Download Spring 2004 - The Owen Graduate School of Management

Print Name __________________________
Owen Graduate School of Management
Vanderbilt University
Final Examination
Management 413a
Final must be completed on or before 4:00 p.m. May 6, 2004
You are allowed to take three hours to complete this exam; you must use the three hours in one
block. You may use any materials we covered in the course, and you may use any notes you
took in the class. Total points on this exam: 148
This exam has two parts: Questions you answer, and supplemental materials you need for some
of the questions.
Please sign the following statement after you have completed the exam.
I have followed all requirements of the Owen School honor code in completing this exam, and I
used no more than three hours to complete the exam.
Name _______________________________________
Please return the exam directly to Germain Böer or to his secretary, Alice Horton
Question I (45 Points)
Use the information in the supplemental materials for Question I (Dell Computer and
Ann Taylor Stores Corp.) to answer the following questions. Use the most recent year for all
your calculations. Consider each question separately unless one question specifically refers to
another one.
______________ 1. Compute the break-even point for Dell Computer for the most recent year
using revenues and expenses related to operations only.
______________ 2. Compute the break-even point for Ann Taylor Stores Corp. for the most
recent year using revenues and expenses related to operations only.
3. Which company will add the most to profit from a $1 million increase in sales? Circle
the name of the company that will get the biggest profit increase and explain why that
company will get the biggest profit increase.
Dell Computer
Ann Taylor Stores Corp
1
4. Complete the following table and then compute the cash gap for each company. Place your
cash gap answer in the blank below the table.
Dell Computer
Average number of days in receivables
Ann Taylor
27
Average number of days in payables
26
Average number of days in inventory
4
Compute the cash gap for each store
______________ Dell Computer cash gap
______________ Ann Taylor cash gap
______________ 5. How much would the before tax operating income be for Dell if the
company had the same gross profit percentage that Ann Taylor has?
2
6. Ann Taylor plans to increase advertising by $10 million, and its marketing managers think
this will increase sales by $15 million. How much will profits change if Ann Taylor decides to
make the added expenditure on advertising?
___________________ Profit change (Indicate whether it is positive or negative.)
Should the company increase its advertising by $10 million? Why?
7. Use the following graph to answer the question below the graph.
Profit Graph
20,000
Profit
15,000
10,000
5,000
0
Sales Volume
Which line represents which company?
__________________ Upper line
__________________ Lower line
3
28,323
25,491
22,659
19,826
16,994
14,162
11,329
8,497
5,665
2,832
0
-5,000
8. Assume Ann Taylor introduces a new line of products that target the consumer interested in
low prices. The product line is a big hit and within months of introduction the product makes up
one-half of all sales for the company. Assume that the sales of this product amount to
$793,854,000 for the latest year and that cost of goods sold for these sales amounts to
$555,697,800 and that everything else on the income statement remains the same. Will the
break-even point go up or down from the current one? Why?
9. Executives at Ann Taylor are examining the following report (see following page) for
their product lines. How much will company profit change if they drop the Accessories
line?
_______________ Profit Change (Indicate whether it is positive or negative.)
Justify your answer in the remaining space on this page.
4
Ann Taylor Stores
Total
$1,587,708
Shoes
$476,312
Clothing
$714,469
Accessories
$ 238,156
Cosmetics
$158,771
Variable costs
721,463
223,654
274,156
129,863
93,790
Contribution margin
Operating expenses traceable to
products:
Administrative
Marketing:
Special programs
Advertising
866,245
252,659
440,313
108,293
64,981
60,000
18,000
24,000
18,000
-
122,957
300,000
18,444
75,000
61,479
135,000
24,591
75,000
18,444
15,000
75,000
15,000
24,000
26,250
9,750
557,957
126,444
244,479
143,841
43,194
308,288
$126,215
$195,834
$(35,549)
$21,787
Revenue
Promotions
Total Traceable Costs
Product Contribution
Company Costs Common to All Products
Selling, general and administrative
Marketing costs
45,000
35,000
New Product Development
60,000
Total operating expenses
Operating income
Income before income taxes
140,000
168,288
168,288
Provision for income taxes
Net income
67,346
$100,942
5
Question II (60 Points)
Use the budget schedules from K&R to answer these questions. Consider each question
separately unless one question specifically refers to another.
