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The Book Wermz reported sales for 2005 of 6,230,000. Cost of goods sold was 55% of sales, and operating expenses were 2,155,000. Interest expense was 190,000. Income taxes were 35% of pretax income. Total assets at the end of 2005 were 5,623,000.

Required Use the information provided to produce an income statement for The Book Wermz for the year ended December 31, 2005. Enter appropriate captions for the statement at the top of the spreadsheet and appropriate captions in column A. Enter amounts in column B. Use equations to calculate subtotals and totals. Calculate cost of goods sold as sales  0.55 and income taxes as pretax income  0.35. Following the income statement, enter the total assets data and calculate asset turnover, profit margin, and return on assets. Enter captions in column A and calculations in column B. Use cell references to the income statement and total assets in these calculations. Suppose that the company’s management believes that it can increase sales by reducing product prices. Cutting the prices relative to the costs of the goods sold would increase the ratio to 60%, but is expected to increase total sales to $7 million. Operating expenses and interest expense are relatively fixed and would not be affected by these changes. Total assets also would not be affected. In column C calculate the effects of the changes on the company’s income statement and financial ratios. Copy the data from column B to column C and make changes as needed. Would the pricing change be advantageous to the company? Another alternative for the company is to raise prices relative to cost of goods sold and significantly increase advertising. The increase in prices would reduce cost of goods sold to 50% of sales. The additional advertising expenses would increase operating expenses to $3 million. Total sales are expected to increase to $7.5 million. Interest expense and total assets would not be affected by these changes. In column D calculate the effects of the changes on income and the financial ratios. Would the company benefit from these changes?

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Cases

In 1989, Robert Smith opened a small fruit and vegetable market in Bethlehem, Pennsylvania. Originally, Smith sold only produce grown on his family farm and orchard. As the market’s popularity grew, however, he added bread, canned goods, fresh meats, and a limited supply of frozen goods. Today, Smith’s Market is a full-range farmers’ market with a strong local customer base. Indeed, the market’s reputation for low prices and high quality draws customers from other Pennsylvania cities and even from the neighboring state of New Jersey. Currently Smith’s Market has forty employees. These include sales staff, shelf stockers, farm laborers, shift supervisors, and clerical staff. Recently Smith has noticed a decline in profits and sales, while his purchases of products for resale have continued to rise. Although the company does not prepare audited financial statements, Robert Smith has commissioned your public accounting firm to assess his company’s sales procedures and controls. Smith’s Market revenue cycle procedures are described in the following paragraphs:
Customers push their shopping carts to the checkout register where a clerk processes the sale. The market has four registers, but they are not dedicated to specific sales clerks because the clerks play many rolls in the dayto-day operations. In addition to checking out customers, sales clerks will stock shelves, unload delivery trucks, or perform other tasks as demand in various areas rises and falls throughout the day. This fluid work demand makes the assignment of clerks to specific registers impractical.
At the beginning of the shift, the shift supervisor collects four cash register drawers from the treasury clerk in an office in the back of the market. The drawers contain $100 each in small bills (known as float) to enable the clerks to make change. The supervisor signs a log indicating that he has taken custody of the float and places the drawers into the respective cash registers.
Sales to customers are for cash, check, or credit card only. Credit card sales are performed in the usual way. The clerk swipes the card and obtains online approval from the card issuer at the time of sale. The customer then signs the credit card voucher, which the clerk places in a special compartment of the cash register drawer. The customer receives a receipt for the purchase and a copy of the credit card voucher.
For payments by check, the clerk requires the customer to present a valid driver’s license. The license number is added to the check and the check is matched against a “black” list of customers who have previously passed bad checks. If the customer is not on the list, the check is accepted for payment and placed in the cash register drawer. The clerk then gives the customer a receipt.
The majority of sales are for cash. The clerk receives the cash from the customer, makes change, and issues a receipt for the purchase.
At the end of the shift, the supervisor returns the cash register drawers containing the cash, checks, and credit cards receipts to the treasury clerk and signs a log that he has handed in the cash drawers. The clerk later counts the cash and credit card sales. Using a standalone PC, he records the total sales amounts in the sales journal and the general Ledger Sales and Cash accounts. The Treasury clerk then prepares a deposit slip and delivers the cash, checks, and credit card vouchers to the local branch of the bank two blocks away from the market.

Required:

a. Create a data flow diagram of the current system.

b. Create a system flowchart of the existing system.

c. Analyze the internal control weaknesses in the system. Model your response according to the six categories of physical control activities specified in COSO.

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You being entrepreneur launch a new form of anti-lies shampoo which is equi-beneficial for defense against hair fall. Although there is no other shampoo which is beneficial for both of these benefits. Then there is a need to check customer perception regarding the shampoo which is offering both of these benefits. Therefore you conducted a survey from those who are suffering mainly from issues of lies. Although your brand is found to be in fourth quadrant of the perceptual mapping grid (as it is in initial phase), this needs to formulate following:

A.Statement through which you will decrease various forms of risks of using your brand
B. Value Proposition grid (product Based) for your shampoo to improve worth but do not decrease price un-necessarily
C. Statements (practical not definition) for influencing consumer purchase decision
D. Explanation of consumer behavior models (practical explanation linked to your brand) in order to market your brand.

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Not all groups or organizations are equally political. Some are different from others changing from organisation to organisation.
The following factors contribute to the political behaviour:

Individual Factors: Employees who posses high self montior, strong focus of internal control, are likely to contribute political behaviour.They tend to maipulate the situation. An individuals competency to get sucessful in an organisation tends him to do political actions.

Organizational Factors: When an organisartions resources are declining,when the existing pattern in an organisation is changing or there are chances of getting promoted there are fair chances of politics.The less trust in the organisation the high chances of political actions.

Role ambiguity: It occurs when the prescribed behaviour of an employee is unclear. The more chance of anbiquety less chance of being visibledue to political actions to hide the traits.

The zero-sum approach: This trait is an outcome of the process if i win you lose. The status the winner gains is highlighted making the loser look bad infront of others.

Democratic Decison Making: Going angainst the will and decisons of other managers ccontribute to political conflicts within the oorganisations.

High Performance pressure: The more pressure you put on the employees more chances to do fraud and political tricks.

Political activity is probably more a function of the organization’s characteristics than of individual difference variables.The act of giving employees the power to make decisions, rewarding employees for strong performance and appointing employees who perform strongly to supervise other employees.Managers find it difficult to point out the political treaits of their subordinates making them do errors int he work. Strict supervison is required to find out such frauds within the organisations.

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