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A Fortune 100 company, Caterpillar is the world s leading manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Caterpillar also manufactures custom piston pins for other manufacturers in the same facility used to make pins for its own heavy duty engines. Piston pins are made with cost effective CNC bar feeders and multispindle barstock machines. This process is a high output, high efficiency operation that eliminates the added costs of purchasing special cut to length barstock or cutting barstock to specific lengths.

The market research department has indicated that a proposed new piston pin for a manufacturerof truck engines would likely sell for $46. A similar piston pin currently being produced has the following manufacturing costs:

Direct materials $24.00
Direct labor 10.00
Overhead 16.00
total $50.00

Assume that Caterpillar desires a gross margin of 35% of the manufacturing cost.

1. Suppose Caterpillar used cost plus pricing, setting the price 35% above the manufacturing cost. What price would be charged for the piston pin? Would you produce such a piston pin if you were a manager at Caterpillar? Explain

2. Caterpillar uses target costing. What price would the company charge for a piston pin? What is the highest acceptable manufacturing cost for which Caterpillar would be willing to produce the piston pin?

3. As a user of target costing, what steps would Caterpillar managers take to try to make production of this product feasible?

On November 1, 2002, the Grey Corporation purchased $10,000 of supplies on credit. At the end of the accounting period, only $3,000 of the supplies remained in Grey s ending inventory. Assuming that Grey had $5,000 of supplies on hand at October 31, 2002, how much office supplies expense should Grey recognize for November 2002?

You keep looking over the financials to see where your analysis is wrong but you can t see any problems it just looks like inventory is getting larger and larger, but you know that you haven t seen growth in the levels of inventory that the financials seem to be indicating. You start to wonder, as the controller of the company, what could be some of the possible reasons. You just finished a comprehensive audit of all the physical controls of inventory so you doubt inventory is being stolen. Everything else in the financials seems to look fine. In fact, they seem to indicate that the company is improving in profitability.

What might be a valid reason for why inventory appears to increase and how would this be accomplished?

Mainline Distributing Company collected cash of $92,000 from customers and $6,000 interest on notes receivable. Cash payments included $24,000 to employees, $13,000 to suppliers, $6,000 as dividends to stockholders, and $5,000 as a loan to another company. How much was Mainline s net cash provided by operating activities?

Andre has asked you to evaluate his business, Andre s Hair Stylling. Andre has five barbers working for him. (Andre is not one of them.) Each barber is paid $9.90 per hour and works a 40 hour week and a 50 week year, regardless of the number of haircuts. Rent and other fixed expenses are $1,750 per month. Hair shampoo used on all clients is .40 per client. Assume that the only service performed is the giving of haircuts, the unit price of which is $12. Andre has asked you to find the following information.

Find the contribution margin per haircut. Assume that the barbers compensation is a fixed cost. Show calculations to support your answer.
Determine the annual break even point, in number of haircuts. Support your answer with an appropriate explanation. Show calculations to support your answer.
What will be the operating income if 20,000 haircuts are performed? Show calculations to support your answer.
Suppose Andre revises the compensation method. The barbers will receive $4 per hour plus $6 for each haircut. What is the new contribution margin per haircut? What is the annual break even point (in number of haircuts)? Show calculations to support your answer.

Would someone please provide me with a step by step solution for the following problem?

A U.S. corporation, Forever Young, Inc., intends to import $1,000,000 worth of cosmetics from Switzerland and will make payment in SF three months from now.The foreign exchange spot rate of Swiss franc to the U.S. dollar is SF6/$. Annual interest rates for U.S. dollar and Swiss franc are 5 percent and 8 percent, respectively.

a. What is the three month forward rate for French franc if interest rate parity holds?
b. How can Forever Young, Inc., use currency trading to hedge against the foreign exchange risk associated with the purchase?