Microline’s profits increased significantly from 2010 to 2011 with the net income of 2011 being over 3 times the amount of 2010. The return on equity also increased, with a 4% ROE in 2010 to 14% in 2011. Their profits are also growing faster than there assets with an increase on their return on assets of 4% between 2010 and 2011. The profit margin rose from 2% in 2010 to 5% in 2011. Sales rose from $7500 between 2010 and 2011, however, this does not account for the substantial increase in their net income. While their sales have increased, their profits have increased at a faster rate. The significant increase in their net income is largely accounted for by gains on sales of land, foreign exchange, income from affiliates and short term equity investments. Combined these account for an increase of $4000 on the income statement between 2010 and 2011. Another point of interest is the large increase in administrative expenses which increased by $5000 dollars from 2010 to 2011. The company did show an increase in sales, however, the amount of the increase brings into question what Microline is writing off as administrative expenses as there is no mention of it in the footnotes. This could be a cause for concern where the majority of the companies net income is being generated from investment opportunities rather than from the sales of…
In addition to the budgeted operating statement and the actual operating statement for 2010, to increase the analysis a flexible budget was created. The flexible budget adjusts revenues and expenses to the actual output level achieved. Here increased sales units could be analyzed given the budgeted rates for variable costs and fixed expenses. The flexible budget enables an analysis of the variances related to selling price, sales volume, sales mix, variable cost per unit, and total fixed costs. The breakdown of total operating income variance is attached for your reference. Below is a detailed analysis of the findings.…
3. It's not an easy life, but it's a good life. Suppose you decide to take the summer off and sign on as a deck hand for a commercial fishing boat in Alaska that specializes in deep-water fishing for ground fish. What kind of fish can you expect to catch? One way to answer this question is to examine the reports on ground fish caught in the Gulf of Alaska. The following list indicates the types of fish caught annually in thousands of metric tons: flatfish, 36.3; Pacific cod, 68.6; sablefish, 16.0; Walleye Pollock, 71.2; rockfish, 18.9. Make a Pareto chart showing the annual harvest for commercial fishing in the Gulf of Alaska.…
Variance Analysis is utilized to support the management during the initial stages. It is the procedure of investigating each variance between the actual and budgeted costs to determine the reasons as to why the planned amount was not met, in more detailed explanation (Ventureline, 2012). There are several influences that contribute to the variance report and one is the department’s assumptions, second is the possible risk for this assumption, and third is the actual expense used for the budget. Let’s say the CEO or Director announces the monthly budget that the department needs to meet. Once the department receives the monthly budget outcomes, the budget for supplies was not properly utilized; therefore the salary is higher than the premeditated budget.…
| Quarterly profits were higher than anticipated ($6,000 versus $5,000) and Return on Capital Employed was much lower than anticipated ($1,500 versus $4,000).…
I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledge and disclosed in the paper. I have also cited any sources from which I used data, ideas of words, whether quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course.…
Based on the formula “Cost of good sold= Beginning inventory + Inventory purchased – Ending inventory”, the cost of good sold during 2012 is equal to 2012 beginning inventory, which should equal the 2011 ending inventory plus inventory purchased over 2012 minus 2012 ending inventory. Therefore, a $1 million overstatement on the 2011 ending inventory causes a $1 million overstatement on the cost of good sold over 2012. Because 2012’s reported income is equal to the amount after cost of good sold has been subtracted from sales, a $1 million overstatement on the cost of good sold results in a $ 1 million understatement on 2012’s reported income.…
A substantial body of research into the determinants of good sales performance has been accumulated over the last century (Shannahan, Bush & Shannahan,…
Since the company is making $80,000 more profit than expected in year 2009, one of the partners, Dave Lundberg pointed out that there isn’t such a need to analyze the profit variance. However, the other partner Adam Dixon was thinking the opposite and he gathered some data to reflect some points in the reasons of this profit variance.…
For all the line items that are calculated as a percentage of sales, we used an average for the last three years as our base case assumptions. Our observations led us to use this average because the percentages were fairly consistent over the last three years. Since the company was not operating at full production capacity we concluded that the company could continue growing without incurring an increase in fixed costs. The dividends were unchanged over the period of observation. Since taxes are not calculated as a percentage of sales but rather as a percentage of EBIT, taxes payable remained unchanged.…
Analysis of sale variance reveals that New Look Jackets record 110,000 actual sale volumes greater that sale volume of 100,000 budgeted for the fiscal year. The favorable variance of 10,000 makes the company to record the increase in the sales revenue for the actual budget. The company recorded $5,747,500 as actual revenue compared to $4,075,000 budgeted as sale revenue making the company to record the favorable variance of $1,672,500 in revenue.…
Over the past year you have sold 4300 books, which look great on the surface. However you have experienced a severe profit loss. From the data that I have gathered from you records, your category D and E books are not doing as well as the other categories of books. You had a total loss of $9000 from those two categories of books. Although your income statement is showing a higher number of book sales in Category D and E, it is costing you more to purchase the books vs selling them.…
Harry W. Markowitz, the father of “Modern Portfolio theory”, developed the mean-variance analysis, which focuses on creating portfolios of assets that minimizes the variance of returns i.e. risk, given a level of desired return, or maximizes the returns given a level of risk tolerance. This theory aids the process of portfolio construction by providing a quantitative take on it. It integrates the field of quantitative analysis with portfolio management. Mean variance analysis has found wide applications both inside and outside financial economics. However it is based on certain assumptions which do not hold good in practice. Hence there have been certain revisions to it, so as to make it a more useful tool in portfolio management.…
In order to derive this forecast, ‘percent-of-sales’ forecasting was used, which involves initially forecasting sales and then forecasting other financial statement accounts based on their direct relationship with sales. This method of forecasting was used due to the lack of information available (only the last three years of financial statements). As a result, every account in the pro forma financial statements are based on one or more key assumptions about their relationship with sales:…
Terms: Forecast vs Forecast Error We clarify the terms used in the practice problems and the final exam problems. Some statisticians speak of the standard deviation or variance of the forecast. The forecast here is the distribution of future values. It is a random variable, which has a standard error (standard deviation and variance). Other statisticians use the term forecast for the mean of the distribution of future values. The forecast error (the error term in the forecast) is the distribution of future values minus its mean. Using these terms: ! The forecast is a scalar with a non-zero value (unless the forecasted value is zero). ! The forecast error is a random variable with a mean of zero and a non-zero standard error. The final exam problems may use either view. The meaning is clear from the context.…