Assignment 08 Accounting for Managers Directions Unless otherwise stated, answer in complete sentences, and be sure to use correct English spelling and grammar.  Sources must be cited in APA format.  Your response should be a minimum of one (1) single-spaced page to a maximum of two (2) pages in length; refer to the "Assignment Format" page for specific format requirements. Horizontal and Vertical Analysis Sanborn Corporation’s condensed comparative income statements for 20x8 and 20x7 appear below. The corporation’s condensed comparative balance sheets for 20x8 and 20x7 appear on the next page. Sanborn Corporation Comparative Income Statements For the Years Ended December 31, 20x8 and 20x7 (in thousands of dollars) 20x8 20x7 Net sales $3,276,800 $3,146,400 Cost of goods sold 2,088,800 2,008,400 Gross margin $1,188,000 $1,138,000 Operating expenses Selling expenses $ 476,800 $ 518,000 Administrative expenses 447,200 423,200 Total operating expenses $ 924,000 $ 941,200 Income from operations $ 264,000 $ 196,800 Interest expense 65,600 39,200 Income before income taxes $ 198,400 $ 157,600 Income taxes expense 62,400 56,800 Net income $ 136,000 $ 100,800 Earnings per share $3.40 $2.52 Sanborn Corporation Comparative Balance Sheets December 31, 20x8 and 20x7 20x8 20x7 Assets Cash $ 81,200 $ 40,800 Accounts receivable (net) 235,600 229,200 Inventory 574,800 594,800 Property, plant, and equipment (net) 750,000 720,000 Total assets $1,641,600 $1,584,800 Liabilities and Stockholders' Equity Accounts payable $ 267,600 $ 477,200 Notes payable (short-term) 200,000 400,000 Bonds payable 400,000 — Common stock, $10 par value 400,000 400,000 Retained earnings 374,000 307,600 Total liabilities and stockholders' equity $1,641,600 $1,584,800 1. Prepare schedules showing the amount and percentage changes from 20x7 to 20x8 for the comparative income statements and the balance sheets. You may use the forms below. (40 points) Sanborn Corporation Comparative Income Statements For the Years Ended December 31, 20x8 and 20x7 (in thousands of dollars) 20x8 20x7 Increase or Decrease Amount Percentage Net sales $3,276,800 $3,146,400 Cost of goods sold 2,088,800 2,008,400 Gross margin $1,188,000 $1,138,000 Operating expenses Selling expenses $ 476,800 $ 518,000 Administrative expenses 447,200 423,200 Total operating expenses $ 924,000 $ 941,200 Income from operations $ 264,000 $ 196,800 Interest expense 65,600 39,200 Income before income taxes $ 198,400 $ 157,600 Income taxes expense 62,400 56,800 Net income $ 136,000 $ 100,800 Earnings per share $3.40 $2.52 Sanborn Corporation Comparative Balance Sheets December 31, 20x8 and 20x7 20x8 20x7 Increase or Decrease Amount Percentage Assets Cash $ 81,200 $ 40,800 Accounts ...

1. Assignment 08
Accounting for Managers
Directions Unless otherwise stated, answer in complete
sentences, and be sure to use correct English spelling and
grammar. Sources must be cited in APA format. Your response
should be a minimum of one (1) single-spaced page to
a maximum of two (2) pages in length; refer to the "Assignment
Format" page for specific format requirements.
Horizontal and Vertical Analysis
Sanborn Corporation’s condensed comparative income
statements for 20x8 and 20x7 appear below. The corporation’s
condensed comparative balance sheets for 20x8 and 20x7 appear
on the next page.
Sanborn Corporation
Comparative Income Statements
For the Years Ended December 31, 20x8 and 20x7
(in thousands of dollars)
20x8
20x7
Net sales
$3,276,800
$3,146,400
Cost of goods sold
2,088,800
2,008,400
Gross margin
$1,188,000
$1,138,000
Operating expenses

2. Selling expenses
$ 476,800
$ 518,000
Administrative expenses
447,200
423,200
Total operating expenses
$ 924,000
$ 941,200
Income from operations
$ 264,000
$ 196,800
Interest expense
65,600
39,200
Income before income taxes
$ 198,400
$ 157,600
Income taxes expense
62,400
56,800
Net income
$ 136,000
$ 100,800
Earnings per share
$3.40
$2.52
Sanborn Corporation
Comparative Balance Sheets
December 31, 20x8 and 20x7
20x8
20x7
Assets

3. Cash
$ 81,200
$ 40,800
Accounts receivable (net)
235,600
229,200
Inventory
574,800
594,800
Property, plant, and
equipment (net)
750,000
720,000
Total assets
$1,641,600
$1,584,800
Liabilities and Stockholders' Equity
Accounts payable
$ 267,600
$ 477,200
Notes payable (short-term)
200,000
400,000
Bonds payable
400,000
—
Common stock, $10 par value
400,000
400,000
Retained earnings
374,000
307,600
Total liabilities and

4. stockholders' equity
$1,641,600
$1,584,800
1.
Prepare schedules showing the amount and percentage changes
from 20x7 to 20x8 for the comparative income statements and
the balance sheets. You may use the forms below. (40 points)
Sanborn Corporation
Comparative Income Statements
For the Years Ended December 31, 20x8 and 20x7
(in thousands of dollars)
20x8
20x7
Increase or Decrease
Amount
Percentage
Net sales
$3,276,800
$3,146,400
Cost of goods sold
2,088,800
2,008,400
Gross margin
$1,188,000
$1,138,000

