QUIZ 2 STUDY GUIDE

According to the depreciation rates used by the company and described in the Production Cost Report, if a company adds 50 new workstations at a cost of $250,000 each and also spends $5 million for an addition to its assembly plant to accommodate the new workstations, then its annual depreciation costs will rise by

$1,750,000
$700,000
$350,000
$17,500,000
None of these

Income Statement Data
Quarter 1

(in 000s)

Sales Revenues
$50,000

Operating Profit
14,400

Net Income
$ 9,555

Balance Sheet Data

Total Current Assets
$70,000

Total Assets
139,000

Total Current Liabilities
26,000

L-T Debt (draw against credit line)
23,000

Total Equity
90,000

Other Financial Data

Depreciation
$4,000

Dividend payments
$2,250

Based on the above figures, the company’s current ratio (defined as current assets divided by current liabilities, as per the Help screen for the Comparative Financial Performance page of the GSR) is

2.69
$44,000
5.38
0.371
None of these

Assume a company’s Income Statement for a given quarter is as follows:

Income Statement Data
Quarter 1

(in 000s)

Sales Revenues
$50,000

Production Costs
26,500

Delivery Costs
1,600

Marketing Costs
8,500

Administrative Expenses
2,000

Operating Profit
14,400

Net Interest
750

Income Before Taxes
13,650

Taxes
4,095

Net Income
$9,555

Based on the above data, which of the following statements is false?

Production costs are 53% of revenues, thus resulting in a gross profit margin (sales revenues less costs of goods sold) of 47%

Delivery costs are 2.8% of revenues and represent the company’s smallest cost component

Marketing costs are 17.0% of revenues

Administrative expenses are 4.0% of revenues

Net interest costs are 1.5% of revenues

Income Statement Data
Quarter