ECO 561 Individual Assignment: Revenue, Cost Concepts, and Market Structure Proposal - Clear Hear Scenario

ECO 561

Axia College of University of Phoenix (UoP)

ECONOMICS

Clear Hear Scenario

Week Four 4

3. Individual Assignment: Revenue, Cost Concepts, and Market Structure Proposal
• Resources: Will Bury, Clear Hear, or Thomas Money Service scenarios located on your student Web site.
• Select from the Will Bury, Clear Hear, or Thomas Money Service scenarios located on your student Web site for this assignment.
• Create a 1,050- to 1,400-word business proposal in which you provide recommendations to the company for increasing revenue for the company, achieve ideal production levels, determine how fixed and variable costs should be adjusted to maximize profit, and identify methods to reduce costs.
• Describe your process to make recommendations.
• Include economic concepts to provide support for recommendations.
• Answer the question: What assumptions did you make about the organization and its values?

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ECO561
Week 4
Clear Hear Scenario

Clear Hear is a manufacturer of cell phones, where Kendra Sherman works as a business development specialist. Kendra anxiously awaits her appointment with Lisa Norman, the production manager for Clear Hear. Kendra has secured an order for 100,000 cell phones that are nearly identical to Clear Hear’s Alpha model, which will support a promotion that a major chain, Big Box, is running with a telephone service provider. The delivery date is in 90 days. Lisa is interested, in part, because she has an excess capacity of 70,000 cell phone units over the next 3 months, and part of her bonus is based on running the factory at capacity. The larger part of her bonus, however, is based on factory total profitability. Big Box, however, will not pay more than $15 for each of the cell phones, which are based on the $20 per unit Alpha model, lessening Kendra’s enthusiasm.

Clear Hear runs two production lines at its factory. The other line produces the Beta model, which has more features. The Beta model sells for $30 but also costs more to produce. Lisa knows that she could switch production of 30,000 units from the Beta model to Alpha to complete the order. Just last week, however, an Original Equipment Manufacturer (OEM), which has extensive experience manufacturing cell phones for other brands and has won several quality awards for its manufacturing processes, showed Lisa a prototype of the Alpha unit. The OEM sought to convince Lisa that not only could they produce up to 100,000 units of the Alpha on short notice, but the performance of the cell phone would be identical to Clear Hear’s product. The price would be a nonnegotiable $14 per unit.

After the meeting, Lisa reviewed the last month’s unit profitability report that revealed the following:

Table 1

Unit Profitability Report
Alpha model Beta model
Price per unit 20 30
Variable cost per unit 8 12
Fixed overhead 9 10
Profits 3 8
Note. All unit prices are in dollars.

Unfortunately, although unit profits were good and cost controls met factory standards, the underutilization of capacity deprived Lisa and the factory of profits that could have been earned on an additional 70,000 units. Kendra wants to know if she should accept the order from Big Box.

As Lisa Norman thinks about how to proceed, she studies Clear Hear’s statement of values. Clear Hear’s values include the following:

• Keep our employees working.
• Provide our customers with products on time and that reliably meet or exceed their expectations.
• Treat our business partners the same as we want to be treated.
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ACC 281 Week 4: P11-7A On July 1, 2008, Rossillon Company

ACC 281

Axia College of University of Phoenix (UoP)

Financial Accounting Transaction Analysis

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.

ACC 281 Week Four Solution

Learning Team Assignment

P11-7A On July 1, 2008, Rossillon Company issued $4,000,000 face value, 8%, 10-year bonds at $3,501,514.This price resulted in an effective-interest rate of 10% on the bonds. Rossillon uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.
Instructions (Round all computations to the nearest dollar.)
(a) Prepare the journal entries to record the following transactions. (1) The issuance of the bonds on July 1, 2008. (2) The accrual of interest and the amortization of the discount on December 31, 2008. (3) The payment of interest and the amortization of the discount on July 1, 2009, assuming no accrual of interest on June 30. (4) The accrual of interest and the amortization of the discount on December 31, 2009.
(b) Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2009, balance sheet.
(c) Provide the answers to the following questions in letter form. (1) What amount of interest expense is reported for 2009? (2) Would the bond interest expense reported in 2009 be the same as, greater than, or less than the amount that would be reported if the straight-line method of amortization were used? (3) Determine the total cost of borrowing over the life of the bond. (4) Would the total bond interest expense be greater than, the same as, or less than the total interest expense that would be reported if the straight-line method of amortization were used?

