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132
MBA 4–3
Metric Effects
Liquidity Profitability
Transaction Working Capital Gross Profit Percent
MBA 4–4
Metric Effects
Liquidity Profitability
Transaction Working Capital Ability to Achieve Gross
Profit Percent of 30%
MBA 4–5
1. Year 2 Year 1
Gross profit percent:
133
MBA 4–6
The gross profit percents and markup percents for Wal-Mart and Target are
summarized below.
Gross Profit Markup
Percent Percent
Wal-Mart:
The gross profit percent and markup percent are higher for Target than for Wal-
MBA 4–7
1. Year 2 Year 1
Gross profit percent:
2. Markup percent:
3. Deere & Company’s financial performance declined slightly from Year 1 to
134
MBA 4–8
1. Year 2 Year 1
Gross profit percent:
MBA 4–9
The gross profit percents and markup percents for Deere and Caterpillar are
summarized below.
Gross Profit Markup
Percent Percent
Deere:
135
MBA 4–10
1. In order to earn a significant profit, companies with low gross profit and markup
2. Kroger Tiffany
Gross profit percent:
136
CASES
Case 4–1
Standards of Ethical Conduct for Management Accountants requires manage-
Case 4–2
137
Case 4–3
1. If Eric doesn’t need the stereo immediately (by the next day), Dynamic Sound
Systems offers the best buy as shown below.
Even if the 1% cash discount offered by First Audio is considered, Dynamic
Sound Systems still offers the best buy as shown below.
If Eric needs the stereo immediately (the next day), then First Audio has the
best price. This is because a shipping and handling charge of $44.99 would
be added to Dynamic Sound Systems’ price as shown below.
138
Case 4–3, Concluded
First Audio price (see previous page) ................................. $943.40
Less first installment (down payment) ................................ 314.47
2. Other considerations in buying the stereo include the ability to have the
139
Case 4–4
1.
HARBOR READY PARTS COMPANY
Projected Income Statement
For the Year Ended October 31, 20Y7
Revenues:
Sales (a) ....................................................................... $1,380,000
Notes:
(a) Projected sales
[$1,200,000 + (15% × $1,200,000)] .......................... $1,380,000
140
Case 4–4, Concluded
3. Possible concerns related to the proposed changes include the following:
The primary concern is with the accuracy of the estimates used for projecting
Case 4–5
Note to Instructors: Answers will vary. The purpose of this activity is to familiarize
students with the variety of possible purchase prices for a fairly common house-
