Question & Answer

Remuneration plan    (LO2, 4, 5) Matahari Ltd manufactures and installs renewable energy systems. It has four divisions in Australia: Wind, Thermal Solar, Photo Voltaic (PV) and Installation. The company was listed on the Australian Stock Exchange in 2013. The CEO, William Smith, believes that divisional managers should be given a high degree of autonomy and held accountable for the performance of their divisions. He believes that if the divisions prosper then the company and its shareholders will prosper. Before the beginning of each financial year, William reviews performance and then sets a return-on-investment (ROI) target for each division for the coming year. ROI is defined as the operating profit as a percentage of the book-value of the assets employed. Targets are set in consultation with the respective divisional manager with due regard to the prevailing market conditions. William makes sure that the ROI target is challenging but achievable. Over the past 10 years, the ROI targets have tended to increase slightly each year. Key personnel within each division are awarded a performance bonus, if and only if, the ROI of that division exceeds the target. For the past 7 years, Matahari has been using a bonus and incentive scheme to motivate and reward key personnel. The scheme is based on the distribution of a bonus pool. The size of the bonus pool is 10% of Matahari’s residual income for the year and is capped at $1.5 million per year. The bonus pool is distributed to divisions on the basis of  the ROI achieved by each division. If a division does not reach its target, it does not receive a bonus. If a division achieves its target, it receives a bonus score equal to the division’s actual ROI less the division's target ROI, up to a maximum of 5.00 points. The bonus pool is then distributed according to each division’s score relative to the total bonus score. The bonus awarded to a division is then distributed to key personnel as determined by the divisional manager. William is disappointed that Chloe Lee, the manager of the PV Division, has not taken the opportunity to increase her division’s production capacity. The shareholders are supportive and would be happy to finance the expansion. William recalls that divisional managers have been reluctant to submit investment proposals on several occasions in the past. William has also found himself starting to think more about the suitability of the bonus system and underlying performance measures. A member of William’s business network has suggested that Matahari would benefit from the adoption of a balanced scorecard. William gets nervous when people start talking about non-financial measures; he thinks his focus on a small number of key financial measures has worked well to date and aligns with shareholder interests.            Required (a)   For the year ended 30 June 2019, Matahari’s residual income was $13 939 000. The target and actual ROI’s for each division are given in the Table below. Calculate the bonus awarded to each division by completing the Table below.     (b) State two key strengths of the existing bonus plan. (c) Identify one key weakness of the existing bonus plan and suggest a change that would alleviate the weakness.

What are the advantages of a mixed model line over a batch model line for producing different product styles?

Horton Corporation is preparing a bank reconciliation and has identified the following potential reconciling items. For each item, indicate if it is (1) added to balance per bank statement, (2) deducted from balance per bank statement, (3) added to balance per books, or (4) deducted from balance per books. (a) Deposit in transit $5,500. (d) Outstanding checks $7,422. (b) Bank service charges $25. (e) NSF check returned $377. (c) Interest credited to Horton’s account $31.

An analyst recently suggested that there will be a major economic expansion that will favorably affect the prices of highrated, fixed-rate bonds because the credit risk of bonds will decline as corporations improve their performance. Assuming that the economic expansion occurs, do you agree with the analyst’s conclusion? Explain. (LO2)

Do behavioural theories of the firm allow us to make any predictions about firms’ prices and output?

Evaluate the following statement: “When dividends and long-term capital gains are taxed at the same rate, the overall tax rate on corporate income is the same whether the corporation distributes its after-tax earnings as a dividend or whether it reinvests the after-tax earnings to increase the value of the corporation.”

Name some manufacturing processes that produce very poor surface finishes.

Appliance Center is an experienced home appliance dealer. Appliance Center also offers a number of services together with the home appliances that it sells. Assume that Appliance Center sells ovens on a standalone basis. Appliance Center also sells installation services and maintenance services for ovens. However, Appliance Center does not offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for ovens is as follows. Oven only $ 800 Oven with installation service 850 Oven with maintenance services 975 Oven with installation and maintenance services 1,000 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $175. Additionally, the incremental amount charged by Appliance Center for installation approximates the amount charged by independent third parties. Ovens are sold subject to a general right of return. If a customer purchases an oven with installation and/or maintenance services, in the event Appliance Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $800. Instructions (a) Assume that a customer purchases an oven with both installation and maintenance services for $1,000. Based on its experience, Appliance Center believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately. Explain whether the conditions for a multiple-deliverable arrangement exist in this situation. (b) Indicate the amount of revenues that should be allocated to the oven, the installation, and to the maintenance contract.

