1. At the end of January, Mineral Labs had an inventory of 925 units, which cost $9 per unit to produce. During February, the company produced 1,650 units at a cost of $13 per unit.

a. If the firm sold 2,350 units in February, what was the Cost of Goods Sold? (Assume LIFO)

b. If the firm sold 2,350 units in February, what was the Cost of Goods Sold? (Assume FIFO)

3. The Bradley Corporation produces a product with the following costs as of July 1, 2014:

Material $ 4 per unit

Labor 2 per unit

Overhead 2 per unit

Beginning inventory at these costs on July 1 was 4,150 units. From July 1 to December 1, 2014, Bradley produced 14,300 units. These units had a material cost of $5, labor of $4, and overhead of $5 per unit. Bradley uses LIFO inventory accounting.

a. Assuming that Bradley sold 17,600 units during the last six months of the year at $19 each, what is its gross profit?

Gross profit

b. What is the value of ending inventory?

ending inventory

5. The Volt Battery Company has forecast sales in units as follows:

January 1,700 May 2,250

February 1,550 June 2,400

March 1,500 July 2,100

April 2,000

Volt Battery Company keeps an ending inventory equal to 110% of the next months expected sales. The ending inventory for December (January's beginning inventory) is 1,860 units, which is consistent with this policy.

Materials cost $12 per unit and are paid for in the month after purchase. Labor cost is $5 per unit and is paid in the month the cost is incurred. Overhead costs are $10,500 per month. Interest of $8,900 is scheduled to be paid in March, and employee bonuses of $14,100 will be paid in June.

a. Prepare a monthly production schedule for January through June.

Jan Feb Mar Apr May June

Projected unit sales

Desired ending inventory

Total units required

Beginning Inventory

Units to be Produced

b.

Prepare a monthly summary of cash payments for January through June. Volt produced 1,500 units in December.

Summary Of Cash Payments
	December	January	February	March	April	May	June
Units produced
Payments:
Material cost		$	$	$	$	$	$
Labor cost
Overhead cost
Interest
Employee bonuses
Total cash payments		$	$	$	$	$	$

8.

The Hartnett Corporation manufactures baseball bats with Pudge Rodriguezs autograph stamped on them. Each bat sells for $49 and has a variable cost of $26. There are $37,950 in fixed costs involved in the production process.

a.	Compute the break-even point in units.

Break-even point

units

b.	Find the sales (in units) needed to earn a profit of $19,320.

Sales quantity needed

units

14.

DickinsonCompanyhas $12,100,000 million in assets. Currently half of these assets are financed with long-term debtat 10.5 percent and half with common stock having a par value of $8. Ms. Smith, Vice-President of Finance, wishes to analyze two refinancing plans, one with more debt (D) and one with more equity (E). The company earns areturn on assetsbefore interest and taxes of 10.5 percent. The tax rate is 40 percent. Tax loss carryover provisions apply, so negative tax amounts are permissable.

Under Plan D, a $3,025,000 million long-term bond would be sold at aninterest rateof 12.5 percent and 378,125shares of stockwould be purchased in the market at $8 per share and retired.

Under Plan E, 378,125 shares of stock would be sold at $8 per share and the $3,025,000 inproceedswould be used to reduce long-termdebt.

a.	How would each of these plans affectearnings per share? Consider the current plan and the two new plans.(Round your answers to 2 decimal places.)

	Current Plan	Plan D	Plan E
Earnings per share	$	$	$

b-1.	Compute the earnings per share if return onassetsfell to 5.25 percent.(Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

	Current Plan	Plan D	Plan E
Earnings per share	$	$	$

b-2.	Which plan would be most favorable if return on assets fell to 5.25 percent? Consider the current plan and the two new plans.
	Current Plan Plan D Plan E

b-3.	Compute the earnings per share if return on assets increased to 15.5 percent.(Round your answers to 2 decimal places.)

	Current Plan	Plan D	Plan E
Earnings per share	$	$	$

b-4.	Which plan would be most favorable if return on assets increased to 15.5 percent? Consider the current plan and the two new plans.
	Current Plan Plan E Plan D

c-1.

If themarket pricefor common stock rose to $10 before the restructuring, compute the earnings per share. Continue to assume that $3,025,000 million in debt will be used to retire stock in Plan D and $3,025,000 million ofnew equitywill be sold to retire debt in Plan E. Also assume that return on assets is 10.5 percent.(Round your answers to 2 decimal places.)

	Current Plan	Plan D	Plan E
Earnings per share	$	$	$

c-2.	If the market price for common stock rose to $10 before the restructuring, which plan would then be most attractive?
	Plan D Plan E Current Plan

15.

