Alex Guerin is an artist who sells his work under consignment (he displays his work in local barbershops, and customers purchase
1 answer:
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Answer:
Maximum Dollar Increase = $10079.76
Explanation:
(See attachment for full question)
INCOME STATEMENT
Sales ---------- $67,000
Costs ---------- $43,800
EBIT ------------ $23,200
Taxes (34%) ----$7,888
Net income ------$15,312
BALANCE SHEET
Current Assets ------$31,000
Fixed Assets --------- $118,000
Total ------------------- $149,000
Long-term Debt -----$68,000
Equity ------------------- $81,000
Total ----------------- $149,000
Dividend Payout Ratio = 30%
Plowback Ratio is calculated by: 1 - Dividend Payout Ratio
Plowback Ratio = 1 - 30%
Plowback Ratio = 1 - 30/100
Plowback Ratio = 1 - 0.3
Plowback Ratio = 0.7
Plowback Ratio = 70/100
Plowback Ratio = 70%
Return on Equity (ROE) is calculated by: Net Income/Total Equity
Net Income = $15,132
Total Equity = $81,000
ROE = $15,132/$81,000
ROE = 0.186815
ROE = 18.68%
Calculating Sustainable Growth Rate (SGR)
SGR = (ROE * Plowback Ratio)/(1 - ROE * Plowback)
SGR = (0.186815 * 0.7)/( 1 - 0.186815 * 0.7)
SGR = (0.1307705)(1-0.1307705)
SGR = 0.1307705/0.8692295
SGR = 0.150444157728194
SGR = 0.1504
Max increase = (Sales * SGR)= ($67,000 * 0.1504)
Max Increase = $10079.75856778905
Max Increase = $10079.76
Answer:
A) USA will not be better off switching to the new dye since the cost is greater than the Fine
B) $118076
C) The reduction in material/fabric cost can be achieved by the reduction in material wastage and in the use of quality materials
while the reduction in labor cost can be achieved by Hiring well trained employees with the necessary skillset
Explanation:
<u>A) Determine If the USA be better off using the new dye </u>
Units of clothes to be dyed = 50,000
Difference in cost = [ 4 ( 1.25 - 0.5 ) ] = 4 * 0.75 = $3
Total cost of using the new dye = 50000 * $3 = $150,000
Fine = $130,000
hence USA will not be better off switching to the new dye since the cost is greater than the Fine
<u>B) Determine by how much overall cost will be reduced at the end of 12 months using Kaizen costing </u>
<em>condition : reduce fabric and labor cost by 1%</em>
Original Monthly Costs without the use of Kaizen Costing =( Total Units/Number of Months)*(Fabric Cost per Unit + Labor Cost per Unit)*Number of Months
= [( 10000 + 50000 )/12 ) * ( 6 + 4 ) ] *12
= [ 5000 * 10 ] *12 = $600,000
Applying kaizen costing
Given: Fabric cost per unit = $6 , Labor cost per unit = $4
Total units of production = 10000 + 50000 = 60,000
Kaizen costing formula per month = [ (cost per unit * total units / 12 ) - ( 1% of cost per unit * total units / 12) ]
Total annual cost using Kaizen costing = $56807.61
difference in cost = $600,000 - $568076 = $31924
with the new dye and Kaizen costing the overall cost will be change by $118076 i.e. ($150,000 - $31924) = <em>$118076 </em>
C ) The reduction in material/fabric cost can be achieved by the reduction in material wastage and in the use of quality materials
while the reduction in labor cost can be achieved by Hiring well trained employees with the necessary skillset
