Homework Answers
Option c
It is logical to forecast cost of goods sold based on revenue growth. This is because cost of goods sold is directly related to revenues. Higher the quantity sold/produced, higher will be the cost of production. Hence the cost of goods sold will be dependent upon the revenue growth.
Option a is incorrect because forecasting COGS based on revenues will not increase flexibility in the model. Option b is incorrect because forecasting is simply a method of estimations and it does not improve the costs/revenues. Option d is incorrect because cost of goods sold depends upon cost of materials and labor and not simply on inventory.
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10. Which of the following is the recommended approach to forecast COGS, and why? a) Forecast...
11. Which is the recommended way to forecast items such as inventory and accounts payable? a)...
11. Which is the recommended way to forecast items such as inventory and accounts payable? a) Inventory and accounts payable should be forecasted based on revenues, since most other working capital items are forecasted based on revenues. b) Inventory and accounts payable should be forecasted based on COGS, because these items are more correlated with input prices than with output prices. c) Inventory and accounts payable should be the plug once total operating assets and operating liabilities have been forecasted....
5. Using regression analysis to forecast assets The AFN equation and the financial statement-forecasting approach both...
5. Using regression analysis to forecast assets The AFN equation and the financial statement-forecasting approach both assume that assets grow at relatively the same rate as sales. However, the relationship between assets and sales is often a little more difficult than that. In particular, some firms use regression analysis to predict the required assets needed to support a given level of sales. Mainway Toys Co. has used its historical sales and asset data to estimate the following regression equations: Accounts...
5. Using regression analysis to forecast assets The AFN equation and the financial statement–forecasting approach both...
5. Using regression analysis to forecast assets The AFN equation and the financial statement–forecasting approach both assume that assets grow at relatively the same rate as sales. However, the relationship between assets and sales is often a little more difficult than that. In particular, some firms use regression analysis to predict the required assets needed to support a given level of sales. Mile Brewing Co. has used its historical sales and asset data to estimate the following regression equations: Accounts...
5. Using regression analysis to forecast assets The AFN equation and the financial statement–forecasting approach both...
5. Using regression analysis to forecast assets The AFN equation and the financial statement–forecasting approach both assume that assets grow at relatively the same rate as sales. However, the relationship between assets and sales is often a little more difficult than that. In particular, some firms use regression analysis to predict the required assets needed to support a given level of sales. Mile Brewing Co. has used its historical sales and asset data to estimate the following regression equations: Accounts...
Which of the following is NOT a best practice for financial model inputs? Add comments to...
Which of the following is NOT a best practice for financial model inputs? Add comments to cells to give more information Use colour to separate inputs from outputs Data should only be entered once Protect inputs by locking input cells 2 Complex financial models are all of the following EXCEPT: They typically model most outputs from first principles They are more prone to error due to size and complexity They are easy to follow and audit They offer users a...
1. Which of the following are elements of revenue? a. food and beverage b. volume and...
1. Which of the following are elements of revenue? a. food and beverage b. volume and price c. profits and cash flow d. advertising and profits 2. Ignoring price elasticity, which of the following is the best contributor to larger profits? a. increase in menu prices b. increase in customers c. increase in advertising d. inelastic demand 3. Which of the following can be used to forecast sales? a. statistical models b. CVP c. moving average method d. all of...
please explain and show the formulas Question 2-2 Parts (14+6= 20 marks) Part 1. Working as...
please explain and show the formulas
Question 2-2 Parts (14+6= 20 marks) Part 1. Working as a junior analyst for mutual fund, you wonder if your fund should consider adding ABC Food, a large food chain, to your share portfolio. You obtain the following information from its latest financial statements and other sources: $ 100 Earnings: Book value of Equity: $1,000 Dividends: $ 80 You forecast that its earnings will grow by 10% next year and then by 5% per...
(2) Schedules Complete the sales and merchandise purchase plans with supporting schedules: a) A sales plan...
