: Prepare an answer sheet using the following column
headings: For each item, place an X in the Add or Deduct column to indicate whether the dollar
amount shou1d be added to or deducted fr

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The following changes took place during the year in Pavolik Company’s balance sheet
accounts: Long-term investments that had cost the company $6 were sold during the year for $
16, and land that had cost $15 was sold for $9. In addition, the company declared and paid $30 in
cash dividends during the year. No sales o

Refer to the data for Pavolik Company in Exercise 15—6. Required: Use the direct method to
convert the company’s income statement to a cash basis.

Discuss the following statement: “Full cost can be viewed as a floor of protection. If a
company always sets its prices above full cost, it will never have to worry about operating at a
loss?’

How do computerized budgeting systems aid firms in the budgeting process?

Refer to the financial statements for Rusco Products in Problem 15—11. Because the Cash
account decreased so dramatically during 2009, the company’s executive committee is
anxious to see how the income statement would appear on a cash basis. Required: Using the
direct method, adjust the company’s income statement

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“See, I told you things would work out,” said Barry Kresmier, president of Lomax
Company. “We expanded sales from $1.6 million to $2.0 million in 2009, nearly doubled our
warehouse space, and ended the year with more cash in the bank than we started with. A few
more years of expansion like this and we’ll be the

A successful owner of a small business stated: “We have the best technology, the best
products, and the best people in the world. We have no constraints.” Do you agree?

The just completed year, Hanna Company had a net income of $35,000. Balances in the
company’s current asset and current liability accounts at the beginning and end of the year
were:< The Deferred Income Taxes Payable account on the balance sheet increased by $4,000
during the year, and depreciation charges were $20,

Vectra Corporation recently suffered its fourth straight decline in quarterly earnings—despite a
modest increase in sales. Unfortunately, Vectra’s industry is highly competitive, so the
company is reluctant to increase its prices. However, management believes that profits would
improve if the efforts of its sales f

Refer to the financial statements and other data in Problem 16—12. Assume that you are an
account executive for a large brokerage house and that one of your clients has asked for a
recommendation about the possible purchase of Sabin Electronics’ stock. You are not
acquainted with the stock and for this reason wish

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Advanced Pharmaceuticals, Inc., is a wholesale distributor of prescription drugs to independent

retail and hospital-based pharmacies. Management believes that top-notch customer
representatives are the key factor in determining whether the company will be successful in the
future. Customer representatives serve as the

A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto: Members
of the company’s board of directors are surprised to see that net income increased by only
$38,000 when sales increased by two million dollars. Required: Express each year’s income
statement in common-size percentages. Carr

What does the price elasticity of demand measure? What is inelastic demand? What is elastic
demand?

The postal service of St. Vincent, an island in the West Indies, obtains a significant portion of its
revenues from sales of special souvenir sheets to stamp collectors. The souvenir sheets usually
contain several high-value St. Vincent stamps depicting a common theme, such as the life of
Princess Diana. The souvenir s
The financial statements for Castile Products, Inc., are given below: Account balances at the
beginning of the year were: accounts receivable, $25,000; and inventory, $60,000. All sales were
on account. Required: Compute financial ratios as follows: Gross margin percentage. Current
ratio. Acid-test ratio. Debt-to-equ

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At the beginning of the period, the Fabricating Department budgeted direct labor of $22,500 and
equipment depreciation of $7,000 for 900 hours of production. The department actually
completed 750 hours of production. Determine the budget for the department, assuming that it
uses flexible budgeting.

A company seeking a line of credit at a bank was turned down. Among other things, the bank
stated that the company’s 2 to I current ratio was not adequate. Give reasons why a 2 to 1
current ratio might not be adequate.

Under what circumstances would a static budget be appropriate?

Seattle’s Top Coffee owns and operates a chain of popular coffee stands that serve over 30
different coffee-based beverages. The constraint at the coffee stands is the amount of time
required to fill an order, which can be considerable for the more complex beverages. Sales are
often lost because customers leave after

Denna Company’s working capital accounts at the beginning of the year follow: During the
year, Denna Company completed the following transactions: x. Paid a cash dividend previously
declared, $12,000. Issued additional shares of common stock for cash, $100,000. Sold inventory
costing $50,000 for $80,000, on account

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Distinguish between horizontal and vertical analysis of financial statement data.

If the Accounts Receivable balance increases during a period, how will this increase be
recognized using the indirect method of computing the net cash provided by operation activities?

Refer to the data for Carmono Company in Exercise 15—5. Required: Using the direct method,
convert the company’s income statement to a cash basis.

Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic
devices on which he had secured patents. Although the company has been fairly profitable, it is
now experiencing a severe cash shortage. For this reason, it is requesting a $500,000 long-term
loan from Gulfport State Bank, $100,0

What information is needed to measure the absolute profitability of a segment?

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Below are a number of transactions that took place in Seneca Company during the past year:
Common stock was sold for cash. Interest was paid on a note, decreasing Interest Payable. Bonds
were retired. A long-term loan was made to a subsidiary. Interest was received on the loan in (d)
above, reducing Interest Receivable

What is meant by absolute profitability?

What is the basic purpose for examining trends in a company’s financial ratios and other
data? What other kinds of comparisons might an analyst make?

