CMR 302
TEST 3
Financing Operations
1. What forms of financing would a company pursue in Growth 2 of the Financing life cycle?
2. List an advantage and disadvantage of obtaining funds from “Angel Investors”
3. Companies continue to receive funds in the Secondary Market? T F
4. Identify a primary difference between common and preferred stock.
5. Which financing life cycle phase would a company pursue an IPO?
Breakeven Analysis
6. Fixed Expenses change in total when there is a modest change in sales. TRUE FALSE
7. An example of a fixed expense would be a 5% sales commission. TRUE FALSE
8. Property taxes and rent are often considered variable expenses. TRUE FALSE
9. Variable expenses change in total as volume changes. TRUE FALSE
10. If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined with the fixed expenses in order to compute the point at which the company will earn $30,000. TRUE FALSE
11. The contribution margin per unit is the selling price per unit minus the fixed expenses per unit. TRUE FALSE
Use this information to answer questions 12 through 14: SHOW YOUR WORK http://www.accountingcoach.com/wp-content/uploads/images/quiz-tables/break-even-point-q15-17.png
12. What is the company’s contribution margin?
13. What is the break-even point in units?
14. If the company wants to earn a profit of $ 50,000 instead of breaking even, what is the number of units the company must sell?
Business Cash Flow
15. From a cash flow perspective, what does it mean to “train your customers”?
16. How can a business use vendors to help with the cash flow of a business?
Internal Control
17. Separation of Duties in a small business is not a practical internal control solution due to the small number of employees T F
18. Identify two prevention techniques that a small business owner might employ to prevent fraud
19. What is the number one way that fraud is detected?
20. The company accountant should open and reconcile the monthly bank statement before anyone else can gain access to the data in order to prevent fraud. T F
Breakeven Analysis
Your company is considering adding a new product. However, management wants more information regarding the potential profits and or losses from the proposed venture. The company manufactures aluminum cans. A large distillery wants your company to produce cans for its’ new product. The facts are as follows:
Selling price per can will be $ 1.35. A new production line will be added at a cost of $ 8,000 per year. Labor costs will be $ .25 cents per can and materials cost will be $.60 cents per can. Overhead costs will be 10% of the total company costs of $ 80,000 per year. Projected profit from the venture must be $ 30,000 for management to approve the project. The maximum number of cans the new line can produce is 150,000 units per year. Prepare a Breakeven Analysis for the project and answer the questions listed below.
Based on the preparation of your Breakeven analysis how many cans do you estimate must be produced in order to meet the above criteria.
Cash Budget
Access the Refurbished Ipad Breakeven Analysis (document in anvas, under Test 3 instructions). Complete the Cash Budget (file in Canvas, under Test 3 instructions). The breakdown of sales per month are as follows:
Month 1 10 Month 7 20
Month 2 10 Month 8 10
Month 3 20 Month 9 30
Month 4 20 Month 10 30
Month 5 10 Month 11 10
Month 6 30 Month 12 23
Upon completion of the Cash Budget, answer the following questions:
1. What month has the highest cash deficit Month___________ Amount_________
2. What month has the highest cash surplus Month___________ Amount_________
3. What month(s) must the company borrow money Month(s)__________________
4. What is the ending cash balance for Month 6 ____________
Submit the Cash Forecast spreadsheet and the answers to the questions via Canvas.
