Posted: December 29th, 2022

From: Jones, Anasthasia Sent: Sunday, February 08, 2015 12:23 PM To: Jones USB Management Team Subject: Planning for Success

1. Predetermined OH Rate and actual OH true-up, and Under- and over-applied (page 50)The predetermined rate overhead rate for each segment is based on 90% of Direct materials. What is the actual overhead rate? Was it under- or over- applied? Please provide the coding that was used to correct the accrual account?2. Contribution Margin per unitCalculate and explain what it means in comparison to current year, prior year results and/or to industry standards, if data is available3. Contribution Margin RatioCalculate and explain what it means in comparison to current year, prior year results and/or to industry standards, if data is availableFrom: Jones, AnasthasiaSent: Sunday, February 08, 2015 12:23 PMTo: Jones USB Management TeamSubject: Planning for SuccessHello Team,I am reaching out to you all in preparation for the annual board meeting scheduled in 2 weeks. As this is thebiggest planning discussion scheduled for the year, I will need insight and recommendations from each of you inhow to approach various areas of operations. Included within you will find financial statements, operatingstatements, and questions that I have for each manager on their respective area of responsibility within theAccounting and Finance team.I expect you all to talk to one another and ensure that the analysis and stories presented in your response andpresentation do not contradict one another. The following performance evaluation will be applied to eachmanager’s assignment:(1) Business Case Paper (125 points)a. Paper will be styled as an e-mail communication to the Company’s Chief Executive Officer (CEO),Chief Financial Officer (CFO) and Chief Operating Officer (COO) who will make decisions basedon the information presented by the Middle Management team. (5 points)b. The paper will include the following sequence to address the question assigned to you:i. Question (5 points)ii. Understanding of Background (15 points)iii. Explain Issue (15 points)iv. Solution(s) Recommended for Issue (15 points)v. Timing and Difficulty to Execute Solution (s) (10 points)vi. Summarize Financial Impact for Solution (10 points)c. The paper will address how your role impacts all other roles within your Middle Managementteam.(50 points)(2) Business Case Presentation (175 points)a. Your presentation tells a clear and coherent story!!!!! (20 points)b. What’s the issue? (20 points)c. Show your analysis in a graphic form of your choosing. (40 points)d. In your analysis, what did you find? (20 points)e. What does your finding mean? (25 points)f. What solutions would you make to management based on this finding? (30 points)g. Which solution would you recommend and why? (20 points)I look forward to your analysis and recommendations to help our Company continue to grow. The business caseemail response and presentation will are due at our last class meeting on May 9, 2016.Please let me know if you have any questions.Anasthasia “A.J.” Jones, CPA, MBASVP and CFO1Statement of Operations for Jones USB Manufacturing CompanyFor the years ended December 31, 2014 and 201520143,000,7891,941,5661,059,22320155,140,2343,631,3591,508,875Depreciation ExpenseInterest ExpenseSelling, general and administrativeTotal Operating ExpensesOperating Income50,84332,750117,289200,882858,34154,31927,500280,914362,7341,146,141Other Income, netIncome before provision for income taxesProvision for income taxesNet Income21,184879,526290,244589,28230,1771,176,319411,712764,607Net SalesCost of Goods SoldGross MarginBasic Earnings per Share$0.75 $0.76Diluted Earnings per Share$0.66 $0.692Balance Sheet for Jones USB Manufacturing CompanyFor the years ended December 31, 2014 and 201520142015ASSETSCash and cash equivalentsShort-term marketable securitiesAccounts receivable, netInventoriesDeferred tax assetsOther Current AssetsTotal current assetsLong-term marketable securitiesProperty, plant and equipment, netGoodwillIntangible assetsOther assetsTotal