The following is total monthly budgeted cost and activity information for the four activity centers in...
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The following is total monthly budgeted cost and activity information for the four activity centers in the billing department of Oregon Power Company: Activity Center Variable Fixed Cost Driver Account inquiry $83,232 $158,000 3,400 labor hours Correspondence $10,208 $30,000 2,900 letters Account billing $171,500 $75,000 2,450,000 lines Bill verification $11,660 $76,000 22,000 accounts In September, actual costs and activity were as follows: Activity Center Total Costs Driver Amount Account inquiry $242,374 3,480 labor hours Correspondence $40,192 2,890 letters Account billing $232,747 2,250,000 lines Bill verification $88,184 22,110 accounts Required Compute the flexible-budget variances for the following two activity cost items (round all answers to the nearest dollar and enter favorable variances as positive numbers and unfavorable variances as negative numbers): Correspondence Account billing Mr. Person, the finance manager of BBCC, submitted a justification to support the application for a short-term loan from the Queensville Interstate Bank (QIB) to finance increased sales. You are the loan officer at QIB responsible for determining whether BBCC's business is strong enough to be able to repay the loan. Using the attached Income Statement and Balance Sheet, accomplish the following: 1) Calculate the following profitability ratios for 2018 and 2019, compare with the industry averages shown in parentheses, and indicate if the company is doing better or worse than the industry and whether the performance is improving or deteriorating in 2019 as compared to 2018 (The industry average ratio is provided in parentheses) a) Gross profit margin (50 percent) b) Operating profit margin (15 percent) c) Net profit margin (8 percent) d) Return on assets (10 percent) e) Return on equity (20 percent) f) Current ratio (1.5) g) Quick ratio (1.0) h) Debt to total asset ratio (0.5) i) Times interest earned (25) j) Average collection period (45 days) k) Inventory turnover (8) 1) Total asset turnover (1.6) 2) Calculate the economic value added (EVA) and market value added (MVA) for BBCC, assuming that the firm's income tax rate is 40 percent, the weighted average rate of return expected by the suppliers of the firm's capital is 10 percent, and the market price of the firm's stock is $20. There are 1.2 million shares outstanding. 3) Discuss the financial strengths and weaknesses of BBCC based on the financial condition as evident from the ratio analysis. Which ratios should you analyze more critically before recommending granting of the loan and what is your recommendation? You may use financial calculator, or Excel to solve these problems, and present a report to The following is total monthly budgeted cost and activity information for the four activity centers in the billing department of Oregon Power Company: Activity Center Variable Fixed Cost Driver Account inquiry $83,232 $158,000 3,400 labor hours Correspondence $10,208 $30,000 2,900 letters Account billing $171,500 $75,000 2,450,000 lines Bill verification $11,660 $76,000 22,000 accounts In September, actual costs and activity were as follows: Activity Center Total Costs Driver Amount Account inquiry $242,374 3,480 labor hours Correspondence $40,192 2,890 letters Account billing $232,747 2,250,000 lines Bill verification $88,184 22,110 accounts Required Compute the flexible-budget variances for the following two activity cost items (round all answers to the nearest dollar and enter favorable variances as positive numbers and unfavorable variances as negative numbers): Correspondence Account billing Mr. Person, the finance manager of BBCC, submitted a justification to support the application for a short-term loan from the Queensville Interstate Bank (QIB) to finance increased sales. You are the loan officer at QIB responsible for determining whether BBCC's business is strong enough to be able to repay the loan. Using the attached Income Statement and Balance Sheet, accomplish the following: 1) Calculate the following profitability ratios for 2018 and 2019, compare with the industry averages shown in parentheses, and indicate if the company is doing better or worse than the industry and whether the performance is improving or deteriorating in 2019 as compared to 2018 (The industry average ratio is provided in parentheses) a) Gross profit margin (50 percent) b) Operating profit margin (15 percent) c) Net profit margin (8 percent) d) Return on assets (10 percent) e) Return on equity (20 percent) f) Current ratio (1.5) g) Quick ratio (1.0) h) Debt to total asset ratio (0.5) i) Times interest earned (25) j) Average collection period (45 days) k) Inventory turnover (8) 1) Total asset turnover (1.6) 2) Calculate the economic value added (EVA) and market value added (MVA) for BBCC, assuming that the firm's income tax rate is 40 percent, the weighted average rate of return expected by the suppliers of the firm's capital is 10 percent, and the market price of the firm's stock is $20. There are 1.2 million shares outstanding. 