From the preceding information you need to submit to management a detailed report on thecompanyâ??s

From the preceding information you need to submit to management a detailed report on thecompany’s breakeven point. In view of the conditions in the cottonseed market, managementtold you that it would also like to know the average maximum amount that the company canafford to pay for a ton of cottonseed.Required:1. (CVP Analysis and Target Costing). Assume that the revenues in Table 1 are the annualbreakeven sales dollars. At the breakeven point, what is the highest amount that Memphiscan pay per ton of raw cottonseed? Show your answer and calculations in an Excelspreadsheet with formulas for a contribution margin income statement.2. (CVP Analysis and Target Costing). The stockholders consider the minimum satisfactoryreturn on their equity investment (ROE = Pretax net income/ average equity) in thebusiness to be 20% before corporate income taxes. The stockholders’ equity in thecompany is $1,500,000. Compute the average amount that the company can pay for a tonof cottonseed to realize the minimum satisfactory return on the stockholders’ investmentin the company. Show your answer and calculations in an Excel spreadsheet withformulas for a contribution margin income statement.3. (Process Costing). As a part of your financial projections for 2013, you need to estimatethe value of Work-in-Process inventory at December 31, 2013. Use the data in Table 3below to show the total inventory valuation for products and byproducts of the cottonseedprocess. Calculate equivalent units (EU) of DM and CC for each product, the endinginventory value for each product, and the combined inventory value for all five items.Show this in a spreadsheet with formulas.Table 3: Ending Work in Process InventoryMeal Hulls Lint Oil Waste*Ending Inventory (Lbs.) 36,000 48,000 6,000 18,000 12,000DM % complete 100% 100% 100% 100% 100%CC % complete 95% 95% 95% 35% 50%DM unit cost per EU $0.123 $0.123 $0.123 $0.123 $0.123CC unit cost per EU $0.008 $0.002 $0.002 $0.019 $0.011*Processing produces waste or “Soapstock.†Although it has no sale value, it does have a cost.


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