(2) Schedules
Complete the sales and merchandise purchase plans with supporting
schedules:
a) A sales plan by month and in total, including a schedule of
projected cash collections from sales and accounts receivable, by
month and in total (2 schedules).
b) An inventory purchases plan in units and in dollars, including a
schedule of projected cash payments for purchases, by month and in
total (3 schedules).
NOTE: All schedules and budgets should be calculated based on
information entered into the...
[The following information applies to the questions displayed below.) Huron Chalk Company manufactures sidewalk chalk which...
[The following information applies to the questions displayed below.) Huron Chalk Company manufactures sidewalk chalk which it sells online by the box at $26 per unit. Huron uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in- process inventory. The actual application rate for manufacturing overhead is computed each year, actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for...
Young Brands OUNG BRANDS (YB) is a manufacturer of sports clothing and team uniforms. Its industry...
Young Brands OUNG BRANDS (YB) is a manufacturer of sports clothing and team uniforms. Its industry is quite competitive, so the management team has attempted to operate a modern operation with state-of-the-art production facilities. Careful cost management has been an important factor in attaining profits. YB is considered a leader for its fashion sense, pricing, market- ing, and product quality. Professional and university-team uniforms and affiliated products are sold by company salesmen to teams and to retail stores throughout North...
11. Which is the recommended way to forecast items such as inventory and accounts payable? a) Inventory and accounts payable should be forecasted based on revenues, since most other working capital items are forecasted based on revenues. b) Inventory and accounts payable should be forecasted based on COGS, because these items are more correlated with input prices than with output prices. c) Inventory and accounts payable should be the plug once total operating assets and operating liabilities have been forecasted....
5. Using regression analysis to forecast assets The AFN equation and the financial statement-forecasting approach both assume that assets grow at relatively the same rate as sales. However, the relationship between assets and sales is often a little more difficult than that. In particular, some firms use regression analysis to predict the required assets needed to support a given level of sales. Mainway Toys Co. has used its historical sales and asset data to estimate the following regression equations: Accounts...
Which of the following is NOT a best practice for financial model inputs? Add comments to cells to give more information Use colour to separate inputs from outputs Data should only be entered once Protect inputs by locking input cells 2 Complex financial models are all of the following EXCEPT: They typically model most outputs from first principles They are more prone to error due to size and complexity They are easy to follow and audit They offer users a...
please explain and show the formulas
Question 2-2 Parts (14+6= 20 marks) Part 1. Working as a junior analyst for mutual fund, you wonder if your fund should consider adding ABC Food, a large food chain, to your share portfolio. You obtain the following information from its latest financial statements and other sources: $ 100 Earnings: Book value of Equity: $1,000 Dividends: $ 80 You forecast that its earnings will grow by 10% next year and then by 5% per...
(2) Schedules
Complete the sales and merchandise purchase plans with supporting
schedules:
a) A sales plan by month and in total, including a schedule of
projected cash collections from sales and accounts receivable, by
month and in total (2 schedules).
b) An inventory purchases plan in units and in dollars, including a
schedule of projected cash payments for purchases, by month and in
total (3 schedules).
NOTE: All schedules and budgets should be calculated based on
information entered into the...
[The following information applies to the questions displayed below.) Huron Chalk Company manufactures sidewalk chalk which it sells online by the box at $26 per unit. Huron uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in- process inventory. The actual application rate for manufacturing overhead is computed each year, actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for...
Young Brands OUNG BRANDS (YB) is a manufacturer of sports clothing and team uniforms. Its industry is quite competitive, so the management team has attempted to operate a modern operation with state-of-the-art production facilities. Careful cost management has been an important factor in attaining profits. YB is considered a leader for its fashion sense, pricing, market- ing, and product quality. Professional and university-team uniforms and affiliated products are sold by company salesmen to teams and to retail stores throughout North...
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