Define surface texture.

There are 20 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 8.1 Of the three polymer types, which one is the most important commercially: (a) thermoplastics, (b) thermosets, or (c) elastomers? 8.2 Which one of the three polymer types is not normally considered to be a plastic: (a) thermoplastics, (b) thermosets, or (c) elastomers? 8.3 Which one of the three polymer types does not involve cross-linking: (a) thermoplastics, (b) thermosets, or (c) elastomers? 8.4 As the degree of crystallinity in a given polymer increases, the polymer becomes denser and stiffer, and its melting temperature decreases: (a) true or (b) false? 8.5 Which one of the following is the chemical formula for the repeating unit in polyethylene: (a) CH2, (b) C2H4, (c) C3H6, (d) C5H8, or (e) C8H8? 8.6 Degree of polymerization is which one of the following: (a) average number of mers in the molecule chain; (b) proportion of the monomer that has been polymerized; (c) sum of the molecule weights of the mers in the molecule; or (d) none of the above? 8.7 A branched molecular structure is stronger in the solid state and more viscous in the molten state than a linear structure for the same polymer: (a) true or (b) false? 8.8 A copolymer is a mixture of the macromolecules of two different homopolymers: (a) true or (b) false? 8.9 As the temperature of a polymer increases, its density (a) increases, (b) decreases, or (c) remains fairly constant? 8.10 Which of the following plastics has the highest market share: (a) phenolics, (b) polyethylene, (c) polypropylene, (d) polystyrene, or (e) polyvinylchloride? 8.11 Which of the following polymers are normally thermoplastic (four best answers): (a) acrylics, (b) cellulose acetate, (c) nylon, (d) phenolics, (e) polychloroprene, (f) polyesters, (g) polyethylene, (h) polyisoprene, and (i) polyurethane? 8.12 Polystyrene (without plasticizers) is amorphous, transparent, and brittle: (a) true or (b) false? 8.13 The fiber rayon used in textiles is based on which one of the following polymers: (a) cellulose, (b) nylon, (c) polyester, (d) polyethylene, or (e) polypropylene? 8.14 The basic difference between low-density polyethylene and high-density polyethylene is that the latter has a much higher degree of crystallinity: (a) true or (b) false? 8.15 Among the thermosetting polymers, the most widely used commercially is which one of the following: (a) epoxies, (b) phenolics, (c) silicones, or (d) urethanes? 8.16 The chemical formula for polyisoprene in natural rubber is which of the following: (a) CH2, (b) C2H4, (c) C3H6, (d) C5H8, or (e) C8H8? 8.17 The leading commercial synthetic rubber is which one of the following: (a) butyl rubber, (b) isoprene rubber, (c) polybutadiene, (d) polyurethane, (e) styrene-butadiene rubber, or (f) thermoplastic elastomers?

Hawkins Construction Co. has a $60 million contract to construct a highway overpass and cloverleaf. The total estimated cost for the project is $50 million. Costs incurred in the first year of the project are $8 million. Hawkins Construction Co. appropriately uses the percentageof- completion method. How much revenue and gross profit should Hawkins recognize in the first year of the project?

What are the principal material handling functions in manufacturing?

1.    : If you were to interview someone for a position as an international business executive, what are three questions you think it would be important to ask? Explain your reasoning.

Identify the relevant characteristics of any security that can affect its yield. (LO1)

What patterns in interest rates emerged following the financial crisis?

Distinguish between the following interest rates for bonds payable: (a) Yield rate. (d) Market rate. (b) Nominal rate. (e) Effective rate. (c) Stated rate.

