Rob Cougar Landscaping has assets of 70,000 and equity of 30,000 ...

[fagboi]

Rob Cougar Landscaping has assets of 70,000 and equity of 30,000 . Determine the amount of liabilities in the business.
 a. 100,000
  b. 50,000
  c. 40,000
  d. None of the answers listed

Question 2

CVP analysis, income taxes.
 
  (CMA, adapted) J.T.Brooks and Company, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr. Brooks, the president, to believe that an aggressive marketing campaign will be necessary next year to maintain the company's present growth. To prepare for next year's marketing campaign, the company's controller has prepared and presented Mr. Brooks with the following data for the current year, 2014:
 
  Variable cost (per bowl)
  Direct materials  3.00
  Direct manufacturing labor 8.00
  Variable overhead (manufacturing, marketing, distribution,
   and customer service) 7.50
   Total variable cost per bowl  18.50
  Fixed costs
  Manufacturing  20,000
  Marketing, distribution, and customer service 194,500
   Total fixed costs 214,500
  Selling price  35.00
  Expected sales, 22,000 units 770,000
  Income tax rate 40
 
  Required:
  1. What is the projected net income for 2014?
  2. What is the breakeven point in units for 2014?
  3. Mr. Brooks has set the revenue target for 2015 at a level of 875,000 (or 25,000 bowls). He believes an additional marketing cost of 16,500 for advertising in 2015, with all other costs remaining constant, will be necessary to attain the revenue target. What is the net income for 2015 if the additional 16,500 is spent and the revenue target is met?
  4. What is the breakeven point in revenues for 2015 if the additional 16,500 is spent for advertising?
  5. If the additional 16,500 is spent, what are the required 2015 revenues for 2015 net income to equal 2014 net income?
  6. At a sales level of 25,000 units, what maximum amount can be spent on advertising if a 2015 net income of 108,450 is desired?

[pangili4]

Answer to Question 1

C

Answer to Question 2

1. Revenues  Variable costs  Fixed costs =
Let X = Net income for 2014
22,000(35.00)  22,000(18.50)  214,500 =
770,000  407,000  214,500 =
462,000  244,200  128,700 = X
X = 89,100

Alternatively,
Operating income = Revenues  Variable costs  Fixed costs
= 770,000  407,000  214,500 = 148,500
Income taxes = 0.40  148,500 = 59,400
Net income = Operating income  Income taxes
= 148,500  59,400 = 89,100
2. Let Q = Number of units to break even
35.00Q  18.50Q  214,500 = 0
Q = 214,500  16.50 = 13,000 units
3. Let X = Net income for 2015
25,000(35.00)  25,000(18.50)  (214,500 + 16,500) =
875,000  462,500  231,000 =
181,500 =
X = 108,900
4. Let Q = Number of units to break even with new fixed costs of 146,250
35.00Q  18.50Q  231,000 = 0
Q = 231,000  16.50 = 14,000 units
Breakeven revenues = 14,000  35.00 = 490,000
5. Let S = Required sales units to equal 2011 net income
35.00S  18.50S  231,000 =
16.50S = 379,500
S = 23,000 units
Revenues = 23,000 units  35 = 805,000
6. Let A = Amount spent for advertising in 2012
875,000  462,500  (214,500 + A) =
875,000  462,500  214,500  A = 180,750
875,000  857,750 = A
A = 17,250