Campus Café's segment margin

Union Grille operates three restaurants. It reported the following data for the most recent fiscal year for Campus Café, its largest restaurant:

Sales $100,000
Cost of sales 50,000
Advertising 2,000
Depreciation 5,000
Salaries 30,000
Property tax 1,000

a) What is Campus Café's contribution margin?
b) What is Campus Café's performance margin?
c) What is Campus Café's segment margin?
d) If Campus Café utilizes $35,000 of asses, compute return on investment (ROI) for the most recent year.

Hot Bun Bakeries operates two segments: North and South. The business segment performance report for 20X2 follows:

Total %of Sales | North %of Sales | South %of Sales

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Sales $152,000 100.0% $90,000 100.0% $600,000 100.0%
Variable Costs 97,000 63.8% 57,000 63.3% 378,000 64.5%
Contribution Margin 55,000 36.2 33,000 36.7 222,000 35.5
Controllable fixedcosts 31,000 20.4 19,000 21.1 102,000 19.4
Performance Margin 24,000 15.8 14,000 15.6 120,000 16.1
Committed fixedcosts 11,000 7.2 8,000 8.9 66,000 4.8
Segment Margin 13,000 8.6 6,000 6.7 54,000 11.3
Common Costs 11,000 7.2
Net Income 2,000 1.4

Based on the data, answer the following questions

a) Which segment performed better? Why?
b) Which division manager performed better? Why?
c) Suppose that the company would like to spend $3,000 in advertising in only one of the segments and that advertising would increase sales by 10 percent. Which segment should receive the advertising funds? Why?

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Heart & Soul CD Emporium typically sells CDs for $10 each. The CDs cost Heart & Soul $5 each. Assume that Heart & Soul is approached by a new Disc Jockey (DJ) company that would like to make a one-time purchase of 200 CDs. Since the DJ company provides entertainment for parties, it requires a wide selection of music. Suppose that the DJ company offers to pay $9 per CD.

a) Should Heart & Soul accept the offer even though the selling price is below its normal price?
b) What are the advantages and disadvantages of offering an initial discount?
c) Identify at least three qualitative and strategic factors that management should consider. Explain each factor that you suggest.

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Anywhere Company has three divisions: Northeast, West, and South. Each segment had the following assets and generated the following margins last year:

Northeast West South
Segment assets $10,000 50,000 30,000
Segment margin 5,000 17,000 10,000

Return on investment (ROI) allows companies to compare segments of different sizes:

a) Compute ROI for each segment
b) Which segment performed the best?
c) Identify one benefit and one limitation of using ROI as a performance measure.

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Smith Company estimates that it will sell 1,000 units of its product in each of the first three fiscal quarters of the coming year. It expects to sell 1,500 units in the fourth quarter. Its product sells for $10 per unit. The company president expects 90 percent of sales to be collected in cash in the quarter when sold, and the remaining 10 percent will be collected in the following quarter. Accounts receivable totaling $3,000 was outstanding at the beginning of the year. Based on these data, complete the following requirements:

a) Prepare a sales forecast for the coming year.
b) Prepare a cash receipts schedule for the coming year.
c) What amount of receivables is expected to be outstanding at year end?

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Seattle Brewing Company incurs the following costs each quarter:

Advertising $30,000
Rent 20,000
Salaries 80,000
Insurance 2,000
Depreciation 15,000

The company pays 80 percent of its cash expenses in the period incurred. The remaining 20 percent are paid in the following fiscal quarter. Accounts payable totaling $25,000 were outstanding at the beginning of the year. Using these data, complete the following requirements:

a) Prepare a quarterly fixed cost budget for the coming year.
b) Prepare a cash payments schedule for the coming year.
c) Compute the total accounts payable expected to be outstanding at year end.

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Heart & Soul Music Store expects to sell 20,000 CDs in the first our months of business in 20X1. Each CD sells for $12 and costs $8. Management wants to prepare an operating budget for the first fiscal quarter (Q1). Q1 consists of January, February, and March. Monthly sales are projected to be as follows:

20X1 January February March April
Expected Sales (in units) 2,500 4,000 7,500 6,000

a) Prepare a monthly sales forecast in dollars for Q1 (January, February, and March).
b) Prepare a monthly contribution margin statement for Q1.
c) Assume that for Heart & Soul's operations, ending inventory is projected to be 80 percent of next month's sales. Assume the company started 20X1 with 2,000 CDs in its inventory. How many CDs does the company need to buy in each month of Q1?
d) What is the cost of inventory purchases for each month?

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Next Generation Computer Consulting is considering a new laser printer that is expected to provide cost saving of $1,000 in the first year of its life, $800 in its second year of life, and $500 for the final two years of its useful life. It is expected to have a resale value of $200 at the end of the four-year period. Assume a 9 percent interest rate and savings at year end.

a) Find the present value of the cost savings and resale proceeds of the printer.
b) If Next Generation could purchase it for $2,400, should the company buy the new printer?
c) If the company assumed a 12 percent interest rate, recomputed the present value of the cost savings and resale proceeds of the printer. Would your answer to question (b) change at the new interest rate?

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