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Describe the elements of PAC, and how does MRP impact these specific areas

How does the textbook describe the elements of PAC, and how does MRP impact these specific areas?

The textbox explains that for a JIT facility the job shop is no longer. There are no production area with high work in progress inventory, and long lead times. They are able to streamline the processes to job cells where the process is completed quickly with low work in progress inventory. “The shop-floor and vendor scheduling activities begin when an order is released. A critical information service provided by MRP is apprising the SFC systems of all changes in material plans. This means revising due dates and quantities for scheduled receipts so correct priorities can be maintained. ”

(Jacobs 276)

Jacobs, Berry, Whybark and Vollmann. Manufacturing Planning and Control for Supply Chain Management, 6th Edition. McGraw-Hill Learning Solutions, 2011. <vbk:0077609115#outline(11.1.2)>.

Which element of PAC (as described by the textbook and lecture) would be impacted the most by the material requirements plan?

The way how Aggregate Production Plan (APP) activities will or could affect Production Activity Control (PAC) is by the planning horizon. Because the aggregate production planning is concerning with demand forecasts into production and capacity level over a planning horizon, this can involve frequent changes in the size of the labor force or retaining a stable workforce that can leads in to inventory build ups during low demand period or idle time increase. While on the other hand, Production Activity Control (PAC) focus on scheduling and shop floor control activities.


The element of PAC as (described by the textbook and lecture) would impact the most by aggregate production plan is shop floor system, the reason is the “back end” approach takes into consideration all of the details of the company and considers the impacts specific details of a products will have on the operation. This will give the company to develop an individual plan that can be implement strategically.

I agree that the element of PAC that would be most impacted by the aggregate production plan would be the shop floor system. Shop floor control feedback is important for material and capacity planning, along with following up with vendors. Feedback can be given by status information like verification or disposition and/or by warning signals which flag certain parts that are in question. Shop floor planning should include elements of lead time, operational setbacks and lead time management. If any specific operation is not being performed it can setback the plan making anything that made it to the back end refer back to the engine stage of PAC.

Jacobs, Berry, Whybark and Vollmann. Manufacturing Planning and Control for Supply Chain Management, 6th Edition. McGraw-Hill Learning Solutions, 2011.

how does CRP impact these two sections of PAC?

The capacity plan is especially critical to managing the detailed shop-floor flow of materials. Capacity’s importance for shop-floor control (SFC) is illustrated by considering two extremes. If insufficient capacity is provided, no SFC system will be able to decrease backlogs, improve delivery performance, or improve output. On the other hand, if more than enough capacity exists to meet peak loads, almost any SFC system will achieve material flow objectives. Input/output analysis in the CRP system provides a method for monitoring the actual consumption of capacity during the execution of detailed material planning. It is linked to the shop floor execution systems, and supported by the database for production activity control (PAC). Input/output analysis indicate the need to update capacity plans as actual shop performance deviates from plans, as well as the need to modify the planning factors used in the capacity planning systems.

Reference: Textbook


The time comes when plans must be put into action. Production activity control (PAC) is responsible for executing the master production schedule and the material requirements plan. At the same time, it must make good use of labor and machines, minimize work-in-process inventory, and maintain customer service.

The material requirements plan authorizes PAC:

To release work orders to the shop for manufacturing.

To take control of work orders and make sure they are completed on time.

To be responsible for the immediate detailed planning of the flow of orders through manufacturing, carrying out the plan, and controlling the work as it progresses to completion.

To manage day-to-day activity and provide the necessary support.

which element of PAC (as described by the textbook and lecture) would be impacted the most by the business plan?

The choice of objectives for PAC and PAC design reflects the firm’s position vis-à-vis its competitors, customers, and vendors and is impacted by the business plan. It also reflects the company’s fundamental goals and the constraints under which it operates. Some firms have more complex products and/or process technologies than others. The result can be a difficult shop-floor management problem and a resultant difference in the appropriate PAC system. As a result PAC system design must be tailored to the particular firm’s needs and business plan based on the SWOT analysis of the firm.

