ABC Company Ltd Statement of Changes in the Earnings For the years anded December 31, 2013 and December 1, 2013 in GHE Retained earnings, beginning of you Net profit Dividends on common shares Dividend on preferred shares Retained caring and of your 2013 179.000 75.000 24.900 0.0001 21.00 2012 115.000 50 000 20.000 2.000 ABC Company LN Statement of Financial Position lance Shoe December 2013 and December 2012 din Ghe 2013 560.000 2012 572.000 38000 Asset Non-current Current Cash Accounts receivables Inventories Prepaid expenses Totales 117.000 180.000 56.000 250.000 40.000 50.000 120.000 2.000 1.00 112.000 200.000 312.000 94.000 250.000 344.000 Liabilities and Owners' Equity Liabilities Current tablities Non-current liabilis Total Liabilities Owners' equity Preferred shares, OH 100 per share Common shares GHE 50 per share Additional capital Retained earnings Total owners' equily Totals and owners wity 100.000 250.000 70.000 100.000 200.000 40.000 178.000 516.000 218.000 538.000 950 000 Industry average Financial ratios 1. Current ratio 2. Quick ratio 3. Average collection period 4. Days in inventory 5. Gross profit margin % 6. Earnings per share 7. Interest coverage ratio 3.0 times 1.8 times 38 days 96 days 40% GH 15.00 4.8 times Required: a) Based on the above information, calculate for ABC the seven (7) financial ratios listed above, for 2013 and 2012 (14%) b) Using the ratios calculated in a), and making industry and inter-period comparisons, assess the financial performance of ABC Company Ltd. (20%) c) Identify and explain two key limitations of using ratio analysis in assessing a company's performance. (6%) QUESTION 4 -30 MARKS The ABC Company Ltd, manufactures and sells a specialized cordless microphone for large gathering environments. The company's contribution format income statement for the most recent year is given below: Per Unit (GHC) Sales 80 Variable expenses 60 Contribution margin 20 Assuming the Company's current year sales level is 20,000 units and the annual fixed costs are GH300,000. The management of the company desires to increase operating profit next year and you have been asked for analysis on a number of items. Required: a) Cost-volume-profit (CVP) graph illustrates important relationships. Describe what these relationships are and illustrate these relationships on a graph showing the three important results of a CVP analysis. (6 Marks) b) Prepare a contribution format income statement for the current year including the ABC company's CM ratio and variable expense ratio. (6 Marks) c) Compute the company's break-even point in both unit sales and cedi sales (4 Marks) d) Assume that sales in units increase by 20% next year. If cost behavior patterns remain unchanged, by how much will the company's operating profit change? Use the income statement to compute your answer. (10 Marks) e) Refer to the original data. Compute the company's margin of safety in both cedi and percentage form and interpret your results. (4 Marks) 2. The following production and costs information are provided by a Company: Units Produced Total Costs (GH) 100 200 200 400 300 600 400 800 500 1,000 a) Calculate the regression line for Y on X. 5 marks b) Calculate the coefficient of determination (R-Square) and interpret your results. 5 marks 3. The Registrar of GIMPA Business School is currently reviewing the costs of educating its admitted MBA students. The following past costs have been recorded at two different levels of activity: Number of Admissions Total Costs 2017 Academic Year 6,000 GH 30,000,000 2018 Academic Year 4,700 GH 28,500,000 Required: Using the High-Low Method: a) Calculate the variable cost per admission 2 marks b) Calculate the fixed cost of providing tuition for each year to its MBA students 2 marks c) The budget for 2019 academic year is 7,200 admissions. What would be the total cost at this budgeted level of admission? 2 marks d) In the 2020 academic year, 8,000 admissions would be made but variable cost per admission is expected to increase by 10%. Calculate the total cost of admissions 4 marks ABC Company Ltd Statement of Changes in the Earnings For the years anded December 31, 2013 and December 1, 2013 in GHE Retained earnings, beginning of you Net profit Dividends on common shares Dividend on preferred shares Retained caring and of your 2013 179.000 75.000 24.900 0.0001 21.00 2012 115.000 50 000 20.000 2.000 ABC Company LN Statement of Financial Position lance Shoe December 2013 and December 2012 din Ghe 2013 560.000 2012 572.000 38000 Asset Non-current Current Cash Accounts receivables Inventories Prepaid expenses Totales 117.000 180.000 56.000 250.000 40.000 50.000 120.000 2.000 1.00 112.000 200.000 312.000 94.000 250.000 344.000 Liabilities and Owners' Equity Liabilities Current tablities Non-current liabilis Total Liabilities Owners' equity Preferred shares, OH 100 per share Common shares GHE 50 per share Additional capital Retained earnings Total owners' equily Totals and owners wity 100.000 250.000 70.000 100.000 200.000 40.000 178.000 516.000 218.000 538.000 950 000 Industry average Financial ratios 1. Current ratio 2. Quick ratio 3. Average collection period 4. Days in inventory 5. Gross profit margin % 6. Earnings per share 7. Interest coverage ratio 3.0 times 1.8 times 38 days 96 days 40% GH 15.00 4.8 times Required: a) Based on the above information, calculate for ABC the seven (7) financial ratios listed above, for 2013 and 2012 (14%) b) Using the ratios calculated in a), and making industry and inter-period comparisons, assess the financial performance of ABC Company Ltd. (20%) c) Identify and explain two key limitations of using ratio analysis in assessing a company's performance. (6%) QUESTION 4 -30 MARKS The ABC Company Ltd, manufactures and sells a specialized cordless microphone for large gathering environments. The company's contribution format income statement for the most recent year is given below: Per Unit (GHC) Sales 80 Variable expenses 60 Contribution margin 20 Assuming the Company's current year sales level is 20,000 units and the annual fixed costs are GH300,000. The management of the company desires to increase operating profit next year and you have been asked for analysis on a number of items. Required: a) Cost-volume-profit (CVP) graph illustrates important relationships. Describe what these relationships are and illustrate these relationships on a graph showing the three important results of a CVP analysis. (6 Marks) b) Prepare a contribution format income statement for the current year including the ABC company's CM ratio and variable expense ratio. (6 Marks) c) Compute the company's break-even point in both unit sales and cedi sales (4 Marks) d) Assume that sales in units increase by 20% next year. If cost behavior patterns remain unchanged, by how much will the company's operating profit change? Use the income statement to compute your answer. (10 Marks) e) Refer to the original data. Compute the company's margin of safety in both cedi and percentage form and interpret your results. (4 Marks) 2. The following production and costs information are provided by a Company: Units Produced Total Costs (GH) 100 200 200 400 300 600 400 800 500 1,000 a) Calculate the regression line for Y on X. 5 marks b) Calculate the coefficient of determination (R-Square) and interpret your results. 5 marks 3. The Registrar of GIMPA Business School is currently reviewing the costs of educating its admitted MBA students. The following past costs have been recorded at two different levels of activity: Number of Admissions Total Costs 2017 Academic Year 6,000 GH 30,000,000 2018 Academic Year 4,700 GH 28,500,000 Required: Using the High-Low Method: a) Calculate the variable cost per admission 2 marks b) Calculate the fixed cost of providing tuition for each year to its MBA students 2 marks c) The budget for 2019 academic year is 7,200 admissions. What would be the total cost at this budgeted level of admission? 2 marks d) In the 2020 academic year, 8,000 admissions would be made but variable cost per admission is expected to increase by 10%. Calculate the total cost of admissions 4 marks