JB Ltd’s Projected Profit Assignment Help With Solution

JB Ltd’s Projected Profit Assignment Help

 
1.JB Ltd’s projected profit for 2015 is $550,000, based on a sales volume of 200,000 units. JB Ltd sells USB flash drive for $15 each. Variable costs consist of the $9 purchase price and a $1 shipping and handling cost. JB’s annual fixed costs are $450,000.

 
REQUIRED:
 
a) Calculate JB Ltd’s break-even point in unit sales and dollars.
 
b) Calculate JB Ltd’s margin of safety in units.
 
c) Calculate JB Ltd’s profit for 2015 if there is a 15% increase in projected unit sales.
 
d) For 2015, management expects that the unit purchase price of the USB flash drive will increase by 10%. Calculate the sales revenue JB Ltd must generate for 2015 to maintain the current year’s profit ($550,000) if the selling price and fixed cost remain unchanged.
 
 
2.Chima construction Ltd is deciding whether to purchase certain equipment in the coming year. The capital budget has a cap of $6,800,000 for the year. Stephen, project analyst at Chima construction Ltd, is preparing an analysis of the three projects under consideration by Rod, the company’s owner.
 

Project AProject BProject C
Projected cash outflow
Net initial investment$5,000,000$1,500,000$4,000,000
Projected cash inflows
Year 1$1,000,000$400,000$1,000,000
Year 2$1,000,000$1,000,000$1,000,000
Year 3$1,500,000$1,000,000$2,100,000
Year 4$1,500,000$500,000$1,000,000
Year 5$3,000,000$300,000$300,000
Required rate of return12%12%12%

 
REQUIRED:
 
a) Calculate the payback period for each of the three projects. Ignore income taxes. Using the payback method, which project should Chima construction Ltd choose?
 
b) Stephen thinks that projects should be selected based on their NPVs. Assume all cash flows occur at the end of the year except for initial investment amounts. Calculate the NPV for each project. Provide NPV projects ranking.
 
 

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c) Which projects would you consider should be funded? Briefly explain the reasons for your decision.
 
 
3.A&L Ltd is a business that prints customised pens for corporate events. It has been decided by the management that the pricing of customer orders will be based upon the plans for the next financial year. The plans for the 2015 financial year are shown below:

 $
Sales revenue 283,000
Direct materials (38,000)
Direct labour (21,000)
Variable overheads (12,000)
Advertising  (2,000)
Depreciation of equipment  (3,000)
Administration expenses  (24,000)
Licence expenses  (1,200)
Profit  191,800

 
A&L Ltd needs to prepare a quote for a customer for an order of pens and has made the following estimates for the direct costs of the job:
 
Direct materials–$2,500
Direct labour–$1,100
 
Required:
 
(a)Prepare a quote for the customer using direct labour costs to apportion overheads and profits. Show all workings.
 
(b)Describe an alternative method that A&L Ltd could have used to apportion overheads and profits.
 
 
3.Ava School of Learning obtained a charter at the start of the year that authorized 50,000 shares of no-par common stock and 20,000 shares of preferred stock, par value $10. During the year, the following selected transactions occurred:
 
a. Collected $31 cash per share from four individuals and issued 4,100 shares of common stock to each.
 
b. Issued 5,100 shares of common stock to an outside investor at $31 cash per share.
 
c. Issued 7,100 shares of preferred stock at $16 cash per share.
 
i). prepare the journal entries for each of these transactions
 
ii).Prepare the stockholders’ equity section of the balance sheet at December 31. At the end of the year, the accounts reflected net income of $27,000. No dividends were declared.
 
 
4.Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $300,000 of net income and the following selected transactions occurred in the order given:
 
a. Issued 120,000 shares of the common stock at $45 cash per share.
 
b. Reacquired 15,000 shares at $40 cash per share.
 
c. Reissued 5,000 shares from treasury for $41 per share.
 
d. Reissued 5,000 shares from treasury for $39 per share.
 
Prepare the stockholders’ equity section of the balance sheet at December 31. (Amounts to be deducted should be indicated by a minus sign.)
 
 

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