The element of PAC that would be impacted the most by the capacity plan is the shop floor systems. The shop floor systems determine scheduling of production. Capacity planning determines the capacity needed to meet changing demand. Poor capacity planning will lead to production schedules being ineffective.

I agree that the capacity plan plays an important part in PAC and it’s connection to MRP systems. Having a detailed capacity plan is vital when managing shop floor materials. Knowing the capacity is knowing what resources are available in order to meet material plans. If the capacity is not correct then the system delays delivery and output as well as increase backlogs. Now if you have enough capacity then it allows for a consistent flow with effective utilization. The goal is to create an even flow instead of the up and down or as the book says peaks and valleys.

Jacobs, Berry, Whybark and Vollmann. Manufacturing Planning and Control for Supply Chain Management, 6th Edition. McGraw-Hill Learning Solutions, 2011.

how important is lead time management in a PAC system?

Lead time includes the time needed to ship the parts from the supplier. The shipping time is included because the manufacturing company needs to know when the parts will be available for material requirements planning.

Lead time is important so that inventory can be minimized and shortages will be less prevalent. If the system maintains positive lead times, production will run smoothly, orders will be fulfilled on time and shipping time will not be an issue. When there is little or no lead time, quality will lack because people will be rushed, items will have to be taken from inventory which may deplete it completely and shipping could become an issue on the far back end of the spectrum.

Lead time is the element needed in order to be able to plan when material is needed for the production demand. There is lead time for out sourced suppliers to procure material to be introduced into production. This is important to the PAC system in that these lead times has to be taken into consideration when planning the order releases, shop floor schedules, purchasing, and vendor scheduling. You can’t promise a customer that you’ll have their product available for them next week when it takes 2 weeks to get the components from your supplier to even make the product. So lead times are very important when it comes to PAC.

Lead time management in a PAC system is very important, the reason for that is part of a PAC system responsibility is execution on scheduling and to review planned orders which is material availability. With short lead time the PAC system have a better control on job orders and work centers. Longer lead time will leads to more jobs in the system , that leads to longer queue, idle time, and more work-in-process inventory.

which specific area of PAC (as described by the textbook and lecture) is impacted the most by lead time management?

10:20 PM

Well, I would think the shop floor is most affected because if we do not receive materials in time our work schedule would be thrown off so we would not be able to start jobs on the shop floor when we planned our book discusses in chapter 8 an “operation setback chart” (Jacobs 279) where we can see how delayed lead times can impact PAC. So that would be the shop floor and the MPS that are greatly affected by lead times. Long lead times, as Archibald mentioned affect work in process inventories which affect our costs.

Jacobs,   Berry, Whybark and Vollmann. Manufacturing Planning and Control for Supply Chain Management, 6th Edition. McGraw-Hill Learning Solutions, 2011. <vbk:0077609115#outline(11.2.1)>.

I would have to say that MRP (material resource planning) would be impacted the most by lead time. MRP plans according to supplier lead time, transportation time, internal distribution time, along with other entities such as process time and material acquisition time. MRP is the main system that takes lead times into consideration when planning for material demand.

The lead time is the duration between placing an order until receiving the order. The time it takes a company to unload a product from a truck, inspect it, and move it into storage is non-trivial. With tight manufacturing constraints or when a company is using Just-In-Time manufacturing it is important for supply chain to know how long their own internal processes take.

So how do you think this will specifically affect each element of PAC?

Lead times impacts every element of PAC because every process requires time to process. For instance, when material is delivered to the plant, there in internal distribution time in which the material will be available for the production line. There is material acquisition time that the supplier needs in order to purchase material to procure. There’s transit time given for the amount of time it takes a supplier to ship and deliver to the facility.