How do the direct and the indirect methods differ in their approach to computing the net cash
provided by operating activities?

Briefly describe the type of human behavior problems that might arise if budget goals are set too
tightly.

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Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 2.5 on June 30 of the current
year. On that date, the company’s assets were: The Norwegian currency is the krone, denoted
here by the symbol Kr. Required: What was the company’s working capital on June 30?
What was the company’s acid-test ratio on J

a. Discuss the purpose of the cash budget. b. If the cash for the first quarter of the fiscal year
indicates excess cash at the end of each of the first two months, how might the excess cash be
used?

Comparative financial statements for Weaver Company follow: During 2009, the company sold
some equipment for $20 that had cost $40 and on which there was accumulated depreciation of
$16. In addition, the company sold long-term investments for $10 that had cost $3 when
purchased several years ago. Cash dividends tot

What is meant by relative profitability?

In the right-hand column below, certain financial ratios are listed. To the left of each ratio is a
business transaction or event relating to the operating activities of Delta Company (each
transaction should be considered independently). Required: Indicate the effect that each business
transaction or event would have

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Assume that two companies in the same industry have equal earnings. Why might these
companies have different price-earnings ratios? If a company has a price-earnings ratio of 20 and
reports earnings per share for the current year of $4, at what price would you expect to find the
stock selling on the market?

Software Solutions, Inc., was started by two young software engineers to market SpamBlocker, a
software application they had written that screens incoming e-mail messages and eliminates
unsolicited mass mailings. Sales of the software have been good at 50,000 units a month, hut the
company has been losing money as show

Balance sheet accounts for Joyner Company contained the following amounts at the end of Years
1and 2: The company’s income statement for Year 2 follows: Equipment that had cost
$40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for
$18,000. Cash dividends totaling $15,00

A company is concerned about its operating performance as summarized below: Sales (P 12.50
per unit) P....................300 000 Variable Cost.......................................180 000 Net Operating
Loss.............................(40 000) How many additional units should have been sold in order for
the compa

On February 21, 2018 Osa Steel Works incorporated in the State of California and is authorized
to issue 50,000 $3 par value common shares. 1. The following stock transactions were made by
Osa Steel during 2018. Prepare the necessary journal entries to record the transactions in the
financial records of the company. a

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a) What is the phrase used to convey that by knowing participants X score in a relationship it
helps us to more accurately predict their Y? b) How do we describe it when our predictions are
closer to participants' actual scores?

Refer to the financial statements for Castile Products, Inc., in Exercise 16-7. Assets at the
beginning of the year totaled $280,000, and the stockholders’ equity totaled $161,600.
Required: Compute the following: Return on total assets. Return on common stockholders’
equity. Was financial leverage positive or nega

Heritage Watercraft makes reproductions of classic wooden boats. The bottleneck in the
production process is fitting wooden planks to build up the curved sections of the hull. This
process requires the attention of the shop’s most experienced craftsman. A total of 1,800
hours is available per year in this bottleneck

What are some parallels and differences between regression models and time series models?
Share some use cases to add to your discussion of the similarities and differences.

Preparing journal entries for merchandising activities-perpetual system July 1 Purchased

merchandise from Borden Company for $6,700 under credit terms of 2/15, n/30, FOB shipping
point, invoice dated July 1. 2 Sold merchandise to Creek Co. for $950 under credit terms of 2/10,
n/60, FOB shipping point, invoice dated

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A local ice cream shop sells 10,000 cones of vanilla-flavored ice cream each year. The cones are
ordered from an outside supplier and it takes 5 days for each shipment of cones to arrive.
Ordering costs are estimated at $15 per order. Carrying costs are $5 per cone per year. Assume
that the ice cream shop is open 250 d

Jenks Company developed the following information about its inventories in applying the lower
of cost or market (LCM) basis in valuing inventories: Product Cost Market A....................
$57,000............$60,000 B......................40,000 ..............38,000
C......................80,000 ..............81,0

Snap, Inc., provides the following data for the next four months: Calculate the amount of
purchases of raw materials in pounds for April and May.

Required:

Pounds of raw material required for each finished Unit = 5 lbs. Raw Materials = 20% of next
month's production needs Desired Ending Inventory

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The accompanying table describes the random variable​ x, the numbers of adults in groups of
five who reported sleepwalking. Complete parts (a) through​ (d) below. a. Find the probability
of getting exactly 4 sleepwalkers among 5 adults. ​(Type an integer or a decimal. Do not
round.) b. Find the probability of

You are interviewing a candidate for a position at a call center. You need someone polite,
courteous, patient, and dependable. The candidate you are talking to seems nice. But how do you
know who is the right person for the job? Will the job candidate like the job or get bored? Will
they steal from the company or be fi

Pranks, Inc. is a manufacturer of joke and novelty products for perpetrators of practical jokes.
The corporation has paid several cash dividends throughout 2016, and is also declaring a stock
dividend to its stockholders as the calendar year-end approaches. You've been brought in as a
consultant to assist with this pro

A brass (non-magnet k) block A and a steel magnet B are in equilibrium in a brass tube under the
magnetic repelling force of another steel magnet C located at a distance x = 0.004 m from B. The
force is inversely proportional to the square of the distance between B and C. If block A is
suddenly removed, the acceleratio