I need to get these cases done but i don t know how much should i offer ?

CASE 1 FASTPACK Manufacturing produces filament packaging tape. In 2007, FASTPACK produced and sold 15 million rolls of tape. The company has recently expanded its capacity, so it now can produce up to 30 million rolls per year. FASTPACK's accounting records show the following results from 2007: Sale price per roll $ 3.00 Variable manufacturing costs per roll $ 2.00 Variable marketing and administrative costs per roll $ 0.50 Total fixed manufacturing overhead costs $8,400,000 Total fixed marketing and administrative costs $1,100,000 Sales 15 million rolls Production 15 million rolls There were no beginning or ending inventories in 2007.!In January 2008, FASTPACK hired a new president, Kevin McDaniel. McDaniel has a one-year contract that specifies he will be paid 10% of FASTPACK's 2008 absorption costing operating income, instead of a salary. In 2008, McDaniel must make two major decisions: Should FASTPACK undertake a major advertising campaign? This campaign would raise sales to 24 million rolls. This is the maximum level of sales FASTPACK can expect to make in the near future. The ad campaign would add an additional $2.3 million in fixed marketing and administrative costs. Without the campaign, sales will be 15 million rolls. ! How many rolls of tape will FASTPACK produce? ! At the end of the year, FASTPACK Manufacturing's Board of Directors will evaluate McDaniel's performance and decide whether to offer him a contract for the following year. ! Requirements Assume the role of Kevin McDaniel, FASTPACK Manufacturing's new president. McDaniel will meet with the Board of Directors shortly after the end of 2008 to decide whether he will remain at FASTPACK. Most of your effort should be devoted to advance preparation for this meeting. Kevin McDaniel should: 1. Compute FASTPACK Manufacturing's 2007 operating income. ! 2. Decide whether to adopt the advertising campaign. Prepare a memo to the Board of Directors explaining this decision. Give this memo to the Board of Directors as soon as possible (before the joint meeting). ! 3. Assume FASTPACK adopts the advertising campaign. Decide how many rolls of tape to produce in 2008. ! 4. Given your response to Requirement 3, prepare an absorption costing income statement for the year ended December 31, 2008, ending with operating income before bonus. Then compute your bonus separately. The variable cost per unit and the total fixed costs (with the exception of the advertising campaign) remain the same as in 2007. Give this income statement and your bonus computation to the Board of Directors as soon as possible (before your meeting with the Board). ! 5. Decide whether you wish to remain at FASTPACK for another year. You currently have an offer from another company. The contract with the other company is identical to the one you currently have with FASTPACKyou will be paid 10% of absorption costing operating income instead of a salary. ! CASE 2 Each autumn, as a hobby, Suzanne Aker weaves cotton placemats to sell through a local craft shop. The mats sell for $20 per set of four. The shop charges a 10% commission and remits the net proceeds to Aker at the end of December. Aker has woven and sold 25 sets each of the last two years. She has enough cotton in inventory to make another 25 sets. She paid $7 per set for the cotton. Aker uses a four-harness loom that she purchased for cash exactly two years ago. It is depreciated at the rate of $10 per month. The accounts payable relate to the cotton inventory and are payable by September 30. Aker is considering buying an eight-harness loom so that she can weave moreintricate patterns in linen. The new loom costs $1,000; it would be depreciated at $20 per month. Her bank has agreed to lend her $1,000 at 18% interest, with $200 principal plus accrued interest payable each December 31. Aker believes she can weave 15 linen placemat sets in time for the Christmas rush if she does not weave any cotton mats. She predicts that each linen set will sell for $50. Linen costs $18 per set. Aker's supplier will sell her linen on credit, payable December 31. Aker plans to keep her old loom whether or not she buys the new loom. The balance sheet for her weaving business at August 31, 2007, is as follows: SUZANNE'AKER,'WEAVER' Balance'Sheet'as'of'August'31,'2007' Assets% ' Liabilities% ' Current'Assets:' ' Current'Liabilities:' ' ' Cash' '$125'' ' Accounts'Payable' $74' ' Inventory'of'Cotton' '175'' ' ' ' ' ' '300'' ' ' ' Fixed'Assets:' ' Owners'%Equity% ' ' Loom'' '500'' Owners''Equity' 486' ' Accumulated'Depreciation' (240)'' ' ' ' ' ' '260'' ' Total'Liabilities'and'' ' Total'Assets' $560'' ' Owners''Equity' $560' ' Requirements% 1.' Prepare' a' cash' budget' for' the' four' months' ending' December' 31,' 2007,' for' two' alternatives:'weaving'the'placemats'in'cotton'using'the'existing'loom,'and'weaving' the'placemats'in'linen'using'the'new'loom.'For'each'alternative,'prepare'a'budgeted' income'statement'for'the'four'months'ending'December'31,'2007.'' 2.' On' the' basis' of' financial' considerations' only,' what' should' Aker' do?' Give' your' reason.' 3.'What'nonfinancial'factors'might'Aker'consider'in'her'decision?' CASE%3%% % A.