It can actually grow far more complicated than this. Lead time is highly variable in a real world setting. Just one situation in which it changes dramatically is when a quality problem arises and an order needs to be replaced. An unexpected demand that needs to be met very urgently takes materials and production capacity earmarked for other orders. This means that the customer service rep needs to be able to quickly provide a lead time for the replacement order (which better be accurate since you’re dealing with an already agitated customer). This can then affect the lead time of all other open orders. Both aspects of PAC, the supplier systems and shop-floor systems, need to be involved in the replacement.

how important is lead time to a PAC system?

There are four elements of lead time and they are run, setup, move, and queue. With good Pac design and practice move and queue can be greatly reduced. Lead time is important because the longer the lead time between order and starting the more orders in the shop. The more orders there equal longer queue time.

The importance of lead time management in PAC system can not be understated. The time to deliver products from either the manufacturer or even one are of the operation to another needs to be monitored and managed to ensure that end products comply with delivery times. Understanding lead time is one of the major processes that allow suppliers as well as manufactures the ability to accurately determine when their products can reach the market.

which element of PAC is impacted the most by lead time?

All these areas in OPC: (1) the business plan, (2) the aggregate production plan, (3) the master production schedule, (4) material resource planning (MRP)/capacity resource planning [CRP]), and (5) production activity control (PAC) play vital role in with OPC, where each of these area are important. Each level varies it purpose, time span ( planning horizon), level of detail,. and planning cycles(frequency). At each one of these levels, there questions must be answers. For instance, what are the priorities, what is the available capacity, and how difference between priorities and capacity be resolved. The business plan is when senior management set major goals and objectives for further planning by marketing, finance, engineering and etc. The aggregate production plan is the quantities of each product group that must be produce in each period, desired inventory levels, and the resource of equipment, labor and materials needed in each period. The master production schedule is to break down the production plan to show for each period, the quality of each end item to be made. Material resource planning is when the component and service are needed to make each end item. Production activity control represents the implementation and control phase that require the responsible for planning and controlling the flow of work through the factory.

How does the textbook describe the core elements of PAC? And which one is impacted the most by the other four areas of OPC? Why do you say so?

The core elements of PAC are that MPS and MRP along with shop data, product data, performance and procurement all directly affect PAC. This in turn affects order release, shop floor scheduling, vendor scheduling, feedback, and order closing. – Detailed scheduling and control of jobs at work centers -reduction in work in process inventories and lead times -feedback from PAC can provide warnings to make changes – effective PAC results in good customer service.

In my opinion PAC is related to each of the five areas of OPC which are the business plan, aggregate production plan, master production schedule, master production schedule, MRP/CRP and last but not least production activity control (PAC). PAC is like the coordinator of manufacturing scheduling and controlling resources related to production of orders and tracking. It takes a plan and implements it to retrieve and achieve results in steps. The roles of PAC are to manage shop floor productions, work flow, scheduling and control work flow. For example im a factory and we make train whistles I would use the information from my MRP system to decide which products I plan to make, how many, scheduling, materials needed (BOM) and even total of jobs or orders completed and placed.

Activities in capacity resource planning (CRP) can have a significant impact on PAC. The most obvious of which is how much of the product is immediately available for use over a period of time. Another significant impact CRP can have on PAC is how the product is able to flow through a system. If capacity is calculated too low for demand then a system will see constant shortages and downtime. If the capacity is calculated too high then the system will have used more space than necessary which could result in increases in travel throughout the system.

What do you think are the three major prerequisites to an effective PAC system?

If I am reading into the hints appropriately, the engine is what feeds PAC. You mentioned the PAC is the back end of the OPC or MPC, which is made up of the front end, engine and back end (the sections of MPC). The engine, according to Fig 8-1 in the text, is made up of three elements; “detailed materials planning, detailed capacity planning and materials and capacity plans.” (Jacobs, 2011)

Having looked at Fig 8-1 in the text, I would argue that to make up an effective PAC, you need an accurate master production schedule, detailed materials and capacity plans and effective follow up that may improve the plans that are now in place. I say this because the master schedule feeds the materials and capacity planning which feeds the PAC. Having effective follow up that will improve the plans in place will only help the PAC be more effective time after time.


