1
answer
0
watching
112
views

Puget Concrete is a major west coast supplier of concrete to residential and commercial builders with multiple sites in the Puget Sound area. Concrete is sold (priced) by the cubic yard including costs based on number of cubic tards, delivery costs based on miles driven, and number of truck-hours while at the job site. The company's pricing policy is to price orders for concrete at 25% over full cost per cubic yard for the order. Full cost includes variable costs for concrete, delivery and yard operations plus an allocation for the estimated annual fixed costs of delivery, site operations and administrative costs (see 2017 cost estimates below).
Delivery costs include a rate per mile, recognizing that more miles means more gas and maintenance costs, plus a rate per truck-hour (hours on the job) since if kept waiting on a job site the truck must be kept running so the concrete will not harden and the driver must be paid for that time. Site operations is the name for the company's place where the concrete is prepared and loaded in the truck for delivery.
The price per cubic foot quoted the customer is based on full cost for the job plus 25% divided by number of cubic yards for the order as follows:
Jobs (orders) are priced as follows (using cost plus method):
Number of yards x Concrete cost/yard* * need to compute cost per yard based on cost data below
Number of Miles driven x $10 per mile using the planned miles for that order
Number of Truck hours x $50 per hour using the planned hours for that order
Total Job Cost
plus Markup (job cost x 25%)
Total Price for the order
Total price divided by number of cu yds ordered is the quoted price per cu yd (includes delivery)
At the start of 2017, the company estimated their costs as follows:
Costs included in concrete cost/yard:
Direct Material cost = $75 per cubic yard
Variable site operations costs = $17 per cubic yard
Fixed site operations costs = $300,000 per year
Fixed Delivery costs = $500,000 per year
Fixed Admin. costs = $2,125,000 per year
Costs included in delivery cost:
Variable Delivery costs = $10 per mile + $50 per truck hour
And estimated 2017 sales volume is as follows:
Annual totals (planned): 2017 amount
Total Cubic Yds to be delivered (sold) 500,000
Total Delivery Miles 700,000
Total Truck-hours 25,000
Total number of jobs (orders) 100
Answer each question below (Q1 - Q5) on the tab for that number. Format answer as needed.
Use "Wrap Text" and "Merge cells" to format cells to hold the text answers on the same page (as shown with this sentence). Increase the row height to make the whole line visible.
Fill in your name on Tab 1
Comprehensive Analysis Project questions (answer on Q# tab)
Q5 Puget's CFO will be meeting with the bank to apply for a loan, he had the following report parepared to meet the bank's request. Review the trends based on the this data and answer the questions below to prepare for the bank meeting:
Report of key ratios for last three years: 2016 2015 2014
Current ratio 2.6:1 2.4:1 2.2:1
Current assets / Current liabilities
Acid test (quick ratio) 0.9:1 1.0:1 1.1:1
(Cash + Short-term receivables) / Current liabilities
Accounts receivable turnover 9.2 times 10.3 times 11.5 times
Net credit sales / Accounts receivable
Inventory turnover 8.1 times 7.8 times 6.2 times
Cost of goods sold / Inventory
Return on total assets 14.5% 13.1% 11.3%
(Net income + [Interest expense x (1-Tax rate)]) / Total assets
Return on common stockholder’s equity 17.2% 15.1% 12.9%
Net income / Stockholders’ equity
Price–earnings ratio 14.5 17.2 17.8
Market price per share / Earnings per share
Earnings per share $1.52 $1.51 $1.54
Net income / Number of common shares outstanding
Note: There has been no change in number of shares outstanding.
Required: Answer each question (a - d) comparing 2016 to prior years and explain which ratio(s) were used and how they are interpreted (results of analysis).
a) Is it becoming easier for the company to pay its bills as they come due?
b) Are customers paying their credit accounts as well as they were in 2014?
c) Is the level of inventory increasing, decreasing, or remaining constant?
d) Is the market price of the company’s stock going up or down compared to 2014?
Required: Answer each question comparing 2016 to prior years and explain which ratio(s) were used and how they are interpreted (results of analysis).
a) Is it becoming easier for the company to pay its bills as they come due?
b) Are customers paying their credit accounts as well as they were earlier?
c) Is the level of inventory increasing, decreasing, or remaining constant?
d) Is the market price of the company’s stock going up or down compared to prior level?

For unlimited access to Homework Help, a Homework+ subscription is required.

Casey Durgan
Casey DurganLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in

Related questions

Weekly leaderboard

Start filling in the gaps now
Log in