Instructions:Put your answers in the spaces provided.

Formula:

BEP = FC UCM	BEP(TP) = (FC + TP) UCM
BEP = FC CM ratio		MOS = S - BEPS
MOS = (S - BEPS) S x %		MOS = (S-BEPS) USP
RI = IO - (% X IA)		ROI = IO IA

1. The following transactions occurred during the month of November in the operation of Wonderful Buy, Inc, a retailer of electronic merchandise.Record each transaction listed below to show its impact on the accounting equation in the table provided on the next page for that purpose. For any entry that impacts Retained Earnings, come up with a brief description in the column provided.

• November 4 Purchased merchandise for $7,000 on account from International Fragrance Corporation, terms: 3/10, n/60.

• November 16 Sold merchandise to a customer on account for $6,500, terms 2/10, n/30. The merchandise had cost Wonderful Buy's $3,200.

• November 18Sold merchandise to a customer for cash, $850. The merchandise had cost Wonderful Buy's $350.

• November 19Customer returned $200 of the merchandise from the sale on November 18 and was given a refund.The merchandise had cost Wonderful Buy's $90.

• November 26 Received full amount due from the customer for the sale of November 16.

• November 27 Paid shipping chargeson merchandise purchased on November 4, $250

• November 30 Recorded the shrinkage adjustment. The inventory on hand as determined by taking a physical inventory at the end of November is $3,200.

For question #1a, b, and c:
Assets = Liabilities + Stockholders' Equity
		Accounts	Merchandise	Accounts	Retained	Description of
Date	Cash	Receivable	Inventory	Payable	Earnings	Retained Earnings transaction
11/4
11/16
11/18
11/19
11/26
11/27
11/30

2. Applehead Technology is a company that purchases a device called the EyePod from a supplier and then sells the devices to retail customers. Applehead ships to its customer's FOB shipping point. Applehead is seeking to increase its operating profit as much as possible. If it makes no changes in its operations, the company expects the following for the coming year.

# of units sold 30,000

Price $300 per unit

Shipping costs $ 3 per unit

Cost of merchandise $160 per unit

Rent of facilities and equipment $ 1,000,000

Managerial and administrative salaries $ 1,500,000

Knowing that the company wishes to increase its operating profit, Maria Garcia, the marketing manager, says "I think we should make 2 changes: first, reduce our price to $290 and, second, we should begin to ship FOB destination. If we take these actions, I estimate we will increase the number of units sold to 32,000."

a. On the spreadsheet provided, prepare contribution margin income statements to analyze each of the 2 possibilities for the coming year, namely

ii. Applehead makes no changes

ii. Applehead adopts Garcia's proposal

b. Given Applehead's goal of maximizing its operating profit, based solely on your calculations, should it make the change that the marketing manager suggests? Why or why not? Answer in about a sentence in the space provided on the spreadsheet.

For question #2a
					Adopt Marketing
	Make no changes		Manager's Proposal
	Total		Computation		Total		Computation
Sales
Variable Costs
Contribution Margin
Fixed Costs
Operating Profit
For question #2b:

c. If the company does not adopt Garcia's proposals, how many EyePods (units) would it need to sell in order to break even? Show all work in the space provided.

d. If the company did not adopt Garcia's proposals and actually sells the 30,000 units at $300 each, what is its margin of safety, expressed as a percent? Show all work in the space provided. (round to second decimal places)

3.Divisional income statements for the year 2020 for the two divisions of a company appear below.

Eastern Division Western Division

Sales $5,000,000 $4,500,000

Operating Expenses 3,800,000 3,000,000

Operating Profit $1,200,000 $1,500,000

Invested Assets $6,000,000 $8,000,000

a. Based on the data above, compute the ROI for the Eastern Division and the Western Division. Please use the Du Pont Model. Show all work and round to second decimal places.

b. The company is planning to invest an additional $600,000 in assets in one or the other of the divisions. Which division should the company expand? Why?