Jacobs, R. (2011). Manufacturing Planning and Control for Supply Chain Management (6th ed). McGraw-Hill Learning Solutions.

Retrieved from

The prerequisites to an effective PAC system is the three sections of the engine of MPC.

Three major prerequistes to an effective PAC system are master production schedule MPS, material requirement planning (MRP, and capacity requirement planning (CRP). All these system play a effective role in the PAC system, because MPS shows when products will be availables to PAC system, the material requirement planning ensure the availability of materials, components, and products for planned production and for customer delivery, and capacity requirement planning shows the requirements that need to meet production requirements.


an operations planning control (OPC) system contains five main elements:

* The business plan

* The aggregate production plan

* The master production schedule

* Material Resource Planning (MRP) / Capacity Resource Planning (CRP)

* Production Activity Control (PAC)

We also know that a Manufacturing, Planning, and Control (MPC) systems contains a Front End, Engine, and Back End that encompasses key elements of OPC.


With that being said, let’s end this week with a discussion on JIT. How is a JIT strategy and its principles directed toward a PAC system?

JIT strategy and it principles directed toward a PAC system with reductions in raw material, WIP, finished inventory, reduce space needed for WIP and inventory, setup time reductions and improved cycle rate. It also improve machine and employee productivity. Utilizing JIT principle is a low risk and high reward proposition.

JIT does not focus on capacity like MRP does. With JIT the capacity does not have to be defined because the main principles of JIT are to get products in and get them out. With JIT, there is much waste reduced, costs are reduced, and there isn’t a need for scheduling. All this in turn allows for a smoother PAC if all works as it should.

JIT systems are designed to produce products on an order to order basis, produce them and ship them our the door. It is not inventory driven and is often times even used to reduce inventory. In most cases it is more economical when using the PAC system. JIT is most effective when the same types of products are being produced frequently rather than new and ever changing production. An MRP system would be more effective for that type of business.

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Douglas Margreiter was severely injured in New Orleans on the night of April 6, 1976 Answer

Douglas Margreiter was severely injured in New Orleans on the night of April 6, 1976. He was the chief of the pharmacy section of the Colorado Department of Social Services and was in New Orleans to attend the annual meeting of the American Pharmaceutical Association. On Tuesday evening, April 6, Mr. Margreiter had dinner at the Royal Sonesta Hotel with two associates from Colorado who were attending the meeting and were staying in rooms adjacent to Mr. Margreiter’s in the New Hotel Monteleone. Mr. Margreiter returned to his room between 10:30 p.m. and 11:00 p.m.; one of his friends returned to his adjoining room at the same time. Another friend was to come by Mr. Margreiter’s room later to discuss what sessions of the meetings each would attend the next day.

About three hours later, Mr. Margreiter was found severely beaten and unconscious in a parking lot three blocks from the Monteleone. The police who found him said they thought he was highly intoxicated, and they took him to Charity Hospital. His friends later had him moved to the Hotel Dieu.

Mr. Margreiter said two men had unlocked his hotel room door and entered his room. He was beaten about the head and shoulders and had only the recollection of being carried to a dark alley. He required a craniotomy and other medical treatment and suffered permanent effects from the incident.

Mr. Margreiter sued the hotel on grounds that the hotel was negligent in not controlling access to elevators and hence to the guests’ rooms. The hotel says Mr. Margreiter was intoxicated and met his fate outside the hotel. Is the hotel liable? [Margreiter v. New Hotel Monteleone 640 F.2d 508 (5th Gr. 1981)]


  1. What are the elements of negligence that Mr. Margreiter will need to prove against the hotel in order to win his case? List the five elements here. (Points : 5)

Ans: The five elements of negligence that Mr. Margreiter would need to prove are:

– Defendant or the hotel has a duty to exercise “reasonable care” for the safety and security of their guests.