______________ 1. Ignore the constraint report for this question. What is the minimum
number of tables that K&R must plan to sell in order to cover all the budgeted direct (traceable)
costs of tables for the six-month period? Show computations to support your answer.
______________ 2. Compute a new break-even point for the East Territory for July if the unit
costs for all three products increase by one dollar.
______________ 3. If K&R dropped its prices by 10% and increased sales volume by 20%,
how much would the company six month profit change? Ignore the constraint report in
answering this question, and assume fixed costs remain the same as now for the six month
period. Transportation will still be 2% of sales, and commissions will still be 5% of sales.
6
4. You have the following actual data on sales for Mary Smith for the month of August.
Actual data for August:
Mary Smith
Foot Stool
Royal Bench
Majestic Table
400
500
400
Total dollar sales
$70,000
Variable marketing costs
Transportation
Commissions
$ 1,400
3,500
Fixed marketing costs
Administration
$ 900
Promotion
450
Calculations using actual units sold
Sales (target prices)
$73,400
Var. production costs
at unit standard cost
41,400
Answer the following questions using the K&R budget schedules and the above data:
___________________ How much did profit change because actual units sold differed from
budgeted units?
___________________ The proportions of units actually sold differs from that budgeted; how
much does this impact profits?
___________________ How much did actual prices in total differ from the target prices for the
products.
7
______________ 5. How much will budgeted company profit change for the month of July if
the Foot Stool is dropped from the product line?
_______________ 8. If the cost of gray paint rises by 20%, what will be the impact on Mary
Smith's segment contribution for the six month period? Give the amount, indicate whether it is
an increase or a decrease, and show computations to support your answer.
______________ 9. Income statement, page 22, December, fixed costs: The $12,500
marketing ad/promo costs traceable to territories is, in fact, the sum of some figures that appear
on other budgets. What are the components of this cost, and what is the lowest organizational
level to which the components are traceable? (Using page numbers to indicate organizational
levels is fine.)
8
10. Explain why there are no fixed costs of production on pages 23 and 24, but some fixed costs
of production are deducted on pages 29, 30, and 31.
_______________ 11. Suppose the company decides to spend another $5,000 monthly on
advertising, how much will the total six-month sales have to increase to cover this added
expense?
_______________ 12. Assume K&R uses an overhead rate of $12 per direct labor hour
worked to assign fixed overhead to inventory. Compute the December ending finished goods
inventory the company would use in external financial reports if actual units equal budgeted
units. Ending inventory in units is on pages 8 and 9 of the budget schedules.
9
Question III (13 Points)
How does XBRL help companies to increase profits?
--------------------------------------------Stop writing at this line------------------------------------------
10
Question IV (30 Points)
Barbara has started a company that prepares healthy meals for people who do not have
the time to prepare meals. This service appeals to healthy conscious individuals and to twoearner households that have limited time to prepare food.
The recipe for one batch (100 portions) of the most popular meal is shown below.
Chicken breast
Broccoli
Brown sugar
Wheat flour
Bread slices
Quantity
25
600
6
10
200
Unit of
Measure
Pounds
Pieces
Pounds
Pounds
Slices
20 pieces per package
20 slices per loaf
Barbara had no beginning inventory, and her ending inventory was also zero. A tabulation of her
purchase invoices showed the following quantities purchased for the past week:
Chicken breast
Broccoli
Brown sugar
Wheat flour
Bread slices
155
150
30
50
50
Pounds
Packages
Pounds
Pounds
Packages
She served 500 portions of this meal for the past week (5 batches). Do you see any problems
anywhere? Explain.