5. Operating expenses
Selling expenses
$ 476,800
$ 518,000
Administrative expenses
447,200
423,200
Total operating expenses
$ 924,000
$ 941,200
Income from operations
$ 264,000
$ 196,800
Interest expense
65,600
39,200
Income before income taxes
$ 198,400

6. $ 157,600
Income taxes expense
62,400
56,800
Net income
$ 136,000
$ 100,800
Earnings per share
$3.40
$2.52
Sanborn Corporation
Comparative Balance Sheets
December 31, 20x8 and 20x7
20x8
20x7
Increase or Decrease
Amount
Percentage
Assets
Cash
$ 81,200
$ 40,800

7. Accounts receivable (net)
235,600
229,200
Inventory
574,800
594,800
Property, plant, and
equipment (net)
750,000
720,000
Total assets
$1,641,600
$1,584,800
Liabilities and Stockholders' Equity
Accounts payable
$ 267,600
$ 477,200
Notes payable (short-term)
200,000
400,000

8. Bonds payable
400,000
—
Common stock, $10 par value
400,000
400,000
Retained earnings
374,000
307,600
Total liabilities and
stockholders' equity
$1,641,600
$1,584,800
2.
Using the forms below, prepare common-size income statements
and balance sheets for 20x7 and 20x8 (40 points)
Sanborn Corporation
Common-Size Income Statements
For the Years Ended December 31, 20x8 and 20x7
20x8
20x7
Net sales

9. Cost of goods sold
Gross margin
Operating expenses
Selling expenses
Administrative expenses
Total operating expenses
Income from operations
Interest expense
Income before income taxes
Income taxes expense
Net income

10. Sanborn Corporation
Common-Size Balance Sheets
December 31, 20x8 and 20x7
20x8
20x7
Assets
Cash
Accounts receivable (net)
Inventory
Property, plant, and equipment (net)
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Notes payable (short-term)

11. Bonds payable
Common stock, $10 par value
Retained earnings
Total liabilities and stockholders' equity
3.
Comment on the results in requirements 1 and 2 by indentifying
favorable and unfavorable changes in the components and
composition of the statements. (30 points)
Assignment 04
Accounting for Managers
Directions: Unless otherwise stated, answer in complete
sentences, and be sure to use correct English spelling and
grammar. Sources must be cited in APA format. Your response
should be a minimum of one (1) single-spaced page to
a maximum of two (2) pages in length; refer to the "Assignment
Format" page for specific format requirements.
Return on Investment and Residual Income
Portia Carter is the president of a company that owns six
multiplex movie theaters. Carter has delegated decision-making
authority to the theater managers for all decisions except those
relating to capital expenditures and film selection. The theater
managers’ compensation depends on the profitability of their
theaters. Max Burgman, the manager of the Park Theater, had
the following master budget and actual results for the month.

12. Master
Actual
Budget
Results
Tickets sold
120,000
480,000
Revenue--tickets
$ 840,000
$ 880,000
Revenue--concessions
480,000
330,000
Total revenue
$1,320,000
$1,210,000
Controllable variable costs
Concessions
120,000
99,000
Direct labor
420,000
330,000
Variable overhead
540,000
550,000
Contribution margin
$ 240,000

13. $ 231,000
Controllable fixed costs
Rent
55,000
55,000
Other administrative expenses
45,000
50,000
Theater operating income
$ 140,000
$ 126,000
1.
Assuming that the theaters are profit centers, prepare a
performance report for the Park Theater using the chart below.
Include a flexible budget. Determine the variances between
actual results, the flexible budget, and the master budget. (25
points)
Actual
Flexible
Master
Results
Variance
Budget
Variance
Budget
Tickets sold
110,000

14. ( )
120,000
Revenue--tickets
$ 880,000
( )
( )
$ 840,000
Revenue--concessions
330,000
( )
( )
480,000
Total revenue
$1,210,000
( )
$1,320,000
Controllable variable costs

15. Concessions
99,000
( )
( )
120,000
Direct labor
330,000
( )
( )
420,000
Variable overhead
550,000
( )
( )
540,000
Contribution margin
$ 231,000
( )

16. ( )
$ 240,000
Controllable fixed costs
Rent
55,000
55,000
Other administrative expenses
50,000
( )
45,000
Theater operating income
$ 126,000
( )
( )
$ 140,000

17. 2.
Evaluate Burgman’s performance as a manager. (25 points)
3.
Assume that the managers are assigned responsibility for capital
expenditures and that the theaters are thus investment centers.
Park Theater is expected to generate a desired ROI of at least 6
percent on average invested assets of $2,000,000.
a.
Compute the theater’s return on investment and residual income
using the chart below. (25 points)
Actual
Flexible
Master
ROI
÷
÷
÷
=
0.00%
=
0.00%
=
0.00%
Residual income
– (
0%

18. x
)
– (
0%
x
)
– (
0%
x
)
=
=
=
b.
Using the ROI and residual income, evaluate Burgman’s
performance as a manager. (25 points)
This is the end of Assignment 04.