Malone Industries has been in business for five years and has been very successful. In the past year, it expanded operations by buying Hot Metal Manufacturing for a price greater than the value of the net assets purchased. In the past year, the customer base has expanded much more than expected, and the company’s owners want to increase the
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- Sarah Welch was hired 15 years ago by Produce-R-Us, an importer of rare and exotic fruits. ProduceR-Us was started by an immigrant family 20 years ago and has grown to a national company with sales of $10 million annually. Although the business has grown, the family-owned business strives to maintain a “family atmosphere” and stresses trust. Because of Sarah’s honesty and hard work, the manager quickly promoted her, and she now signs checks for amounts under $5,000 and also has responsibilities for Accounts Payable. Now, however, the owners are suspicious of Sarah’s recent lifestyle changes and have hired you to determine whether Sarah is embezzling from the company. Public records reveal the following:Perform a net worth calculation using the data above.arrow_forwardCollin Wilkes is the marketing manager at Darby Company. Last year, Collin recommended the company approve a capital investment project for the addition of a new product line. Collin’s recommendation included predicted cash inflows for five years from the sales of the new product line. Darby Company has been selling the new products for almost one year. The company has a policy of conducting annual post-audits on capital investments, and Collin is concerned about the one-year post-audit because sales in the first year have been lower than he estimated. However, sales have been increasing for the last couple of months, and Collin expects that by the end of the second year, actual sales will exceed his estimates for the first two years combined. Collin wants to shift some sales from the second year of the project into the first year. Doing so will make it appear that his cash flow predictions were accurate. With accurate estimates, he will be able to avoid a poor performance evaluation.…arrow_forwardCollin Wilkes is the marketing manager at Darby Company. Last year, Collin recommended the company approve a capital investment project for the addition of a new product line. Collin’s recommendation included predicted cash inflows for five years from the sales of the new product line. Darby Company has been selling the new products for almost one year. The company has a policy of conducting annual post-audits on capital investments, and Collin is concerned about the one-year post-audit because sales in the first year have been lower than he estimated. However, sales have been increasing for the last couple of months, and Collin expects that by the end of the second year, actual sales will exceed his estimates for the first two years combined. Collin wants to shift some sales from the second year of the project into the first year. Doing so will make it appear that his cash flow predictions were accurate. With accurate estimates, he will be able to avoid a poor performance evaluation.…arrow_forward
- Family Resorts, Inc., is a holding company for several vacation hotels in the northeastern and mid-Atlantic states. The firm originally purchased several old inns, restored the buildings, and upgraded the recreational facilities. Vacationing families have been well pleased with the inns because many services are provided that accommodate children and afford parents time for themselves. Since the completion of the restoration 10 years ago, the company has been profitable.Family Resorts has just concluded its annual meeting of regional and district managers. This meeting is held each November to review the results of the previous season and to help the managers prepare for the upcoming year. Before the meeting, the managers submitted proposed budgets for their districts or regions as appropriate. These budgets are reviewed and consolidated into an annual operating budget for the entire company. The 2008 budget has been presented at the meeting, and the managers accepted it. To evaluate…arrow_forwardFamily Resorts, Inc., is a holding company for several vacation hotels in the northeastern and Mid-Atlantic states. The firm originally purchased several old Inns, restored the buildings, and upgraded the recreational facilities. Vacationing families have been well pleased with the Inns because many services are provided that accommodate children and afford parents time for themselves. Since the completion of the restoration 10 years ago, the company has been profitable. Family Resorts has just concluded its annual meeting of regional and district managers. This meeting is held each November to review the results of the previous season and to help the managers prepare for the upcoming year. Before the meeting, the managers submitted proposed budgets for their districts or regions as appropriate. These budgets are reviewed and consolidated into an annual operating budget for the entire company. The 2008 budget has been presented at the meeting and the managers accepted it. To…arrow_forwardYou work for a firm of management consultants that offers assistance to new businesses. One of your clients is Blossom Manufacturing, a company that manufactures a small, but vital, component for the specialized lighting industry. Blossom is a new company (and a new client for your employer) and you have been assigned the task of advising it of its options for financing its inventory during the first few months. The marketing experts have told you that Blossom should have at least three months of inventory on hand so it can meet all demands from its customers. The annual production of the Blossom component is projected to be 140,400 units. Annual direct labour and direct material costs together are estimated at $351,000 per year. Variable manufacturing costs are estimated to be $210,600 per year; fixed manufacturing costs are projected to be $585,000 per year. Fixed marketing and administration costs are estimated at $819,000 per year. These projections are all for the company's first…arrow_forward
- Spencer Wilkes is the marketing manager at Darby Company. Last year, Spencer recommended the company approve a capital investment project for the addition of a new product line. Spencer’s recommendation included predicted cash inflows for five years from the sales of the new product line. Darby Company has been selling the new products for almost one year. The company has a policy of conducting annual postaudits on capital investments, and Spencer is concerned about the one-year post-audit because sales in the first year have been lower than he estimated. However, sales have been increasing for the last couple of months, and Spencer expects that by the end of the second year, actual sales will exceed his estimates for the first two years combined. Spencer wants to shift some sales from the second year of the project into the first year. Doing so will make it appear that his cash flow predictions were accurate. With accurate estimates, he will be able to avoid a poor performance…arrow_forwardSpencer Wilkes is the marketing manager at Darby Company. Last year, Spencer recommended the company approve a capital investment project for the addition of a new product line. Spencer’s recommendation included predicted cash inflows for five years from the sales of the new product line. Darby Company has been selling new products for almost one year. The company has a policy of conducting annual post audits on capital investments, and Spencer is concerned about the one-year post-audit because sales in the first year have been lower than he estimated. However, sales have been increasing for the last couple of months, and Spencer expects that by the end of the second year, actual sales will exceed his estimates for the first two years combined. Spencer wants to shift some sales from the second year of the project into the first year. Doing so will make it appear that his cash flow predictions were accurate. With accurate estimates, he will be able to avoid a poor performance…arrow_forwardRichmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele. Before finalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the Situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses. Required: According to the IMA’s Statement of Ethical Professional Practice, would it be ethical for Perlman not to report the inventory…arrow_forward
- You have been hired as a consultant for Pristine Urban-Tech Zither, Incorporated (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.7 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.9 million on an aftertax basis. In four years, the land could be sold for $3.1 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $335,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 6,700, 7,400, 8,000, and 6,300 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that…arrow_forwardYou have been hired as a consultant for Pristine Urban - Tech Zither, Incorporated (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.4 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.6 million on an aftertax basis. In four years, the land could be sold for $2.8 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $275,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 6, 100, 6, 800, 7, 400, and 5, 700 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we…arrow_forwardI would like to expand my business by creating a new production line. Today, I hired a consultant to plan the project, at a cost of 200,000. In the first year, I spent $800,000 on new machinery. In the second year, I made $125,000. In the third year, I made $200,000. In the fourth year, I made $ 360,000. In the fifth year, I made $620,000. During years 6-8, I made $540,000 each year. Assuming a discount rate of 7.1%, what was the NPV of this project? Question $973,179 $1,242,275 None of these $1,042,275arrow_forward
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