– Hotel has a general duty to reasonably protect guests from harm caused by other guests or non-guests.

– Hotel has a duty to make the premises reasonably safe for their guests. Hotel had a keying system for the hotel rooms that were inadequate.

– Hotel Defendant actually breached his duty in some way.

– The Defendant’s breach caused harm to the plaintiff and the harm was actually done as a result of the negligence.

  1. Applying the facts you have from the case problem above only, lay out a case for negligence against the hotel. Use the elements to outline the case. Start with the first element, explain what facts you have for or against that element, and then continue through the five elements of negligence. If you do not have enough facts to make your case, explain what facts you would need to have in order to support a case of negligence. (Points : 10)

Ans: 1) Hotel has to exercise “reasonable care” for the safety and security of their guests. They had to make sure that the security guard was available in the hotel premises. In this case, the hotel breached the expected security measures as there were no security personnel’s available at the time of the incident as the case shows. Because, if there were security personnel’s, they would have prevented the assailant to carry Mr. Margreiter to a parking lot three blocks away from the Monteleone.

2) Hotel has a general duty to reasonably protect guests from harm caused by other guests or people. The Hotel was negligent in controlling access to the evaluator. Probably, the hotel didn’t have security cameras also. The hotel didn’t take proper care to secure the premises.

3) Hotels have an affirmative duty to make the premises reasonably safe for their guests. The very fact that assailant could enter into Mr. Margreiter’s room suggests that they had access to the alternative keys and the hotel management should have looked into updating the key system for the rooms. There should be some sort of an audit system in place so each key is accounted for or is voided if the customer forgets to turn it in.

4) Hotel is at fault for this crime as they failed in its duty to provide reasonable security and the assailant got into the plaintiff’s room and cause immense damage to him and the harm was actually done as a result of the negligence.

It is very clear from the above that the hotel didn’t have reasonable security standards and failed to enforce or implement them in some way. This led to immense suffering and damage to Mr. Margreite and the hotel is liable to compensate for this damage done to Mr. Margreite.

  1. What defense(s) does the hotel have on its side? List (and define) those here. Very briefly state why you think the hotel could use this defense. (Points : 10)

Ans: 1) The hotel is responsible for general safety of each guess but not absolute safety. Absolute safety means total and complete security.

2) Hotels are not liable for every accident or loss that occurs on the premises. When someone books a room and sign the paperwork at the time of check in, one releases some of the liability from the hotel to take responsibility upon oneself. For example, in the pool area it is always posted “No lifeguard on duty”.

3) The Hotel would not be liable if Mr. Margreiter was in fact drunk and he let the men into his room. The attack happened outside the hotel premises or at least Mr. Margreiter was found unconscious outside the hotel premises in inebriated state. Any incident that happens outside the premises, the hotel mayn’t be held responsible for the same.


4) Hotels are to take reasonable care of their guests. They do have an audit system that they track all key cards or destroy them after each use. The hotel also can contend that they followed all the security measures and standards and did everything that was reasonably adequate from the security perspective for their guests.

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ACCT 301 Week 2 Homework Answer

In two to three paragraphs, describe the Sarbanes-Oxley Act and why it is important to the accounting profession. (15 points)

Ans: The Sarbanes-Oxley Act was passed by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. SOX was enacted in response to the accounting scandals in the early 2000s. Scandals such as Enron, Tyco, and WorldCom shook investor confidence in financial statements and required an overhaul of regulatory standards.

SOX was enacted following a series of failures involving various functions designed to protect the interests of the investing public. Containing several highly controversial provisions, SOX created a total revision of the regulatory framework for the public accounting and auditing profession and provided guidance for strengthened corporate governance.

