Challenging Business Problems with Detailed Answers
Darwin is a 60-year-old software engineer for Compuswerve, Inc. Recently, the company went through a reorganization process meant to revamp the business and the work it does. The directors want to rework the company as a fresh, hip business with cutting-edge knowledge from young, creative-minded employees. Obviously, Darwin doesnt fit into the directors vision, so the managers wish to replace him. Sure enough, a few weeks later Compuswerve hires some new employees, and Darwin is offered a severance plan and dismissed. Which of the following, if true, would legally support the companys decision to fire and replace Darwin? Check all that apply. if the company had fewer than 20 employees if the company was a private (non-governmental) organization if Darwin was unable to perform the essential functions of his job if Darwin planned to retire in less than five years if Darwin had another job offer elsewhere if Darwin needed a reasonable accommodation to perform his job due to a disability if there were more highly skilled workers in the organization who could take his place
1. Daisys Donuts needs your help in calculating their break-even point. They pay $3000 in rent and $2000 in other fixed costs per month. The cost to make each donut is $0.10. Daisy sells her donuts for $0.50 each. a. How many donuts must Daisy sell to break even each month?b. What is Daisys profit margin? Andys car wash washed 2000 cars in June. The cost of water, soap, and hydro to wash each car are $2.00. Andy charges $5.00 for each car wash. His total fixed costs are $9000. c. Did Andy break even in June? How do you know?Bep = fixe9000/5-2= 9000/3= 3000 carsd. How much profit or loss did he have for the month?2. May purchases scarves for $30 and sell them for $100. a. What is her profit margin?b. What is her markup?c. If she discounted the scarves by 10%, what would the new price be?Stylogel wants to price a new style of the pen for the retail market. Its fixed costs will be $500 000 per year. It is examining three price points to the retailer: $1, $2.50, and $5, with a manufacturers suggested retail price of $2, $5, and $10 respectively. The variable costs of the pens depend on the price point. The $1 pen has variable costs of $.25 because it has little packaging and is made of basic materials. The $2.50 pen has little packaging as well, but the materials are of better quality, so its variable costs are $.50. The $5 pen is made of metal and comes in a gift box; therefore, its variable costs are $2 per pen. Advise Stylogel as to the price it should select. You have decided to start up your own business for the summer rather than getting a summer job. A business contact that you know can supply you with Nike knock-off hooded sweaters at $10 each. The sweaters look the same and are of similar quality to true Nile sweaters that retail in other stores for $60 each. The knock-off sweaters have the brand name Nik and a swoosh logo very similar to the Nike sweaters.You go and visit your local shopping mall and find out that there are two possible Kiosk locations that you can rent for July and August. The Kiosk that rents for $500 per week is located at the far end of the mall behind the food court. You note that there is not much shopper traffic in this area as most shoppers just grab something to eat and return to the main mall. The other Kiosk rents for $1000 a week and is located right in the middle of the mall, in front of a store that sells Nike sweaters. Both locations have additional utility costs of $250 per week. You are going to hire a sales associate to run the Kiosk since you rather be playing golf during the summer. You calculate that this helper will work 35 hours per week. The going rate for sales associates in the mall is $10 per hour and 10% commission of the sales they make. You notice that there are several stores in the mall with sales help wanted signs. Answer the following questions:Determine all the fixed costs. These are the costs (expenses that remain the same irrespective of how much you sell.How much would you pay your employee? Give at least 2 reasons for your choice.What is the relationship between the selling price and demand for the sweaters?What else, other than price affects the demand for the sweaters? Indicate at least 2 different strategies that you can try to increase the demand for your sweater.Establish a selling price. Give at least 2 reasons for your choice.What are your variable costs (expenses that are directly related to how much you sell the more you sell the higher they are)?Based on your selling price, what is your profit per sweater sold (how much do you make for every sweater sold?Determine how many sweaters you have to sell before you start making money (to cover all your fixed and variable costs).Your golf membership and pay fees for the summer are $6,000. How many sweaters are you going to have to sell to make sure that you make enough profit so that you can play all summer?
Evergreen Company sells lawn and garden products to wholesalers. The companys fiscal year-end is December 31. During 2021, the following transactions related to receivables occurred:Feb. 28 Sold merchandise to Lennox, Inc., for $10,000 and accepted a 10%, 7-month note. 10% is an appropriate rate for this type of note.Mar. 31 Sold merchandise to Maddox Co. that had a fair value of $7,200, and accepted a noninterest-bearing note for which $8,000 payment is due on March 31, 2022.Apr. 3 Sold merchandise to Carr Co. for $7,000 with terms 2/10, n/30. Evergreen uses the gross method to account for cash discounts. 11 Collected the entire amount due from Carr Co. 17 A customer returned merchandise costing $3,200. Evergreen reduced the customers receivable balance by $5,000, the sales price of the merchandise. Sales returns are recorded by the company as they occur. 30 Transferred receivables of $50,000 to a factor without recourse. The factor charged Evergreen a 1% finance charge on the receivables transferred. The sale criteria are met.June 30 Discounted the Lennox, Inc., note at the bank. The banks discount rate is 12%. The note was discounted without recourse.Sep. 30 Lennox, Inc., paid the note amount plus interest to the bank.Required:1. Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold.2. Prepare any necessary adjusting entries at December 31, 2021. Adjusting entries are only recorded at year-end.3. Prepare a schedule showing the effect of the journal entries on 2021 income before taxes