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Hellman's Net Operating Income

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Hellman Manufacturing has the following cost information available for 2012:

Direct materials \$6.00 per unit
Direct labor \$4.00 per unit
Variable manufacturing overhead \$2.00 per unit
Variable selling and administrative costs \$1.00 per unit
Fixed selling and administrative costs \$25,000

During 2012, Merriman produced 12,500 units out of which 11,000 units were sold for \$60 each.

I need help in answering these questions:
A. Calculate Hellman's net operating income assuming the company uses variable costing.
B. Calculate Hellman's net operating income assuming the company uses absorption costing.

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Solution is also attached.
Steps :
1) First Find Cost of Goods Sold which is Opening Inventory+Manufacturing expenses-Closing Inventory
2) Find Gross Profit= Sales-COGS
3) Find Net Profit= Gross Profit- Other ...

Solution Summary

This solution helps in estimating Hellman's net operating income assuming the company uses variable costing.

\$2.19

Balance Sheet Analysis

Obtain the latest annual report and accounts of a company of your choice.* Consult the Balance Sheet and determine the company's net asset value.

· What is the composition of the assets, i.e. the relative size of fixed and current assets?
· What is the relative size of intangible fixed and tangible fixed assets?
· What proportion of current assets is accounted for by stocks and debtors?
· What is the company's policy towards asset revaluation?
· What is its depreciation policy?

Now consult the financial press to assess the market value of the equity. This is the current share price times the number of ordinary shares issued. (The notes to the accounts will indicate the number of shares issued.)

· What difference do you find between the net asset value and the market value?
· How can you explain this?
· What is the P:E ratio of your selected company?
· How does this compare with other companies in the same sector?
· How can you explain any differences?
· Do you think your selected company's shares are under- or over-valued?

Notes:
You chosen company MUST have a full listing on the London Stock Exchange.

You MUST attach to your coursework a copy of the latest annual report and accounts of your chosen company. (This does not contribute towards the word count.)

Your coursework should be no less than 1500 words and no more than 2500.
Ratio analysis as well as company valuation methods are required, along with a critical appraisal of the techniques used.

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