Home » Lark art company sells unfinished wooden decorations at a price of

Lark art company sells unfinished wooden decorations at a price of

Lark Art Company sells unfinished wooden decorations at a price of $15.00. The current profit margin is $5.00 per decoration. The company is considering taking individual orders and customizing them for sale. To finish the decoration the company would have to pay additional labor of $3.00, additional materials costing an average of $4.00 per unit and fixed costs would increase by $1,500. If the company estimates that it can sell 600 units for $25 each month, would they make additional profits or losses? Select one: a. $300 profit b. $300 loss c. $800 profit d. $800 loss

 

a) Current ratio. (b) Accounts receivable turnover. (Assume the prior year’s accounts receivable balance was $100,000.) (c) Days’ sales uncollected. (d) Inventory turnover. (Assume the prior year’s inventory was $50,200.) (e) Times interest earned ratio. (f) Return on common stockholders’ equity. (Assume the prior year’s common stock balance was $480,000 and the retained earnings balance was $128,000.) (g) Earnings per share (assuming the corporation has a simple capital structure, with only common stock outstanding). (h) Price earnings ratio. (Assume the company’s stock is selling for $26 per share.) (i) Divided yield ratio. (Assume that the company paid $1.25 per share in cash dividends.) Income statement data: Sales (all on credit) $1,075,000 Cost of Goods Sold 575,000 Gross Profit on Sales $ 500,000 Operating Expenses 305,000 Operating Income $ 195,000 Interest Expense 20,400 Income Before Taxes $ 174,600 Income Taxes 74,000 Net Income $ 100,600 Balance sheet data: Cash $ 38,400 Accounts receivable 120,000 Inventory 56,700 Prepaid Expenses 24,000 Total current assets $ 239,100 Total plant assets 708,900 Total assets $ 948,000 Accounts payable $ 91,200 Interest payable 4,800 Long-term liabilities 204,000 Total liabilities $ 300,000 Common stock, $10 par 480,000 Retained earnings 168,000 Total liabilities and equity $ 948,000

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