assets70,671658,158146,171422,50878,72472,3971,448,629796,3712,303,55271,05856,70842,3074,718,625183,278833,077148,580581,266118,166102,5321,966,8991,230,3902,563,312.32159,51462,37947,3846,029,878LIABILITIESAccounts payableAccrued expensesShort-term debtDeferred revenuesTotal current liabilitiesDeferred revenue - non-currentLong-term debtOther noncurrent liabilitiesTotal liabilities148,08674,043105,00062,936390,06518,881550,00069,8751,028,820164,29082,145120,00069,823436,25820,947430,00078,650965,855STOCKHOLDERS' EQUITYCommon StockRetained earningsAccumulated other comprehensive incomeTotal stockholders' equityTotal liabilities and stockholders' equity789,7542,854,95345,0973,689,8044,718,6241,001,3543,997,57165,0985,064,0236,029,8783Cost of Goods Manufactured and Sold for Jones USB Manufacturing CompanyFor the year ended December 31, 2015Direct materialsRaw materials inventory, Beginning Inventory for Current YearRaw materials purchasesRaw materials available for useLess: Raw materials, Ending Inventory for Current YearDirect Materials usedDirect LaborFactory OverheadIndirect laborFactory SupervisionFactory utilitiesRepairs - Factory equipmentProperty Taxes - Factory BuildingFactory supplies usedFactory insurance expiredDepreciation expenseTotal factory overheadTotal manufacturing costsAdd: Work-in-Process inventory, ending inventory for previous yearLess: Work in Process inventory, ending inventory for current yearCost of goods manufacturedAdd: Finished goods inventory, ending inventory for previous yearTotal Available for saleLess: Finished goods inventory, beginning inventory for previous yearCost of goods sold169,0031,628,1931,797,196(232,506)1,564,6891,289,304112,820.58311,230.3191,955.5564,368.88155,624.2836,782.2264,014.1382,759.99919,5563,773,549147,878(203,443)3,717,98458,6923,776,676(145,317)3,631,3594Production Detail for Jones USB Manufacturing CompanyFor the year ended December 31, 2015Total Product Price20142015CONSOLIDATED CONSOLIDATED$4.02 $4.952015GENERIC USB CUSTOMIZED USB4.675.45Cost per USB:Direct MaterialsDirect LaborVariable Factory Overhead: Variable SellingVariable Factory Overhead: General Administrative & Utilities$$$$$$$$$2.601.301.040.100.16$$$$$3.501.301.070.150.981.170.430.360.050.33$$$$2.330.870.710.100.652014GENERIC USB CUSTOMIZED USB3.854.38$$$$0.870.430.350.030.05$$$$1.730.870.690.070.11Units Produced909,2591,203,607689,359.31514,247.94617,156292,103Units Sold746,7561,037,531594,263.98443,308.78506,627239,7890.501.000.501.000.501.00Machine hours per productTarget Price Increase for 2016Operating Capacity10%60%75%5Segment Operating Statements for Jones USB Manufacturing CompanyFor the years ended December 31, 2015 and 2014INCOME STATEMENTNet SalesCost of Goods SoldGross MarginDepreciation ExpenseInterest ExpenseSelling, general and administrativeTotal Operating ExpensesOperating IncomeOther Income, netIncome before provision for income taxesProvision for income taxesNet IncomeGeneric USB2,775,7261,210,4531,565,2732015Customized USB2,415,9102,420,906(4,996)Generic USB1,950,513647,188.501,303,3242014Customized USB1,050,2761,294,377.01(244,101)18,106.509,166.6793,638.01120,9111,444,36236,213.0018,333.33187,276.03241,822(246,818)16,947.5810,916.6739,096.4866,9611,236,36433,895.1521,833.3378,192.97133,921(378,022)10,059.171,454,421137,237.201,317,18420,118.33(226,700)274,474.40(501,175)7,061.491,243,42596,747.841,146,67714,122.98(363,899)193,495.67(557,395)6Inquiries from CFOManagerVaniaVaniaVaniaVaniaVaniaVaniaEduardoEduardoEduardoEduardoEduardoRayRayRayResponsible AreaFinancial Planning andAnalysisFinancial Planning andAnalysisFinancial Planning andAnalysisFinancial Planning andAnalysisFinancial Planning andAnalysisFinancial Planning andAnalysisFinancial ReportingManagerFinancial ReportingManagerFinancial ReportingManagerFinancial ReportingManagerFinancial ReportingManagerCustomized USBLocation ManagerCustomized USBLocation ManagerAssignmentCurrent RatioQuestionCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableAcid Test RatioCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableAR TurnoverCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableTotal Asset TurnoverCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableInventory TurnoverCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableDays Sales UncollectedCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableInventory TurnoverCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableWorking CapitalCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableProfit MarginCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableComparative StatementsCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableCommon Size StatementsCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableControllable vs. Noncontrollable CostsWhat different ways can each of your respective segments reduce costs? What would bethe impact on your segments operating income?Job Order Cost Documents and Materials The accounting system shows the same labor and materials requisitioins being submittedCost Flows (Ledger Card, Requisition,four times incorrectly. What would be the impact on operating income if this wasLabor Time Ticket and related Jes) andincorrectly entered into the system? What would be the journal entry to correct eachAccounting for Manufacturing Activities duplicate $15,657 timesheet and $30,078 material requisition?(inventories and transfers)Customized USBLocation ManagerMeasuring Cost Behavior (ScatterDiagrams, High-Low Method, and LeastSquares regression which is advanced sodon't put it in the business case)I need to understand the companie's fixed and variable Cost behavior. Please provide therelationship of fixed and variable costs in comparison to total costs by preparing ascattergraph and calculation using the high-low method. Explain why they are different andrecommendation for which one management should use as a result of the differences.7Inquiries from CFO (continued)ManagerAminResponsible AreaInternal ReportingManagerAssignmentCost of Goods ManufacturedQuestionIf we sold the Generic USB at $2.25 and the Customized USB at $5.25, and an assumptionof customer demand/sold units increased by 10%, what would our operating income be foreach segment?If we sold the Generic USB at $5.00 and the Customized USB at $6.00, and an assumptionof customer demand/sold units increased by 15%, what would our operating income be foreach segment?AminAminAminAminJamalJamalJamalInternal ReportingManagerInternal ReportingManagerCost of Goods SoldWhy has the cost per unit for both Generic and Customized USB's increased?Absorption vs. Variable CostsInternal ReportingManagerInternal ReportingManagerGeneric USB SegmentManagerGeneric USB SegmentManagerGeneric USB SegmentManagerSalesUsing the 2015 and 2014 GAAP and IRS issued Financial Statements, what would operatingincome using variable costing? How much is the difference between 2014 and 2015operating income using the full cost vs. variable cost approach?Based on 2016 projections and assumptions, please prepare the sales budget for 2016.Production (DM, DL, FOH)Sales Mix SelectionSegment EliminationAccepting Additional BusinessBased on 2016 projections and assumptions, please prepare the production budget for2016.Based on our 2015 and 2014 results, what would be the ideal sales mix needed to reachthe highest profitability result?The customized segment has been in an operating loss position for the last 2 years, do yourecommend management continue to operate or eliminate the segment?A large oil and gas company would like to purchase a bulk order of 20,000 customized USBsfor a business conference they are sponsoring in Las Vegas, however they would like topurchase these customized USBs at a discounted price of $4.50 instead of the normal$5.45. They are also considering 10,000 generic USBs for an employee event at $3.00 aUSB. This is a large order for Jones USBs, so we need to determine if the order is profitable.Additional costs to consider for these orders would be a $.02/USB clerical charge for thecustomized USBs and $.01/USB for the generic USB. The selling costs would decrease by$.6 for the customized USB and by $.02 for the generic USB. Please let me know if weshould move forward with negotiations for each of your respective segments.8Inquiries from CFO (continued)ManagerJamalJamalResponsible AreaGeneric USB LocationManagerGeneric USB LocationManagerAssignmentControllable vs. Noncontrollable CostsQuestionWhat different ways can each of your respective segments reduce costs? What would bethe impact on your segments operating income?Job Order Cost Documents and Materials The accounting system shows the same labor and materials requisitioins being submittedCost Flows (Ledger Card, Requisition,four times incorrectly. What would be the impact on operating income if this wasLabor Time Ticket and related Jes) andincorrectly entered into the system? What would be the journal entry to correct eachAccounting for Manufacturing Activities duplicate $15,657 timesheet and $30,078 material requisition?