Name and briefly describe the five components of COSO’s internal control framework. (10 points)

Ans: The Control Environment – relates to the control consciousness of the people within the organization. The control environment is the basis for all other components of internal control.Risk Assessment – refers to the organization’s identification, analysis, and management of the risks that are related to financial statement preparation, in order to ensure that financial statements are presented fairly and in compliance with generally accepted accounting principles.Control Activities – the organization’s policies and procedures which help ensure that necessary actions are taken to address the potential risks involved in accomplishing the entity’s objectives.Information and Communication – focuses on the nature and quality of information needed for effective control, the systems used to develop such information, and reports necessary to communicate it effectively.Monitoring – involves assessing the quality and effectiveness of the organizations internal control process over time. It includes assessing the design and operation of controls, and assessing compliance with policies and procedures. It also provides for the implementation of appropriate actions when necessary. 

Describe the relationship between the Sarbanes-Oxley Act and COSO. (10 points)

Ans: COSO issues articles that aim to assist public companies to comply with sections of the Sarbanes-Oxley Act. COSO is also the standard by which Sarbanes-Oxley Act compliance is judged.

Tom Jackson is a CPA who really likes to go to Las Vegas, play poker, and bet on football games. Tom knows that the accounting profession disapproves of gambling, but because he spends a lot of time studying sports facts and how to win at poker, he feels that he is simply making educated decisions based on facts. He says that this is no different from using accounting information to buy stocks. Use the fraud triangle as a basis to comment on Tom’s gambling activities. (15 points)

Ans: Using the fraud triangle, I believe Tom can correlate with Opportunity and Rationalization. Tom being a CPA creates the opportunity to have a mathematical advantage over statistical sports betting and card playing. He attempts to rationalize his endeavors by stating that “it is no different from using accounting information to buy stocks.”

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ECO 425 Homework 6 Lessons 11 and 12 Answer

Economics 425

Homework 6

Lessons 11 and 12

1.(10 points)Consider two metropolitan areas, one that has many small school districts and one that has only a few large school districts. In a paragraph, what are the efficiency and equity effects of introducing a voucher system likely to differ across these two areas?
2.(30 points) Suppose the town of State College has three families, each with one child, and each of which earns $20,000 per year (pre-tax). Each family is taxed $4,000 per year to finance the public school system in the town, which any family can then freely attend. Education spending is $6,000 per student in the public schools. The three families differ in their preferences for education. Though families A and B both send their children to the public school, family B places a greater value on education than family A. Family C places the greatest relative value on education and sends its child to private school.
1.Graph the budget constraints facing each of the three families and draw a possible indifference curve which could correspond to the choice each family makes.

The city council is considering replacing its current system with a voucher system. Under the new system, each family would receive a $6,000 voucher for education, and families would still be able to send their children to the same public school. Since this would be more costly than the current system, they would also raise taxes to $6,000 per household to pay for it.
1.Draw the budget constraint the families would face under this system.

Suppose that, when the new system is introduced, family A continues to send their child to public school, but family B now sends their child to private school (along with family C’s child).
1.Explain how you know that family C is made better off and family A is made worse off by the voucher policy.
2.Show, using a diagram, that it is ambiguous whether B would be made better or worse off under the policy.


1.(10 points) In business, there is a tension between the principals (shareholders/owners) and agents (managers). The managers may choose policies that increase short-term profitability (and their bonuses) at the expense of long-term profitability. In a paragraph, describe why the same types of problems may exist in government as well, where elected officials are the agents and voters are the principals.
2.(20 points) Voters rarely get to choose the exact level of spending on a public good. Instead, they are provided with two options—a proposed spending level posed by the government and a default (or “reversion”) level that would be enacted if the proposal were rejected by voters. The “Leviathan” theory of bureaucracy states that governments will select intentionally large proposed spending levels and default levels that are well below the desired level of spending. In a paragraph (or two) explain why this behavior is consistent with a size-maximizing government?
3.(30 points) “Logrolling” is a phenomenon in which elected representatives trade votes with one another. For instance, Representative A may be willing to vote for Representative B’s prefered policy, even if A doesn’t like it, provided that B will vote for Representative A’s prefered policy, even if B doesn’t like it.
4.Suppose we have the follwing three projects up for vote: A naval ship, a hospital, and a park. There are three representatives who will individually vote on the projects. The net social benefits to the constituents of each representative are given in the table below. Note these benefits may be negative, meaning that the policy actually does harm to the constituents of the representative.

