Individual Assignment II (4*5% = 20%)

Guideline:

1. Do not submit any printed document!

2. Submission date March 13/200 ( Not Before + After)

1. The Balance sheet and Income statement of ABC Corporation as follow:

ABC Corporation
Balance Sheet
December 31, 2012
Cash Br. 6,000 Accounts Payable Br. 15,000
Marketable Securities 14,000 Accruals 5,000
Accounts Receivable 12,000 Total Current Liabilities Br. 20,000
Inventories 18,000 Mortgage Notes Payable 17,000
Total Current Assets 50,000 Long Term Bonds 8,000
Net Plant Assets 30,000 Total Long term Liabilities Br. 25,000
Total Liabilities Br. 45,000
Common Stock 25,000
Retained Earnings 10,000
________ Total Stockholders’ Equity Br. 35,000
Total Assets Br. 80,000 Total Liabilities &Stockholders’ Br. 80,000
Equity

ABC Corporation
Income Statement
For Year Ended December 31, 2012
Sales (All Credit) Br. 75,000
Cost of Goods Sold 35,000
Gross Profit Br. 40,000
Operating Expenses 12,000
Operating Income Br. 28,000
Interest Expense 6,000
Income before Tax Br. 22,000
Income Taxes 4,400
Income after Tax Br. 17,600
Required: Compute the Following Ratios from the above balance sheet and income statement for
ABC Corporation:
(1) Quick Ratio
(2) Inventory Turnover
(3) Fixed Assets Turnover
(4) Total Assets Turnover
(5) Average Collection Period
(6) Debt Ratio
 (7) Debt to Equity Ratio
(8) Net Income Margin
(9) Return on Investment
(10) Return on Equity

2. Ratliff Company has a current production level of 20,000 units per month. Unit costs at this level
are:

Direct materials Br 0.25

Direct labor 0.40
Variable overhead 0.15
Fixed overhead 0.20
Marketing - fixed 0.20
Marketing/distribution - variable 0.40
Current monthly sales are 18,000 units. Jim Company has contacted Ratliff Company about
purchasing 1,500 units at Br 2.00 each. Current sales would not affected by the one-time-only
special order and variable marketing/distribution costs would not incur on the special order.
Required: What is Ratliff Company's change in operating profits if the special order is accepted?
3. Southwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors
from Jinx Motors for Br 1,250 each. South western's plant can manufacture the motors for the
following costs per unit:
Direct materials Br 500
Direct manufacturing labor 250
Variable manufacturing overhead 200
Fixed manufacturing overhead 350
If Southwestern buys the motors from Jinx 70% of the fixed manufacturing overhead applied will
not be avoided. Required:
A. Should the company make or buy the motors?
B. What additional factors should Southwestern consider in deciding whether to make or buy the
motors?
4. Rambo Company has three products, A, B, and C. The following information is available:

Product A Product B Product C

Sales Br 60,000 Br 90,000 Br 24,000
Variable costs 36,000 48,000 15,000
Fixed costs:
Avoidable 6,000 15,000 4,000
Unavoidable 7,000 9,000 5,400
Rambo Company is thinking of dropping Product C because it is reporting a loss. Assuming Rambo
drops Product C and does not replace it. What will happen to operating income because of this decision?
 Individual Assignment (10%)
Guideline:
1. Do not submit any printed document!
2. Submission date March. 13/2022 ( Not Before + After)

1. Assume that Okusha Plc. incurred fixed cost & variable cost per units birr 40 & 22 birr respectively.
The firm desired rate on investment per units is 13 birr to produce 40,000 units by 300,000 birr.
What would be the target selling Price? (2 mark)
2. If planned net income is Br 30,000 and the tax rate is 30%, then what would be planned operating
income? (1 mark)
3. Given: Breakeven point = 30,000, profit = 1,500 and fixed cost = 6000Br. What is the amount of
breakeven point in sales? (1 mark)
4. Discuss the factors affecting Cost Volume Profit analysis and the model used by cost manager (2
marks).
5. Discuss briefly the role and responsibility of financial manager (1 mark)
6. Discuss the most common pricing decisions that any firms will use for decision-making (3marks).