15. Coca-Cola reported cost of goods sold of $19.8 billion and gross profit for $6.0 billion. Its reported net sales was: A. $25.8 billion B. $19.8 billion C. $13.8 billion D. $ 6.0 billion

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Real-World Focus

The Coca-Cola Company hardly needs an introduction. A line taken from the cover of a recent annual report says it all: If you measured time in servings of Coca-Cola, âa billion Coca-Cola's ago was yesterday morning.â On average, every U.S. citizen drinks 363 8-ounce servings of Coca-Cola products each year. Coca-Cola's primary line of business is the making and selling of syrup to bottlers. These bottlers then sell the finished bottles and cans of Coca-Cola to the consumer.

In the annual report of Coca-Cola, the information shown below was provided.

THE COCA-COLA COMPANY Management Discussion

Our gross margin declined to 61 percent this year from 62 percent in the prior year, primarily due to costs for materials such as sweeteners and packaging.

The increases [in selling expenses] in the last two years were primarily due to higher marketing expenditures in support of our Company's volume growth.

We measure our sales volume in two ways: (1) gallon shipments of concentrates and syrups and (2) unit cases of finished product (bottles and cans of Coke sold by bottlers).

Instructions

Answer the following questions:

Are sweeteners and packaging a variable cost or a fixed cost? What is the impact on the contribution margin of an increase in the per unit cost of sweeteners or packaging? What are the implications for profitability?

In your opinion, are Coca-Cola's marketing expenditures a fixed cost, variable cost, or mixed cost? Give justification for your answer.

PC Connection is a leading mail-order retailer of personalcomputers. A recent financial report issued by the company revealedthe following information.

Merchandise inventory (beginning of the year) $79 million

Merchandise inventory (end of the year) $91 million

Net sales for the year $2.46 billion

gross profit margin 13%

A. compute the company's cost of goods sold for the year

b. approximately how much inventory did PC Connection purchaseduring the year?

c. what factors might contribute to the company's low grossprofit margin?

d. discuss reasons why PC Connection uses a perpetual inventorysystem.

Union Planters is a Tennessee bank holding company (that is, acorporation that owns banks). (Union Planters is now part ofRegions Bank.) Union Planters manages $32 billion in assets, thelargest of which is its loan portfolio of $19 billion. In additionto its loan portfolio, however, like other banks it has significantdebt investments. The nature of these investments varies fromshort-term in nature to long-term in nature. As a consequence,consistent with the requirements of accounting rules, UnionPlanters reports its investments in two differentcategoriesâtrading and available-for-sale. The following facts werefound in a recent Union Plantersâ annual report.

Gross Gross

Amortized Unrealized Unrealized Fair

(All dollars inmillions) Cost Gains Losses Value

Trading account assets $275 -- -- $275

Securities available for sale 8,209 $108 $15 8,302

Net income 224

Net securities gains(losses) (9)

How must Union Planters account for its investments in each ofthe two categories?