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Accounting and Financial Management Question 1: Lucky Luke Inc. combines its operating expenses for budget purposes in a selling and administrative expenses budget. For the first six months of 2014, the following data are available: 1. Sales: 55,000 units in Quarter1; 68,000 units in Quarter 2 2. Variable costs per dollar of sales; sales commissions 5.5%; delivery expenses 6%; and advertising 10% 3. Fixed costs per quarter: sales salaries $13,500; office salaries $5,500; depreciation $7,700; insurance $1,200; utilities $750, and repairs $950 4. Unit selling price; $26 Required: Prepare a selling and administrative expenses budget by quarters for the first six months of 2014. Question 2: Lucky Luke Ltd. is considering three long-term capital investment proposals. Each investment has a useful life of five years. Relevant data on each project are as follows: Project 1 Project 2 Project 3 Capital Investment $125,000 $175,000 $189,000 Annual Net Income Year 1 $12,000 $15,000 $22,000 Year 2 $12,000 $12,000 $12,000 Year 3 $12,000 $14,000 $21,000 Year 4 $12,000 $16,000 $15,000 Year 5 $12,000 $11,000 $13,000 Total $60,000 $68,000 $83,000 Depreciation is calculated by the straight-line method and there is no salvage value. The company’s cost of capital is 15%. (Use average net annual cash flows in your calculations) Required: 1. Calculate the cash payback period for each project. 2. Calculate the net present value for each project. 3. Calculate the annual rate of return for each project. Question 3: Perma Inc. sells a single product for $50. Its management estimates the following revenues and costs for the year 2014: Net Sales $600,000 Selling expenses – Variable $20,000 Direct Materials 80,000 Selling expenses – Fixed 15,000 Direct Labour 70,000 Admin expenses – Variable 5,000 Mfg Overhead – Variable 30,000 Admin expenses - Fixed 4,000 Mfg Overhead - Fixed 20,000 Required: 1. Assuming fixed costs and net sales are spread evenly throughout the year, determine Perma’s monthly break-even point in (a) units and (b) dollars. 2. Calculate the contribution margin ratio, the annual margin of safety ratio, and the annual profit 3. Determine the percentage increase of annual profits if Perma Inc. increases its selling price by 20% and all other factors (including demand) remain constant. 4. Assume the price remains at $50 per unit and variable costs remain the same per unit, but fixed costs increase by 20% annually. Calculate the percentage increase in unit sales required to achieve the same level of annual profit calculated in required # 2 5. Determine the sales required to earn an operating income of $345,000 after tax. Perma Inc.’s income tax is 35%.

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Accounting And Financial Management Assignment
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