9 Effect of order quantity on special order decision LO 13-2 Levy Quilting Compa

Question

9 Effect of order quantity on special order decision LO 13-2

Levy Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Levy made 29,000 blankets during the prior accounting period. The cost of producing the blankets is summarized as follows.

Rios Motels has offered to buy a batch of 500 blankets for $59 each. Levy's normal selling price is $96 per unit, calculate the relevant cost per unit for the special order. COST PER UNIT ( )

Ratio analysis 11 LO 9-2, 9-3, 9-4, 9-5

The average number of common stock shares outstanding during 2014 was 850 shares. Net income for the year was $15,600.

Compute each of the following. (Round your answers to 2 decimal places.)

a. CURRENT RATIO ( )

b. EARNING PER SHARE ( )

c. QUICK (ACID TEST) RATIO ( )

d. RETURN ON INVESTMENT ( )

e. RETURN ON EQUITY ( )

f. DEBT TO EQUITY RATIO ( )

Levy Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Levy made 29,000 blankets during the prior accounting period. The cost of producing the blankets is summarized as follows.

Explanation / Answer

9. The relevant cost per unit for the special order are: Material cost $28 + Labor cost $24 + Manufacturing supplies $3 + Batch level cost $0 (being order less than 1000 unit batch) = $55 per unit.

11. Ratio analysis:

a. CURRENT RATIO= Current assets / Current liabilities =( $14500+7780+13340+11200) / $8570+3520+4100) =

= 2.89

b. EARNING PER SHARE = 15600 / 850 = $18.35

c. QUICK (ACID TEST) RATIO =( $14500+7780+13340) / $8570+3520+4100) =

= 2.20

d. RETURN ON INVESTMENT = Here investment means Total Assets. So,

= $15600 * 100 / $208420 = 7.48%

e. RETURN ON EQUITY = EPS / Total equity fund = (850 * $18.35) * 100 / ($114700 + 55630) = 9.16%

f. DEBT TO EQUITY RATIO = $38090 / 170330 = 0.22

Related Questions

Navigate

• Browse (All)
• Browse 9
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.