The controller for Clint Eastwood Co. is attempting to determine the amount of cash to be reported on its December 31, 2014, balance sheet. The following information is provided. 1. Commercial savings account of $600,000 and a commercial checking account balance of $900,000 are held at First National Bank of Yojimbo. 2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Eastwood to write checks on this balance, $5,000,000. 3. Travel advances of $180,000 for executive travel for the first quarter of next year (employee to reimburse through salary reduction). 4. A separate cash fund in the amount of $1,500,000 is restricted for the retirement of long-term debt. 5. Petty cash fund of $1,000. 6. An I.O.U. from Marianne Koch, a company customer, in the amount of $190,000. 7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank. 8. The company has two certificates of deposit, each totaling $500,000. These CDs have a maturity of 120 days. 9. Eastwood has received a check that is dated January 12, 2015, in the amount of $125,000. 10. Eastwood has agreed to maintain a cash balance of $500,000 at all times at First National Bank of Yojimbo to ensure future credit availability. 11. Eastwood has purchased $2,100,000 of commercial paper of Sergio Leone Co. which is due in 60 days. 12. Currency and coin on hand amounted to $7,700. Instructions (a) Compute the amount of cash to be reported on Eastwood Co.’s balance sheet at December 31, 2014. (b) Indicate the proper reporting for items that are not reported as cash on the December 31, 2014, balance sheet.

There are 19 correct answers in the following multiple-choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 9.1 Anisotropic means which one of the following: (a) composite materials with composition consisting of more than two materials, (b) properties are the same in every direction, (c) properties vary depending on the direction in which they are measured, or (d) strength and other properties are a function of curing temperature? 9.2 The reinforcing phase is the matrix within which the secondary phase is imbedded: (a) true or (b) false? 9.3 Which one of the following reinforcing geometries offers the greatest potential for strength and stiffness improvement in the resulting composite material: (a) fibers, (b) flakes, (c) particles, or (d) infiltrated phase? 9.4 Wood is which one of the following composite types: (a) CMC, (b) MMC, or (c) PMC? 9.5 Which of the following materials are used as fibers in fiber-reinforced plastics (four best answers): (a) aluminum oxide, (b) boron, (c) cast iron, (d) E-glass, (e) epoxy, (f) Kevlar 49, (g) polyester, and (h) silicon? 9.6 Which of the following metals are used as the matrix material in fiber-reinforced MMCs (two best answers): (a) aluminum, (b) copper, (c) iron, (d) magnesium, and (e) zinc? 9.7 Which of the following metals are used as the matrix metals in nearly all WC cemented carbides and TiC cermets (two correct answers): (a) aluminum, (b) chromium, (c) cobalt, (d) lead, (e) nickel, (f) tungsten, and (g) tungsten carbide? 9.8 Ceramic matrix composites are designed to overcome which of the following weaknesses of ceramics (two best answers): (a) compressive strength, (b) hardness, (c) hot hardness, (d) modulus of elasticity, (e) tensile strength, and (f) toughness? 9.9 Which one of the following polymer types are most commonly used in polymer matrix composites: (a) elastomers, (b) thermoplastics, or (c) thermosets? 9.10 Which of the following materials are not composites (two correct answers): (a) cemented carbide, (b) phenolic molding compound, (c) plywood, (d) Portland cement, (e) rubber in automobile tires, (f) wood, and (g) 1020 steel?

Would this argument still hold if prices rose?

1.    : How does starting an online business differ from starting a small business such as a local auto repair shop or delicatessen? Is it really possible for businesses that operate totally in cyberspace to build close customer relationships? Discuss.

Brian Erlacher, an inventory control specialist, is interested in better understanding the accounting for inventories. Although Brian understands the more sophisticated computer inventory control systems, he has little knowledge of how inventory cost is determined. In studying the records of Strider Enterprises, which sells normal brand-name goods from its own store and on consignment through Chavez Inc., he asks you to answer the following questions. Instructions (a) Should Strider Enterprises include in its inventory normal brand-name goods purchased from its suppliers but not yet received if the terms of purchase are f.o.b. shipping point (manufacturer’s plant)? Why? (b) Should Strider Enterprises include freight-in expenditures as an inventory cost? Why? (c) If Strider Enterprises purchases its goods on terms 2/10, net 30, should the purchases be recorded gross or net? Why? (d) What are products on consignment? How should they be reported in the financial statements?

Describe how the interaction between buyers and sellers affects the market value of a firm and explain how that value can subject a firm to the market for corporate control. (LO6)

Sergey Co. has net cash provided by operating activities of $1,200,000. Its average current liabilities for the period are $1,000,000, and its average total liabilities are $1,500,000. Comment on the company’s liquidity and financial flexibility, given this information.

What is the difference between gross income and adjusted gross income, and what is the difference between adjusted gross income and taxable income?

For each of the following independent situations, indicate the amount the taxpayer must include in gross income and explain your answer: