Waltham Motors Division

1. Using the excel spreadsheet provided, and the recommended consequential disclosures as a basis you your analysis, what recommendations would you give Phillips on each of the items listed below? In each case, justify your recommendations and estimate how much the decision will change the “true” value of the company and its value in the eyes of an investor in a private company.

Question 1: Using budget data, how many motors would have to be sold for Waltham Motors Division to breakeven?

2. What do you think are the motives of Harnischfeger's management in making the changes in its financial reporting policies? Do you think investors will see through these changes?

10. If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?

Only the incremental costs and benefits are relevant. In particular, only the variable manufacturing overhead and the cost of the special tool are relevant overhead costs in this situation. The other manufacturing overhead costs are fixed and are not affected by the decision.

In this task I’m going to analyse the figures on cash flow that I created in P3 and justify why you think the business might have problems also provide range of solutions.

The wages of general production employees who are idled due to machine breakdown are classified as indirect costs. Direct costs are usually variable and change as production volumes change. Thus, direct materials and direct labor are typically variable costs. For special orders, some direct costs can be fixed, however. The costs (depreciation, electricity, and routine maintenance) associated with a machine dedicated to one product are direct costs of that product. Indirect costs cannot be easily and conveniently assigned to a special order. Rather, these costs are common costs, in that they are incurred to produce a variety of special orders. Maintenance costs of general purpose equipment, the supervisor’s salary, and utilities are direct costs needed to produce special orders in general, but are indirect costs for a particular special order. Moreover, general production costs, including property taxes, insurance, lawn care, cafeteria costs, and miscellaneous supplies consumed in production are indirect costs properly allocated to special orders manufactured.

6. Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.

1) Evaluate Patagonia’s Workbook Process. Would you recommend to Patagonia’s management that they continue the process? Why or why not?

3. Conduct an analysis of Williams’ sources and uses of funds during the first half of 2002. How do you expect these numbers to evolve over the second half of 2002? What is the problem facing Williams? How did it get into this situation? How has it tried to address the problem it is facing?

Going into 2004, Bob Moyer planned to produce 10,000 bicycles at Mile High Cycles. Construction of his bicycles includes the utilization of three departments, frames, wheel assembly, and final assembly. During this year, Mile High Cycles ended up actually producing 10,800 bicycles to meet higher than expected demand. Bob is curious as to whether or not he was successful in maintaining costs to meet these higher levels of demand.

The information used to calculate the total direct material and total direct labor variances are retrieved from the cost/ price variance and efficiency variance data. The material variance is zero, meaning there have been no changes for the cost of materials. The labor variance was favorable due to a fall in the labor rate. The efficiency variance for direct labor tells management how efficient the direct labor was in making the actual output that was produced by the direct labor. With that being said, in this case it is considered unfavorable. This is because, both the labor rate and efficiency of the labor has been reduced. The areas that should be reviewed at Peyton Approved include product design, reduction of scrap,

All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.

Q.3 Why Superior Improved Profitability during the period January 1 to June 30, 2005? How useful was the data in Exhibit 4 for the purpose of this analysis?

a How would you report on the three-month operations of Ribbons an’ Bows, Inc., through June 30?