ADMS 3920 Chapter Notes - Chapter 13: Cash Flow Statement, Deferral, Cash Flow

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pucewildebeest131

12 May 2014

School

York University

Department

Administrative Studies

Course

ADMS 3920

Professor

all

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Document Summary

Financial statement reports of a firm"s financial performance and resources, including an income statement, a balance sheet, and a statement of cash flows. Cost of goods sold the cost of producing or acquiring goods or services to be sold by a firm. Gross profit sales less the cost of goods sold. Operating expenses - costs related to general administrative expenses and selling and marketing a firm"s product or service. Operating income earnings before interest and taxes are paid. This figure is important because it measures the financial attractiveness of a business opportunity. Financing costs the amount of interest owed to lenders on borrowed money. Net income income that may be distributed to the owners or reinvested in the company as retained earnings. Balance sheet a financial report that shows a firm"s assets, liabilities, and owners" equity capital at a specific point in time: current assets liquid assets that can be converted into cash within a company"s operating cycle.

Related Questions

On the following page are the Consolidated Statements of Income and Parent Company Profit and Loss Statement of Vantaa Corporation (Finland) from the companyâs 2009 annual report.

Vantaa Corporation Consolidated Statements of Income June 30, 2009
	2009 FIM million
Net sales	12,795
Cost of goods sold	(9,178)
Gross profit	3,617
Selling, marketing, and administrative expenses	(1,328)
Other income and expenses, net	204
Operating profit	2,493
Share in results of associated companies	2
Interest and other financial expenses, net	(78)
Profit before extraordinary items and income taxes	2,417
Extraordinary items	-
Profit before income taxes	2,417
Income taxes	(962)
Profit before minority interest	1,455
Minority interests	-
Net profit	1,455
Earnings per share, FIM	15.47

Vantaa Corporation Parent Company Profit and Loss Statement June 30, 2009
	2009 FIM million
Net sales	20
Cost of goods sold	(29)
Gross margin	(9)
Administrative expenses	(50)
Other income and expenses, net	125
Operating profit	66
Interest and other financial expenses, net	(173)
Loss before contribution, untaxed reserves and income taxes	(107)
Group contributions	470
Decrease in untaxed reserves	-
Increase in accelerated depreciation	(1)
Profit before income taxes	362
Income taxes	(108)
Net profit	254

Compare the net income and other important items in the two financial statements. Does this influence your opinion about the operating performance of the company? In your opinion, which statement is more informative from 1) a user perspective, 2) a management perspective?

olivealligator582

24-5

Differential Analysis for a Discontinued Product

The condensed product-line income statement for PorcelainTableware Company for the month of December is as follows:

PorcelainTableware Company Product-Line Income Statement For the Month Ended December 31, 2014
	Bowls	Plates	Cups
Sales	$65,900	$90,300	$25,900
Cost of goods sold	25,500	32,000	14,000
Gross profit	$40,400	$58,300	$11,900
Selling and administrativeexpenses	29,400	34,100	15,500
Income from operations	$11,000	$24,200	$(3,600)

Fixed costs are 12% of the cost of goods sold and 38% of theselling and administrative expenses. Porcelain Tableware assumesthat fixed costs would not be materially affected if the Cups linewere discontinued.

a. Prepare a differential analysis datedDecember 31, 2014, to determine if Cups should be continued(Alternative 1) or discontinued (Alternative 2). If an amount iszero, enter zero "0".

Differential Analysis

Continue Cups (Alt. 1) or Discontinue Cups (Alt. 2)

December 31, 2014

Continue Cups (Alternative 1)

Discontinue Cups (Alternative 2)

Differential Effect on Income (Alternative 2)

Revenues

Costs:

Variable cost of goods sold

Variable selling and admin. expenses

Fixed costs

Income (Loss)

amaranthweasel30

Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells about 100 tons of its granular. In its nine-year history, the company has never reported a net loss. However, because of this year's unusually mild winter, projected demand for its product is only 60 tons. Based on its predicted production and sales of 60 tons, the company projects the following income statement (under absorption costing).


Sales (60 tons at $20,500 per ton)	$	1,230,000
Cost of goods sold (60 tons at $15,500 per ton)		930,000
Gross margin		300,000
Selling and administrative expenses		319,200
Net loss	$	(19,200	)

Its product cost information follows and consists mainly of fixed cost because of its automated production process requiring expensive equipment.


Variable direct labor and material costs per ton	$	3,167
Fixed cost per ton ($740,000 Ã· 60 tons)		12,333
Total product cost per ton	$	15,500

Selling and administrative expenses consist of variable selling and administrative expenses of $320 per ton and fixed selling and administrative expenses of $300,000 per year. The company's president is concerned about the adverse reaction from its creditors and shareholders if the projected net loss is reported. The operations manager mentions that since the company has large storage capacity, it can report a net income by keeping its production at the usual 100-ton level even though it expects to sell only 60 tons. The president was puzzled by the suggestion that the company can report income by producing more without increasing sales.

Required:
1. Can the company report a net income by increasing production to 100 tons and storing the excess production in inventory? Complete the following income statement (using absorption costing) based on production of 100 tons and sales of 60 tons. (Round your answers to the nearest whole dollar.)

	Production volume
Cost of goods sold:	60 tons	100 tons




Cost of goods sold per unit
Number of tons sold
Total cost of goods sold

SAFETY CHEMICAL
Income statement - Absorption method
	Production volume
Sales volume - 60 tons	60 tons	100 tons





Under absorption costing, can a company report a higher net income amount by producing more units than they sell?

beigeraccoon584

ADMS 3920 Chapter Notes - Chapter 13: Cash Flow Statement, Deferral, Cash Flow

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