The Lopez-Portillo Company has $12.3 million in assets, 70 percent financed by debt, and 30 percent financed by common stock. The interest rate on the debt is 8 percent and the par value of the stock is $10 per share. President Lopez-Portillo is considering two financing plans for an expansion to $26.5 million in assets. Under Plan A, the debt-to-total-assets ratio will be maintained, but new debt will cost a whopping 11 percent! Under Plan B, only new common stock at $10 per share will be issued. The tax rate is 35 percent.

a.	If EBIT is 9 percent on total assets, compute earnings per share (EPS) before the expansion and under the two alternatives.(Round your answers to 2 decimal places.)

	Earnings Per Share
Current	$
Plan A	$
Plan B	$

b.	What is the degree of financial leverage under each of the three plans?(Round your answers to 2 decimal places.)

	Degree Of Financial Leverage
Current
Plan A
Plan B

c.	If stock could be sold at $20 per share due to increased expectations for the firms sales and earnings, what impact would this have on earnings per share for the two expansion alternatives? Compute earnings per share for each.(Round your answers to 2 decimal places.)

	Earnings Per Share
Plan A	$
Plan B	$

16.

Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows:

Sales	$	5,500,000
Variable costs (50% of sales)		2,750,000
Fixed costs		1,850,000
Earnings before interest and taxes (EBIT)	$	900,000
Interest (10% cost)		300,000
Earnings before taxes (EBT)	$	600,000
Tax (40%)		240,000
Earnings after taxes (EAT)	$	360,000
Shares of common stock		250,000
Earnings per share	$	1.44

The company is currently financed with 50 percent debt and 50 percent equity (common stock, par value of $10). In order to expand the facilities, Mr. Delsing estimates a need for $2.5 million in additional financing. His investment banker has laid out three plans for him to consider:

1.Sell $2.5 million of debt at 13 percent.

2.Sell $2.5 million of common stock at $20 per share.

3.Sell $1.25 million of debt at 12 percent and $1.25 million of common stock at $25 per share.

Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2,350,000 per year. Delsing is not sure how much this expansion will add to sales, but he estimates that sales will rise by $1.25 million per year for the next five years. Delsing is interested in a thorough analysis of his expansion plans and methods of financing.He would like you to analyze the following:

a.	The break-even point for operating expenses before and after expansion (in sales dollars).(Enter your answers in dollars not in millions, i.e, $1,234,567.)

	Break-Even Point
Before expansion	$
After expansion	$

b.	The degree of operating leverage before and after expansion. Assume sales of $5.5 million before expansion and $6.5 million after expansion. Use the formula: DOL = (STVC) / (STVC FC).(Round your answers to 2 decimal places.)

	Degree of Operating Leverage
Before expansion
After expansion

c-1.	The degree of financial leverage before expansion.(Round your answers to 2 decimal places.)

Degree of financial leverage

c-2.	The degree of financial leverage for all three methods after expansion. Assume sales of $6.5 million for this question.(Round your answers to 2 decimal places.)

	Degree of Financial Leverage
100% Debt
100% Equity
50% Debt & 50% Equity

d.	Compute EPS under all three methods of financing the expansion at $6.5 million in sales (first year) and $10.5 million in sales (last year).(Round your answers to 2 decimal places.)

	Earnings per share
	First year	Last year
100% Debt	$	$
100% Equity
50% Debt & 50% Equity

17.

Sinclair Manufacturing and Boswell Brothers Inc. are both involved in the production of brick for the homebuilding industry. Their financial information is as follows:

	Sinclair		Boswell
Capital Structure
Debt @ 12%	$	780,000			0
Common stock, $10 per share		520,000		$	1,300,000
Total	$	1,300,000		$	1,300,000
Common shares		52,000			130,000
Operating Plan:
Sales (53,000 units at $25 each)	$	1,325,000		$	1,325,000
Variable costs		954,000			636,000
Fixed costs		0			303,000
Earnings before interest and taxes (EBIT)	$	371,000		$	386,000

The variable costs for Sinclair are $18 per unit compared to $12 per unit for Boswell.

a.	If you combine Sinclairs capital structure with Boswells operating plan, what is the degree of combined leverage?(Round your answer to 2 decimal places.)

Degree of combined leverage

b.	If you combine Boswells capital structure with Sinclairs operating plan, what is the degree of combined leverage?(Round your answer to the nearest whole number.)

Degree of combined leverage

c.	In part b, if sales double, by what percentage will EPS increase?(Round your answer to the nearest whole percent.)

EPS will increase by

%