Question

Question 4: Solve the following Case (10 marks) Following a strategy of product differentiation, Bright Company makes a high-end Appliance. AP15. Bright Company presents the following data for the years 2016 and 2017: Units of AP15 produced and sold Selling price Direct materials (square feet) Direct materials costs per square foot Manufacturing capacity in units of AP15 Total conversion costs Conversion costs per unit of capacity Selling and customer-service capacity (customers) Total selling and customer-service costs 2016 2017 20,000 21,000 $200 $220 60,000 61,500 $22 25,000 25,000 $1,000,000 $1,100,000 $44 58 $360,000 $362,500 Selling and customer-service capacity cost per customer $6,000 $6,250 $20 $40 60 Bright Company produces no defective units but it wants to reduce direct materials usage per unit of AP15 in 2017. Manufacturing conversion costs in each year depend on production capacity defined in terms of AP15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Bright Company has 46 customers in market size for high-end appliances increased 5% from 2016 to 2017. 2016 and 50 customers in 2017. The industry Required 1) What is operating income for 2016? 2) What is operating income in 2017 3) What is the change in operating income from 2016 to 20177 Page 8 of 10 Given the following aocout information for Leong Corporstion, preparea poeport form for the company as of December 31, 2015. All acounts have nomal balances Interest Expense 2,400 Retained Earnings Dividends 57,320 Bonds Payable Notes Payable (due in 6 months Share Capital-Ordinary Accumulated Depreciation- Equip Prepaid Advertising 10,000 351,400 Buildings Supplies Taxes Payable Utilities Expense Advertising Expense Salaries and Wages Expense Salaries and Wages Payable Accumulated Depr.- Buildings Cash Depreciation Expense 1,860 1,560 15,000 Page 6 of 10

Answer 1

ANSWER 4

Particulars	2016	2017
Units Sold	20000	21000
Selling Price	200	220
Total Sales (A)	4,000,000	4,620,000
Direct Materials	60000	61500
Direct Materials Cost per Sq Ft	20	22
Total Materials Cost (B)	1,200,000	1,353,000
Total Conversion Cost (C)	1,000,000	1,100,000
Conversion cost per unit	40	44
Capacity	25,000	25,000
Selling and Customer Service Capacity	60	58
Selling and Customer Service Cost (D)	360,000	362,500
Selling and Customer Service Cost Per Customer	6,000	6,250
Operating Income (A-B-C-D)	1,440,000	1,804,500
Change in Operating Income		25.31%
		Increase

ANSWER 3

Income Statement	Amount
Revenue	351400
Expenses
Supplies	1860
Utility Expenses	1320
Advertising Expenses	1560
Salary and Wages Expenses	53040
Total Expenses	57780
EBITDA	293620
Depreciation Expenses	8000
EBIT	285620
Interest Expenses	2400
PROFIT	283220

BALANCE SHEET
Assets		Amount
Current Assets		147000
Inventory	102000
Prepaid Advertising	5000
Cash	40000
Equipment	40000	252720
less: Depreciation	10000
	30000
Land	157320
Building	80400
less: Depreciation	15000
	65400
TOTAL ASSETS		399720
Liabilities
Current Liabilities		28900
Interest Payable	600
Notes Payable	24400
Taxes Payable	3000
Salary and Wages Payable	900
Non Current Liabilities		78000
Bonds Payable	78000
Shareholders Fund		292820
Capital	60000
Add: Reserves	283220
Add: Retained Earnings
Less: Dividend	50400
TOTAL LIABILITIES		399720