Project John Dennis Susan
Naval Ship 200 -75 -40
Hospital -40 150 -25
Park -100 -80 360



What are the total benefits from each project?
1.If a vote were held for each project, what would be the result for each project? Is this socially optimal?
2.If these reperesentatives were to logroll (trade votes) to get their prefered policy to pass, what would be the result? (Hint: one of these representatives will be disappointed.)
3.Is the final result from c) an improvement over the outcome of b)? Is it optimal?
4.As hinted, one of the representatives will be left out of the logrolling. In principal, is there anything else that representative can do to get his/her prefered policy passed?
5.Now suppose the benefits looked like this:

Project John Dennis Susan
Naval Ship 200 -170 -90
Hospital -100 150 -80
Park -250 -130 360


What are the total benefits from each project?
1.If a vote were held for each project, what would be the result for each project? Is this socially optimal?
2.If these reperesentatives were to logroll (trade votes) to get their prefered policy to pass, what would be the result?
3.Is the final result from h) an improvement over the outcome of g)?
4.What conclusions, if any, can we make about the practice of logrolling from these examples?


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ECO 425 Homework 6 Lessons 11 and 12 Answer

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Separate the current assets from non-current assets and provide a total for each Answer

Required: 1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each. 2. Using the Balance Sheet from your answer above calculate;


Balance Sheet      
Cash 8,442    
Short-term Investments and Marketable Securities 8,109    
Receivables 4,812    
Allowance for Doubtful Accounts -53    
Prepaid Expenses 2,781    
Inventories 3,264    
Other Current Assets 2,973    
Total Current Assets   30328  
Long-term Investments 10,448    
Property, Plant and Equipment 23,486    
Accumulated Depreciation -9,010    
Trademarks 6,527    
Other Intangible Assets 20,810    
Other Non-current Assets 3,585    
Total Non Current Assets 55,846 55846  
Total Assets   86174  
Liabilities and SHE      
Income Taxes Payable $471    
Accounts Payable 8,680    
Short Term Notes Payable 17,874    
Other Current Liabilities 796    
Current Liabilities   27821  
Long-Term Liabilities 14,736    
Other non-current Liabilities 10,449    
Common Stock 1,760    
Non current Liabilities   26,945  
Total Liabilities   54,766  
Shareholders’ Equity      
Paid-in-Capital in Excess of Par Value 11,379    
Retained Earnings 55,038    
Treasury Stock -35,009    
Total SHE   31,408  
Liabilities and SHE   86,174  
Current Ratio,   1.09 30328/27821
Days in Inventory,   60.89 365*3178.5/19053
Average Collection Period,   36.79 365*4839.5/48017
Return on Assets Ratio,   10.86% 9019/83074
Debt to Total Assets and   63.55% 54766/86174
Return on common stockholders’ equity   28.48% 9019/31664.5


Required: Using the information provided above: 1. Prepare a multiple-step income statement 2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.


(Points : 36)


Income Statement  
Net Sales 466,114
Cost of Goods Sold 352,488
Gross Profit 113,626
Operating, Selling and Administrative Expenses 88,873
Operating Profit 24,753
add other Income  
Membership Revenues 3048
Earnings before interest and taxes 27,801
#REF! 2,064
Earnings before taxes 25,737
less Taxes 7981
Net Income 17,756
Gross profit/Sales  
113626/466114 24.38%
Net Income /Sales  
17756/466114 3.81%


The gross profit margin is around 24%, while the net profit margin is around 4%. It shows that the profit margin available to recover operating expenses which is around 24% and after deduction of operating expense, only 4% of sales are available; it shows that 20% has been used to meet operating expenses.