Green Products Value chain; QT Investments ethics; Aquaman Corp cost flow model
25. The and strategic cost analysis. Green Products raises trees, cuts the trees into logs, and processes the logs into paper. Green products sells the paper to a distributor, who then sells the paper to distributor. Assume that a weighted average cost of capital of 10 precent is appropriate for timber and paper processing. Here are the costs and revenues of each stage of the value chain. All data are for the production of enough timber to produce 20,000 tons of paper.
Timber The estimated market value of timber assets at the beginning of the year is 5,400,000 and at the end of the year is 5,000,000. Revenues if the timber were sold in the market, would equal to $2,100,000. Operating costs total 1,500,000, excluding .
Paper Processing The estimated market value of paper processing assets at the beginning of the year is $15,000,000 and $13,000,000 at the end of the year. Revenues if the paper were sold in the market, would be $12,000,000. Operating costs total 8,700,000, including all costs of materials but excluding depreciation.
Distributor The distributor sells the paper for $800 per ton. The cost of the paper to the distributor () can be found by reviewing the from paper processing. Operating costs total $135 per ton, including economic depreciation. The cost of capital for the distributor is $50 per ton.
Retailer The retailer sells the paper for $850 per ton. The cost of the paper to the retailer (cost of goods sold) can be found by reviewing the sales from the distributor . Operating costs total $25 per ton, including economic depreciation. The cost of capital for the retailer is $18 per ton.
a. Compute the profits of each stage of the value chain. Show amounts in total ( for 20,000 tons) and per ton.
b. Assume you are advising a loan approval committee in a bank. Write a short memo to the loan approval committee in which you evaluate the profitability of each of the value chain.
27. Ethics and altering the books (adapted from CMA exam). QT investments, a closely held investment services group , has been successful for the past three years. Bonuses for top management have ranged from 50 percent to 100 percent of base salary. Top management however holds only 35 percent of the common stock, and recent industry news indicate that a major corporation may try to acquire QT. top management fears that they might lose their bonuses, not to mention their employment, if the takeover occurs. Management has told BOB Evans, QT’s controller, to make few changes to several policies and practices, thus making QT a much less attractive acquisition. Bob knows that these changes are not in accordance with . Bob has also been told not to mention these changes to anyone outside the top-management group.
a. What are Bob Evan’s responsibilities?
b. What steps should he take to resolve this problem?
31. Ethics and obsolescence (adapted from CMA exam). The external auditors of Heart Scientific are currently performing their annual audit of the company with the help of assistant controller Tino Mariano. Several year ago Heart Scientific developed unique balloon technique for opening obstructed arteries in the heart. The technique utilizes an expensive component that Heart Scientific produces. Until last year , Heart Scientific maintained a monopoly in this field.
During the past year, however a major competitor developed a technically superior product that uses an innovative, less costly component. The competitor was granted FDA approval, and it is expected that Heart Scientific will lose their market share as a result. Heart scientific currently has several years worth of expensive components essential for the manufacture of its balloon product. Tino Mariano knows that these components will decrease in value due to the introduction of competitors product. He also knows that his boss, the controller is aware of situation.the controller, however, has informed the chief financial officer that there is no obsolete inventory nor any need for reductions of inventories to market values. Tino is aware that the chief financial officer’s bonus plan is tied directly to the corporate profits, which depend on ending inventory valuations.
In signing the auditor’s representation letter, the chief financial officer acknowledges that all relevant information has been disclosed to the auditors and that all accounting procedures have been followed according to generally accepted accounting principles. Tino knows that external auditors are unaware of the inventory problem, and he is unsure of what to do.
a. Has the controller behaved unethically?
b. How should Tino Mariano resolve this problem? Should he report this inventory overvaluation to the external auditors?
19. Cost flow model. Marie Johson is trying to compute unknown values in inventory accounts in three of her stores. Knowing of your expertise in cost flows, she asks for your help and provides you with the following information about each store.
Midwest Northeast Southeast
Beginning inventory $60000 ? ?
Transfers into inventory accounts 200000 $200000 $160000
Transfers out inventory accounts 220000 180000 150000
Ending inventory ? 60000 40000
Tell Marie Johnson what the missing values (?) are for each stores.
20. Cost flow model. A flood has destroyed the inventory of Aquaman Corporation. Before paying for damages, the JRC insurance company wants to know the amount of ending inventory that is missing. You have been hired to search through the water sodden mess to find as much information as you can. You find the following information about four Aquaman’s big selling inventory items:
Beginning inventory $60,000 $60,000 ? $160,000
Transfers into inventory accounts 480,000 90,000 $120,000 180,000
Transfers out of inventorry accounts 540,000 75,000 150,000 240,000
Ending Inventory ? ? ? ?
Compute the ending inventory, which is the amount destroyed by the flood, for any foo of the products you can. You may not be able to compute the ending inventory state what additional information you need.
……. QUESTION TITLE :- Green Products Value chain; QT Investments ethics; Aquaman Corp cost flow model