3) Discuss the financial strengths and weaknesses of BBCC based on the financial condition as evident from the ratio analysis. Which ratios should you analyze more critically before recommending granting of the loan and what is your recommendation? You may use financial calculator, or Excel to solve these problems, and present a report to The following is total monthly budgeted cost and activity information for the four activity centers in the billing department of Oregon Power Company: Activity Center Variable Fixed Cost Driver Account inquiry $83,232 $158,000 3,400 labor hours Correspondence $10,208 $30,000 2,900 letters Account billing $171,500 $75,000 2,450,000 lines Bill verification $11,660 $76,000 22,000 accounts In September, actual costs and activity were as follows: Activity Center Total Costs Driver Amount Account inquiry $242,374 3,480 labor hours Correspondence $40,192 2,890 letters Account billing $232,747 2,250,000 lines Bill verification $88,184 22,110 accounts Required Compute the flexible-budget variances for the following two activity cost items (round all answers to the nearest dollar and enter favorable variances as positive numbers and unfavorable variances as negative numbers): Correspondence Account billing Mr. Person, the finance manager of BBCC, submitted a justification to support the application for a short-term loan from the Queensville Interstate Bank (QIB) to finance increased sales. You are the loan officer at QIB responsible for determining whether BBCC's business is strong enough to be able to repay the loan. Using the attached Income Statement and Balance Sheet, accomplish the following: 1) Calculate the following profitability ratios for 2018 and 2019, compare with the industry averages shown in parentheses, and indicate if the company is doing better or worse than the industry and whether the performance is improving or deteriorating in 2019 as compared to 2018 (The industry average ratio is provided in parentheses) a) Gross profit margin (50 percent) b) Operating profit margin (15 percent) c) Net profit margin (8 percent) d) Return on assets (10 percent) e) Return on equity (20 percent) f) Current ratio (1.5) g) Quick ratio (1.0) h) Debt to total asset ratio (0.5) i) Times interest earned (25) j) Average collection period (45 days) k) Inventory turnover (8) 1) Total asset turnover (1.6) 2) Calculate the economic value added (EVA) and market value added (MVA) for BBCC, assuming that the firm's income tax rate is 40 percent, the weighted average rate of return expected by the suppliers of the firm's capital is 10 percent, and the market price of the firm's stock is $20. There are 1.2 million shares outstanding. 3) Discuss the financial strengths and weaknesses of BBCC based on the financial condition as evident from the ratio analysis. Which ratios should you analyze more critically before recommending granting of the loan and what is your recommendation? You may use financial calculator, or Excel to solve these problems, and present a report to The following is total monthly budgeted cost and activity information for the four activity centers in the billing department of Oregon Power Company: Activity Center Variable Fixed Cost Driver Account inquiry $83,232 $158,000 3,400 labor hours Correspondence $10,208 $30,000 2,900 letters Account billing $171,500 $75,000 2,450,000 lines Bill verification $11,660 $76,000 22,000 accounts In September, actual costs and activity were as follows: Activity Center Total Costs Driver Amount Account inquiry $242,374 3,480 labor hours Correspondence $40,192 2,890 letters Account billing $232,747 2,250,000 lines Bill verification $88,184 22,110 accounts Required Compute the flexible-budget variances for the following two activity cost items (round all answers to the nearest dollar and enter favorable variances as positive numbers and unfavorable variances as negative numbers): Correspondence Account billing Mr. Person, the finance manager of BBCC, submitted a justification to support the application for a short-term loan from the Queensville Interstate Bank (QIB) to finance increased sales. You are the loan officer at QIB responsible for determining whether BBCC's business is strong enough to be able to repay the loan. Using the attached Income Statement and Balance Sheet, accomplish the following: 1) Calculate the following profitability ratios for 2018 and 2019, compare with the industry averages shown in parentheses, and indicate if the company is doing better or worse than the industry and whether the performance is improving or deteriorating in 2019 as compared to 2018 (The industry average ratio is provided in parentheses) a) Gross profit margin (50 percent) b) Operating profit margin (15 percent) c) Net profit margin (8 percent) d) Return on assets (10 percent) e) Return on equity (20 percent) f) Current ratio (1.5) g) Quick ratio (1.0) h) Debt to total asset ratio (0.5) i) Times interest earned (25) j) Average collection period (45 days) k) Inventory turnover (8) 1) Total asset turnover (1.6) 2) Calculate the economic value added (EVA) and market value added (MVA) for BBCC, assuming that the firm's income tax rate is 40 percent, the weighted average rate of return expected by the suppliers of the firm's capital is 10 percent, and the market price of the firm's stock is $20. There are 1.2 million shares outstanding. 3) Discuss the financial strengths and weaknesses of BBCC based on the financial condition as evident from the ratio analysis. Which ratios should you analyze more critically before recommending granting of the loan and what is your recommendation? You may use financial calculator, or Excel to solve these problems, and present a report to
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Answer rating: 100% (QA)
Loan Analysis Report for BBCC To Queensville Interstate Bank QIB Loan Committee From Your Name Loan Officer Date 20240308 Subject Analysis of BBCC Loan Application Introduction This report analyzes BB... View the full answer
Related Book For
Introduction to Management Accounting
ISBN: 978-0133058789
16th edition
Authors: Charles Horngren, Gary Sundem, Jeff Schatzberg, Dave Burgsta
Posted Date:
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