%Equipment%Replacement% ! Sinclair! Company! is! considering! the! purchase! of! new! equipment! to! perform! operations!currently!being!performed!on!different,!less!efficient!equipment.!The! purchase!price!is!$250,000,!delivered!and!installed.!! A! Sinclair! production! engineer! estimates! that! the! new! equipment! will! produce! savings!of!$72,000!in!labor!and!other!direct!costs!annually,!as!compared!with!the! present!equipment.!She!estimates!the!proposed!equipment's!economic!life!at!five! years,!with!zero!salvage!value.!The!present!equipment!is!in!good!working!order! and!will!last,!physically,!for!at!least!five!more!years.! The! company! can! borrow! money! at! 9! percent,! although! it! would! not! plan! to! negotiate! a! loan! specifically! for! the! purchase! of! this! equipment.! The! company! requires! a! return! of! at! least! 15! percent! before! taxes! on! an! investment! of! this! type.!Taxes!are!to!be!disregarded.!! ! Questions% 1. Assuming! the! present! equipment! has! zero! book! value! and! zero! salvage! value,!should!the!company!buy!the!proposed!equipment?! 2. Assuming! the! present! equipment! is! being! depreciated! at! a! straightJline! rate! of! 10! percent,! that! it! has! a! book! value! of! $135,000! (cost,! $225,000,! accumulated! depreciation,! $90,000),! and! has! a! zero! net! salvage! value! today,!should!the!company!buy!the!proposed!equipment?!! 3. Assuming! the! present! equipment! has! a! book! value! of! $135,000! and! a! salvage! value! today! of! $75,000! and! that! if! retained! for! 5! more! years! its! salvage! value! will! be! zero,! should! the! company! buy! the! proposed! equipment?! 4. Assume! the! new! equipment! will! save! only! $37,500! a! year,! but! that! its! economic! life! is! expected! to! be! 10! years.! If! other! conditions! are! as! described! in! (1)! above,! should! the! company! buy! the! proposed! equipment?! ! B.%Replacement%Following%Earlier%Replacement% ! Sinclair! Company! decided! to! purchase! the! equipment! described! in! Part! A! (hereafter!called!\"model!A\"!equipment).!Two!years!later,!even!better!equipment! (called! \"model! B\")! comes! on! the! market! and! makes! the! other! equipment! completely! obsolete,! with! no! resale! value.! The! model! B! equipment! costs! $500,000!delivered!and!installed,!but!it!is!expected!to!result!in!annual!savings!of! $160,000!over!the!cost!of!operating!the!model!A!equipment.!The!economic!life!of! model!B!estimated!to!be!5!years.!Taxes!are!to!be!disregarded.!! ! Questions% 1. What!action!should!the!company!take?! 2. If!the!company!decides!to!purchase!the!model!B!equipment,!a!mistake!has! been! made! somewhere,! because! the! good! equipment,! bought! only! two! years!previously,!is!being!scrapped.!How!did!this!mistake!come!about?! ! C.%Effect%of%Income%Taxes% ! Assume! that! Sinclair! Company! expects! to! pay! income! taxes! of! 40! percent! and! that! a! loss! on! the! sale! or! disposal! of! equipment! is! treated! as! a! capital! loss! resulting! in! a! tax! saving! of! 28! percent! of! the! loss.! Sinclair! uses! an! 8! percent! discount! rate! for! analyses! performed! on! an! afterJtax! basis.! Depreciation! of! the! new!equipment!for!tax!purposes!is!computed!using!the!double!declining!balance! system.!! ! Questions% 1. Should! the! company! buy! the! equipment! is! the! facts! are! otherwise! the! same!as!those!described!in!Part!A!(1)?! 2. If!the!facts!are!otherwise!the!same!as!those!described!in!Part!A!(2)?! 3. If!the!facts!are!otherwise!the!same!as!those!described!in!Part!B?! ! D.%Changes%in%Earnings%Pattern% ! Assume! that! the! savings! are! expected! to! be! $79,500! in! each! of! the! first! three! years!and!$60,750!in!each!of!the!next!two!years,!other!conditions!remaining!as! described!in!Part!A!(1).! ! Questions% 1. What!action!should!the!company!take?! 2. Why!is!the!result!here!different!from!that!in!Part!A!(1)?! 3. What!effect!would!the!inclusion!of!income!taxes,!as!in!Part!C,!have!on!your! recommendation?! (You! are! not! expected! to! perform! any! more! calculations!in!answering!the!question.)! CASE 4 Rye Financial Services provides banks access to sophisticated financial information and analysis systems over the Web. The company combines these tools with access to benchmarking data, including e-mail and wireless communications, so that banks can instantly evaluate individual loan applications and entire loan portfolios. Rye Financial Services' CEO Jon Wise is happy with the company's growth. To bet- ter focus on client service, Wise is considering outsourcing some functions. CFO Jenny Lee suggests that the company's e-mail may be the place to start. She recently attended a conference and learned that many companies were outsourcing their e-mail function. Wise asks Lee to identify costs related to Rye Financial Services' in-house Microsoft Exchange e-mail application, which has 2,300 mailboxes. This information follows: Variable costs: E-mail license $ 7 per mailbox per month Virus protection license $ 1 per mailbox per month Other variable costs $ 4 per mailbox per month Fixed costs: Computer hardware costs $ 94,300 per month $8,050 monthly salary for two information technology staff members who work only on e-mail $16,100 per month ! Requirements+ 1.!Compute!the!total!cost!per!mailbox!per!month!of!Rye!Financial!Services'!cur