1. 2. Financial data for Redstone Company for last year appear below: Redstone C

Question

1.

2.

Financial data for Redstone Company for last year appear below: Redstone Company Statements of Financial Position Beginning Ending Balance Balance Assets Cash Accounts receivable Inventory Plant and equipment (net) Investment in Balsam Company Land (undeveloped) $356,000 318,575 79,000 284,000 259,000 445,000 238,000 326,000 278,000 143,000 467,000 278,000 lotal assets $1,766,000 $1,805,575 Liabilities and owners' equity: Accounts payable Long-term debt Owners' equity 227000 $ 179,000 813,000 726,000 813,000 813,575 Total liabilities and owners' equity $1,766,000 $1,805,575

Explanation / Answer

1)a. Margin = Net Income / Sales * 100

= $219575/$2350000 * 100

= 9.34%

Turnover = Sales / Average assets

= $2350000 / (($1766000 + $1805575)/2)

= $2350000 / $1785788

= 1.316 Times

Return of Investment = Net income / Average Assets*100

= $219575/$1785788 * 100

= 12.3%

b. Residual Income = Net income - (Minimum Required Return * Average Operating assets)

= $219575 - (38% * $1785788)

= $219575 - $678599

= ($459024)

2).

Direct Labor Budget :-

Total Units Produced In June = Ending Inventory + Sales - Beginning Inventory

= 160 + 36000 - 580

= 35580 Units

Direct Labor Cost = 35580 Units * 3.3 Hrs * $29 = $3405006

The Answer is "D".

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