1. The financial statements of Zoro Industries for the year ended Dec. 31, 2021, are given below.

Zoro Industries

Income Statement

For the year Ended Dec. 31, 2021

Sales Revenue P160,000.00

Less: Cost of Goods Sold 106,000.00

Gross Profit 54,000.00

Less: Operating Expenses

Selling Expense 16,000.00

General and Administrative Expenses 10,000.00

Lease Expense 1,000.00

Depreciation Expense 10,000.00

Total Operating Expenses 37,000.00

Operating Profit 17,000.00

Less: Interest Expense 6,100.00

Net Profit Before Taxes 10,900.00

Less: Taxes 4,360.00

Net Profit After Taxes 6,540.00

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Zoro Industries

Balance Sheet

December 31, 2021

Assets

Cash P 500.00

Marketable Securities 1,000.00

Accounts Receivable 25,000.00

Inventories 45,500.00

Total Current Assets P 72,000.00

Land P 26,000.00

Buildings and Equipment 90,000.00

Less: Accumulated Depreciation 38,000.00

Net Fixed Assets P 78,000.00

TOTAL ASSETS P 150,000.00

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Liabilities and Stockholders’ Equity

Accounts Payable P 22,000.00

Notes Payable 47,000.00

Total Current Liabilities P 69,000.00

Long Term debt P 22,950.00

Common Stock 31,500.00

Retained Earnings 26,550.00

TOTAL LIABILITIES AND

STOCKHOLDERS’EQUITY P 150,000.00

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Required:Complete the table below using the preceding statements.Analyze Zoro’sfinancial condition as it relates to :

1. Liquidity
2. Asset management
3. Debt Management
4. Profitability

Ratio	Industry Average	Actual 2020	Actual 2021
Current ratio	1.80	1.84	1.04
Quick Ratio	.70	.78	0.38
Inventory Turnover	2.5	2.59	2.36
Average Collection period	37 days	36 days	57 days
Debt-Equity ratio	50%	51%	46%
Times Interest Earned	3.8	4.0	2.79
GrossProfit Margin	38%	40%	34%
Net Profit Margin	3.5%	3.6%	4.1%
Return on Total Assets	4.0%	4.0%	4.0%
Return on Equity	9.5%	8.0%	11.3%

1. The following financial statements are from Rainey Company:

	December 31, 2020	December 31, 2021
Cash	14,000	16,000
Accounts Receivable(net)	22,000	28,000
Inventories	65,000	55,000
Fixed Assets(net)	85,000	79,000
Total Assets	186,000	178,000
	======	======
Accounts Payable	30,000	15,000
Bonds Payable	60,000	75,000
Common Stock(par value $10)	60,000	60,000
Retained Earnings	36,000	28,000
Total Liabilities & Equity	186,000	178,000
	======	======

December 31, 2021

Sales 360,000

Cost of Goods Sold 240,000

Gross Margin 120,000

Operating Expenses(including 20,000 of depn. exp.) 100,000

Income Before Taxes 20,000

Income Taxes 8,000

Income After Taxes 12,000

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Required: 1. Prepare common-sized statements (Income Statement and Balance Sheets) from the above data.

2. Find the following ratios(rounded to two decimal places):

a) Inventory turnover for 2021

b) The average market price for Rainey stock, if the P/E ratio is 8.

c) The earnings per share

d) The current ratio by the end of 2021

e) Gross Margin percentage for 2021

f) The dividend per share for 2021

g) The dividend payout ratio for 2021

1. Jefferson Company has a plant capacity of 100,000 units, at which level variable costs are $720,000. Fixed costs are expected to be $432,000. Each unit of product sells for $12.
2. Determine the company’s break-even point in sales dollars and units.
3. At what level of sales dollars would the company earn net income of $144,000?
4. If the selling price were raised to $14.40 per unit, at what level of sales dollars

would thecompany earn $144,000? Explain the benefits of using the breakeven point formula in predicting future sales and projecting Costs and expenses to plan for the profitability of the company.

1. Barney Company makes and sells stuffed animals. One product, Michael Bears, sells for $28 per bear. Michael Bears have fixed costs of $100,000 per month and a variable cost of $12 per bear. How many Michael Bears must be produced and sold each month to break even?

Volume (units)	Cost
8,000	$70,000
68,000	190,000

1. Peter Garcia Meza is considering buying a company if it will break even or earn net income on revenues of $80,000 per month. The company that Peter is considering sells each unit it produces for $5. Use the following cost data to compute the variable cost per unit and the fixed cost for the period. Calculate the break-even point in sales dollars. Should Peter buy this company?

1. 
   
2. The management of Bootleg Company wants to know the break-even point for its new line hiking boots under each of the following independent assumptions. The selling price is $50 pair of boots unless otherwise stated. (Each pair of boots is one unit.)
3. Fixed costs are $300,000; variable cost is $30 per unit.
4. Fixed costs are $300,000; variable cost is $20 per unit.
5. Fixed costs are $250,000; variable cost is $20 per unit.
6. Fixed costs are $250,000; selling price is $40; and variable cost is $30 per unit.
7. Explain how the profitability of the company can be affected by the movements in Fixed costs and variable costs. You may illustrate using graphs.

1. Monroe Company has recently been awarded a contract to sell 25,000 units of its product to the federal government. Monroe manufactures the components of the product rather than purchasing them. When the news of the contract was released to the public, President Mary Monroe, received a call from the president of the McLean Corporation, Carl Cahn. Cahn offered to sell Monroe 25,000 units of a needed component, Part J, for $15.00 each. After receiving the offer, Monroe calls you into her office and asks you to recommend whether to accept or reject Cahn’s offer. You go to the company’s records and obtain the following information concerning the production of Part J. You calculate the unit cost of Part J to be $12.12 or ($2,424,000/200,000). But you suspect that this unit cost may not hold true at all production levels. To find out, you consult the production manager. She tells you that to meet the increased production needs, equipment would have to be rented and the production workers would work some overtime. She estimates the machine rental to be $60,000 and the total overtime premiums to be $108,000. She provides you with the following information:

Costs at current production level (200,000 units)
Direct labor	1,248,000
Direct materials	576,000
Manufacturing overhead	600,000
Total cost	2,424,000

The production manager advises you to reject Cahn’s offer, since the unit cost of Part J would be only $12.80 or ($2,880,000/225,000 units) with the additional costs of equipment rental and overtime premiums. This amount still is less than the $15.00 that Cahn would charge. Undecided, you return to your office to consider the matter further.

Costs at current productionlevel (225,000 units)
Direct labor	$1,404,000
Direct materials	648,000
Manufacturing overhead (including equipment rental and overtime premiums)	828,000
Total cost	$2,880,000

Required:

1. Compute the total costs to manufacture the additional units of Part J. (Note: include overtime premiums as a part of direct labor.)
2. Compute the unit cost to manufacture the additional units of Part J.
3. Write a report recommending that Monroe accept or reject Cahn’s offer.

• Below is an income statement for Jewell Co. for 2020:

Sales $ 300,000

Variable costs (150,000)

Contribution margin $ 150,000

Fixed costs (100,000)

Profit before taxes $ 50,000

What is the company’s breakeven Point and margin of safety ratio in 2020? Explain the benefits of determining the Margin of Safety for the company. What does the margin of safety indicate and how important is it in planning the operations of the company?

• You are presented with the income statement for Bender Co. for 2020:

Sales $ 400,000

Variable costs ( 125,000)

Contribution margin $ 275,000

Fixed costs (200,000)

Profit before taxes $ 75,000

Compute:

1. Bender’s degree of operating leverage
2. Bender’s break-even point for 2020 in dollars
3. Bender’s margin of safety for 2020
4. Assuming that the fixed costs are expected to remain at $200,000 for 2021 and the sales price per unit and variable costs per unit are also expected to remain constant, how much profit before taxes will be produced if the company anticipates 2021 sales rising to 130 percent of the 2020 level?
5. Explain what is “degree of operating leverage”. What does it measure and what benefits does it provide to the planner of operations? to the management?

• The following comparative income statements and balance sheets are given to you.

Required:

From the following statements, prepare a base year comparison, using 2019 as the base year. All figures are in thousands. Round off figures to two decimal places. Prepare a report on the performance of the company based on the results of your analyses. Point out on your report the financial aspects which need management’s attention in terms of policy direction and recommendation.

		2021	2020	2019
Sales		395	340	285
Cost of Goods Sold		279	235	201
Gross Margin		116	105	84
Operating Expenses		67	60	47
Interest Expense		10	9	8
Net income Before Income taxes		39	36	29
Income Taxes		21	19	14
Net income after income taxes		18	17	15
		=====	=====	=====
	2021	2020	2019	2018
Current assets:
Cash	59	64	50	43
Accounts Receivable	77	76	62	64
Inventories	108	120	108	93
Other current assets	8	8	12	11
Total Current assets	252	268	232	211