Problem 3-22: Marlin Company

The company started off producing 20,000 units of mountain bikes. We did not change the production quantity. Last year our forecast sales were 24,000 when we only sold 19,866; therefore we thought it would be best to leave production at 20,000 bikes. Having excess inventory, we concluded that 20,000 units should be enough considering our quality has not changed and our advertising will not increase the sales dramatically. Although we had the choice to produce as much as 30,000 units, we felt as though we did not have sufficient money to increase production. We were interested in allocating the money towards marketing as opposed to production. We realized that without awareness, no matter how many units we make, sales would be inefficient.

If the companies share the market both the companies will have additional sales lower than the break-even sales resulting income lower than their current income. In such a case Steady will suffer far more losses. Low variable costs and hence lower contribution margins of Swing make the company more profitable in comparison to Steady for the sales of additional units. Since the market cannot be segmented, I would advise Swing to reduce its price and enter the market to acquire 40% additional sales. Steady should overlook the new market and continue selling to the current market without changing its price.

The calculation has proven that contribution margin of Model S is higher than Model LX. In conclusion, all resources should be allocated to produce Model S up to its maximum production capacity.

When an error of overstatement like this one happens, the financial statements have to be restated in order(ed) to bring net income to the correct amount. The Cost of goods sold should’ve been increased by $8 million and the same

In 2007 the company was generating cash from everyday operations but the statement of cash flows shows that the company has had a negative profit from 2006 to 2007, but this is because More Vino has expenses that are higher than their sales

Management should note that the level of activity was above what had been planned for the month. This led to an expected increase in profits of $1,100. However, the individual items on the report should not receive much management attention. The favorable variance for revenue and the unfavorable variances for expenses are entirely caused by the increase in activity.

Castillo Products improved from an operating loss in 2009 to profitability in 2010. The net profit margin went from negative to positive. The asset turnover (total-sales-to-total-assets)

The negative outcome with this strategy would be that it may not lock-in retailers. More research and negotiation with retailers will be needed. Another negative affect would be that this strategy would be costly. We would have to see if we are financially stable to invest.

In order to find out the factors that caused the less actual quarterly income, we did analysis on variances. Sales variance, production cost variances and overhead variances are calculated as follows:

Implementing newer strategies could result in possibly more confusion for customers---which could lead to a future decrease in sales; changing the management could affect the company financially as well. I’ve listed the SWOT Analysis of JC Penney below:

Based on the master budget, there have something wrong and unclear. All the numbers are the same, evenly quarter two have more sale than other quarter, at least less 30% than quarter two. We can easy to recognize with a few changes and we can achieve a goal $1.000.000

However we feel that this strategy also has several weaknesses. Compared to the first option presented by the VP of Advertising, we would still need to advertise that our product is coming down in price. If we don’t advertise, the consumer is still going to be drawn to our competitors because they will remain unaware of the new parity in pricing. Also, if we

The internal sales data showed that the business would need $45,000 in monthly revenue to break even. The sales forecast which have been prepared keep in mind a 65% gross margin, however, based on actual figure for 2009, this target has not been reached, and the forecasted sales have fallen.

After closely reviewing the financial and production data, our accounting team has found that your traditional cost allocation is faulty and misleading. The costs of products A and C were over allocated and products B and D were under allocated causing deceptive information on the true profits of the company. Also, product B appears to be

Under the original costing system used by Dakota Office Products, Customer A is shown to be slightly less profitable than Customer B. From the calculations above, we see that Customer A is slightly profitable at 0.3% profit as a percent of sales, and Customer B is not profitable, at a loss of (7.1%). We observe that Customer A is a consumer of low-cost services and generally pay their bills within 30 days unlike customer B who took 90 days or more. Timely servicing of debt led to profitability of Customer A.