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ACC 281 Week 4: E11-8 Jim Thome has prepared

ACC 281

Axia College of University of Phoenix (UoP)

Financial Accounting Transaction Analysis

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.

ACC 281 Week Four Solution

Individual Assignment

E11-8 Jim Thome has prepared the following list of statements about bonds. 1. Bonds are a form of interest-bearing notes payable. 2. When seeking long-term financing, an advantage of issuing bonds over issuing common stock is that stockholder control is not affected. 3. When seeking long-term financing, an advantage of issuing common stock over issuing bonds is that tax savings result. 4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds. 5. Secured bonds are also known as debenture bonds. 6. Bonds that mature in installments are called term bonds. 7. A conversion feature may be added to bonds to make them more attractive to bond buyers. 8. The rate used to determine the amount of cash interest the borrower pays is called the stated rate. 9. Bond prices are usually quoted as a percentage of the face value of the bond. 10. The present value of a bond is the value at which it should sell in the marketplace.
Instructions Identify each statement above as true or false. If false, indicate how to correct the statement. Evaluate statements about bonds

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ACC 281 Week 2: E6-5 Catlet Co. uses a periodic

ACC 281

Axia College of University of Phoenix (UoP)

Financial Accounting Transaction Analysis

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.

ACC 281 Week Two Solution

Individual Assignment

E6-5 Catlet Co. uses a periodic inventory system. Its records show the following for the month of May, in which 65 units were sold. Units Unit Cost Total Cost May 1 Inventory 30 $ 8 $240 15 Purchases 25 11 275 24 Purchases 35 12 420 Totals 90 $935 Compute inventory and cost of goods sold using FIFO and LIFO.
Instructions
Compute the ending inventory at May 31 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method.

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ACC 281 Week 4: E11-18 Hrabik Corporation issued

ACC 281

Axia College of University of Phoenix (UoP)

Financial Accounting Transaction Analysis

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.

ACC 281 Week Four Solution

Individual Assignment

E11-18 Prepare entries for issuance of bonds, payment of interest, and amortization of discount using effective-interest method
Hrabik Corporation issued $600,000, 9%, 10-year bonds on January 1, 2008, for $562,613.This price resulted in an effective-interest rate of 10% on the bonds. Interest is payable semiannually on July 1 and January 1. Hrabik uses the effective-interest method to amortize bond premium or discount.
Instructions
Prepare the journal entries to record the following. (Round to the nearest dollar.)
(a) The issuance of the bonds.
(b) The payment of interest and the discount amortization on July 1, 2008, assuming that interest was not accrued on June 30.
(c) The accrual of interest and the discount amortization on December 31, 2008

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ACC 281 Week 4: E11-2 On June 1, Melendez Company borrows

ACC 281

Axia College of University of Phoenix (UoP)

Financial Accounting Transaction Analysis

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.

ACC 281 Week Four Solution

Individual Assignment

E11-2 Prepare entries for interest bearing notes
On June 1, Melendez Company borrows $90,000 from First Bank on a 6-month, $90,000, 12% note.
Instructions
(a) Prepare the entry on June 1.
(b) Prepare the adjusting entry on June 30.
(c) Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30.
(d) What was the total financing cost (interest expense)?

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ACC 281 Week 4: Questions 1 and 2

ACC 281

Axia College of University of Phoenix (UoP)

Financial Accounting Transaction Analysis

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.

ACC 281 Week Four Solution

Individual Assignment

Chapter 11 Questions 1 and 2
1. Jill Loomis believes a current liability is a debt that can be expected to be paid in one year. Is Jill correct? Explain.

2. Frederickson Company obtains $40,000 in cash by signing a 9%, 6-month, $40,000 note payable to First Bank on July 1. Frederickson’s fiscal year ends on September 30. What information should be reported for the note payable in the annual financial statements?

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