(inventories and transfers)JamalGeneric USB Location Measuring Cost Behavior (ScatterManagerDiagrams, High-Low Method, and LeastSquares regression which is advanced sodon't put it in the business case)I need to understand the companie's fixed and variable Cost behavior. Please provide therelationship of fixed and variable costs in comparison to total costs by preparing ascattergraph and calculation using the high-low method. Explain why they are different andrecommendation for which one management should use as a result of the differences.AlejandroSayedFinancial Planning andAnalysisFinancial Planning andAnalysisFinancial Planning andAnalysisFinancial Planning andAnalysisPerformance ManagerSayedPerformance Manager Contribution Margin per unitSayedPerformance Manager Contribution Margin RatioMilesForecast ManagerBreak-even pointMilesForecast ManagerMargin of SafetyMilesForecast ManagerDollar Sales and Unit Sales at TargetIncomeCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableThe predetermined rate overhead rate for each segment is based on 90% of Directmaterials. What is the actual overhead rate? Was it under- or over- applied? Please providethe coding that was used to correct the accrual account?Calculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableIf we sold the Generic USB at $5.00 and the Customized USB at $6.00, what would ourbreak-even point need to for be for each segment in both dollars and units?What margin of safety would you recommend if we expected a 10% increase in 2016 incomparison to 2015 sales?If net income is expected to be 10% higher in 2016 in comparison to 2015, and fixed costsare expected to decrease by 5% in 2016, what would the dollar sales and unit sales attarget income be if the contribution margin ratio remained flat in 2016 when compared to2015?AlejandroAlejandroAlejandroReturn on Comon Stockholders' EquityReturn on Total AssetsPrice-Earnings RatioDividend YieldPredetermined OH Rate and actual OHtrue-up, and Under- and over-applied9Inquiries from CFO (continued)ManagerMilesResponsible AreaForecast ManagerAssignmentSensitivity AnalysisQuestionBased on your calculation for dollar sales and unit sales, how much would target incomeand unit sales change if we assume sales decreased or increased by 20% in comparison to2015 results?Saad: Management is considering buying a new PRO1000EX, which is better for customizedUSBs, for $57,000 and receive $7,000 in return for trading in the new machine with amarket value of $7,000. The new machine will reduce manufacturing costs by $7,500 ayear. The machine is expected to have a useful life of 5 years. Should we buy or replace thenew machine.Based on our 2015 and 2014 results, what would be the ideal sales mix needed to reachthe highest profitability result? Also, provide sensitivity analysis for a 10% +/- change incustomer demand at current sales mix vs. proposed.A large oil and gas company would like to purchase a bulk order of 20,000 customized USBsfor a business conference they are sponsoring in Las Vegas, however they would like topurchase these customized USBs at a discounted price of $4.50 instead of the normal$5.45. They are also considering 10,000 generic USBs for an employee event at $3.00 aUSB. This is a large order for Jones USBs, so we need to determine if the order is profitable.Additional costs to consider for these orders would be a $.02/USB clerical charge for thecustomized USBs and $.01/USB for the generic USB. The selling costs would decrease by$.6 for the customized USB and by $.02 for the generic USB. Please let me know if weshould move forward with negotiations for each of your respective segments.MariangeCustomized USBActivity ManagerMake or Buy DecisionMariangeCustomized USBActivity ManagerSales Mix SelectionMariangeCustomized USBActivity ManagerAccepting Additional BusinessKiermaPerformance Manager Favorable vs. Unfavorable PerformanceCalculate and explain what this means for the Company.KiermaPerformance Manager Price vs. Quantity for DMCalculate and explain what this means for the Company.KiermaPerformance Manager Rate vs. Time for DLCalculate and explain what this means for the Company.KiermaPerformance Manager Rate vs. Activity for OHCalculate and explain what this means for the Company.KiermaPerformance Manager Investment TurnoverIf our required ROI for the average invested assets for Generic and Customized USBs, are10% and 15%, respectively, and average invested assets are $160,000 and $205,000,respectively, did we achieve our goal for each segment in 2015?10Inquiries from CFO (continued)ManagerClintResponsible AreaTreasury ManagerClintTreasury ManagerClintTreasury ManagerClintTreasury ManagerClintTreasury ManagerAllanBudget ManagerAllanBudget ManagerAllanBudget ManagerAllanBudget ManagerAllanBudget ManagerAllanBudget ManagerAllanBudget ManagerAssignmentPayback Period, Accounting Rate ofReturn, Net Present Value (Required Rateof Return and discounted cash flows),and Internal Rate of ReturnQuestionWe are considering purchasing a marketing company for $250,000. The projected annualcash flows per year is $30,000, the annual after-tax net income is $35,000, and the annualaverage investment for 2015 is $200,000. Management wants to recoup it's investment byYear 5 and it requires an NPV of 10% and IRR of 8%. Please provide your answers andrecommendations to management on how to move forward.Debt RatioCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableEquity RatioCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableTimes Interest EarnedCalculate and explain what it means in comparison to current year, prior year resultsand/or to industry standards, if data is availableCash (page 22-34 for additionalBased on 2016 projections and assumptions (INCOME STATEMENT: 10% increase in sales,liabilities)5% decrease in COGS, 5% decrease in Fixed costs, 35% tax rate, and hold everything elseon the income statement constant. BALANCE SHEET: New machine of $100,000, 70% ofSales are cash, while remaining are collecting in full the folloing month, Direct materialsand direct labor are paid in full in the current period, cash dividend of $1,600,000. Pleaseprepare the Cash budget for 2016.Capital ExpendituresBased on 2016 projections and assumptions (purchase $100,000 machine in cash), pleaseprepare the capital expenditures budget for 2016.Selling and general and administrativeBased on 2016 projections and assumptions (5% decrease in COGS and 5% decrease inexpensesFixed costs), please prepare the SG&A budget for 2016.Budgeted Income Statement (Needs Cash Based on 2016 projections and assumptions (10% increase in sales, 5% decrease in COGS,Budget)5% decrease in Fixed costs, 35% tax rate, and hold everything else constant), pleaseprepare the Budgeted Income Statement for 2016.Budgeted Balance Sheet (needs IS)Based on 2016 projections and assumptions, please prepare the budgeted Balance Sheetfor 2016. See assumptions for Cash budget.SalesBased on 2016 projections and assumptions, please prepare the sales budget for 2016. Seeassumptions for Income Statement.Production (DM, DL, FOH)Based on 2016 projections and assumptions, please prepare the production budget for2016. See assumptions for Income Statement.Cash (page 22-34 for additionalBased on 2016 projections and assumptions (INCOME STATEMENT: 10% increase in sales,liabilities)5% decrease in COGS, 5% decrease in Fixed costs, 35% tax rate, and hold everything elseon the income statement constant. BALANCE SHEET: New machine of $100,000, 70% ofSales are cash, while remaining are collecting in full the folloing month, Direct materialsand direct labor are paid in full in the current period, cash dividend of $1,600,000. Pleaseprepare the Cash budget for 2016.11

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