11
Supplemental Materials
Management 413a
Using Financial Systems to Create Value
Final Exam
October 14, 2003
Financial Statements for Dell Computer
DELL COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)
Net revenue
Cost of revenue
Gross margin
Fiscal Year Ended
-----------------------------------------January 31,
February 1,
February 2,
2003
2002
2001
---------------------------------$ 35,404
$ 31,168
$ 31,888
29,055
25,661
25,445
---------------6,349
5,507
6,443
----------------
Operating expenses:
Selling, general and
administrative
Research, development and
engineering
Special charges
Total operating expenses
Operating income
Investment and other income
(loss), net
Income before income taxes and
cumulative effect of change in
accounting principle
Provision for income taxes
Income before cumulative effect
of change in accounting
principle
Cumulative effect of change in
accounting principle, net
Net income
$
3,050
2,784
3,193
455
452
482
-----3,505
-----2,844
183
482
-----3,718
-----1,789
(58)
105
-----3,780
-----2,663
531
-----3,027
-----1,731
-----3,194
905
-----2,122
485
-----1,246
958
-----2,236
-
-
59
-----2,122
------
$
1
-----1,246
------
$
-----2,177
------
DELL COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
January 31,
2003
--------------
February 1,
2002
--------------
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Other
4,232
406
2,586
306
1,394
-----Total current assets
8,924
Property, plant and equipment, net
913
Investments
5,267
Other non-current assets
366
-----Total assets
$ 15,470
-----LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable
Accrued and other
$
Total current liabilities
Long-term debt
Other
Commitments and contingent
liabilities (Note 6)
Total liabilities
Stockholders equity:
Preferred stock and capital in
excess of $.01 par value; shares
issued and outstanding: none
Common stock and capital in excess
of $.01 par value; shares
authorized: 7,000; shares issued:
2,681 and 2,654, respectively
Treasury stock, at cost; 102 and 52
shares, respectively
Retained earnings
Other comprehensive income (loss)
Other
Total stockholders
$
equity
Total liabilities and
stockholders equity
5,989
2,944
-----8,933
506
1,158
-
$
3,641
273
2,269
278
1,416
-----7,877
826
4,373
459
-----$ 13,535
------
$
5,075
2,444
-----7,519
520
802
-
-----10,597
------
-----8,841
------
-
-
6,018
5,605
(4,539)
(2,249)
3,486
(33)
(59)
-----4,873
-----$ 15,470
1,364
38
(64)
-----4,694
-----$ 13,535
2
Financial Statements for Ann Taylor Stores Corp.
Ann Taylor Stores Corp.
CONSOLIDATED STATEMENTS OF INCOME
For the Fiscal Years Ended January 31, 2004, February 1, 2003 and February 2,
2002
Fiscal Years Ended
-------------------------------January 31,
February 1,
February 2,
2004
2003
2002
--------------------------(in thousands, except per share amounts)
Net sales
Cost of sales
Gross margin
Selling, general and administrative
expenses
Amortization of goodwill
Operating income
Interest income
Interest expense
Income before income taxes
Income tax provision
Net income
$ 1,587,708
721,463
----------866,245
694,590
$ 1,380,966
633,473
----------747,493
612,479
$ 1,299,573
651,808
----------647,765
576,584
-----------171,655
3,298
6,665
----------168,288
67,346
----------$
100,942
-----------
-----------135,014
3,279
6,886
----------131,407
51,249
----------$
80,158
-----------
11,040
----------60,141
1,390
6,869
----------54,662
25,557
----------$
29,105
-----------
3
Ann Taylor Stores Corp.
CONSOLIDATED BALANCE SHEETS
January 31, 2004 and February 1, 2003
January 31,
February 1,
2004
2003
------------------(in thousands)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable
Merchandise inventories
Prepaid expenses and other current assets
$
Total current assets
Property and equipment, net
Goodwill, net
Deferred financing costs, net
Other assets
Total assets
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued salaries and bonus
Accrued tenancy
Gift certificates and merchandise credits
redeemable
Accrued expenses
Total current liabilities
Long-term debt, net
Deferred lease costs and other liabilities
Stockholders' equity
Common stock, $.0068 par value; 120,000,000
shares authorized; 49,465,620 and 48,932,860
shares issued, respectively
Additional paid-in capital
Retained earnings
Deferred compensation on restricted stock
Treasury stock, 4,087,620 and 4,050,972
Shares respectively, at cost
Total stockholders' equity
Total liabilities and stockholders'
4
337,087
12,476
172,058
55,747
----------577,368
265,569
286,579
4,886
17,471
----------$ 1,151,873
-----------
212,821
10,567
182,984
46,599
----------452,971
247,115
286,579
4,170
17,691
----------$ 1,008,526
-----------
$
$
52,170
23,714
11,185
32,120
$
54,558
27,567
10,808
25,637
42,431
----------161,620
125,152
34,465
30,325
----------148,895
121,652
23,561
336
516,824
393,926
(6,148)
----------904,938
332
500,061
296,113
(3,968)
----------792,538
(74,302)
----------830,636
----------$ 1,151,873
-----------
(78,120)
----------714,418
----------$ 1,008,526
-----------