Analyzing the statement based on trend analysis.
Marcus Company
You are the senior financial analyst for the Marcus Company and your company assembles products from a group of interconnecting parts. Some of the parts are produced by your company, and some are purchased from outside vendors. The vendor for part X has informed you that they will be increasing their price effective next year to $12.00 per unit for the first 5,000 units purchased and $9.00 for each additional unit purchased next year. The estimated annual usage of part X is 7,500 units.
After meeting with the distribution and production managers, you find out the following information. No additional parts will be purchased beyond what are needed in the year. If you decide to manufacture part X, the costs will be as follows:
Direct materials, $3.50 per unit.
Direct labor, $1.75 per unit.
Variable manufacturing overhead, $3.80 per unit.
Variable administrative expense, $1.65 per unit.
Current fixed manufacturing overhead, $18,000 annually.
1. Should you recommend that your company begin manufacturing part X or should you continue to purchase the part from your existing vendor for next year? Why?
The purpose of this assignment is to compute a trend analysis and interpret the results.
The following sales and accounts receivable information is available for the Partridge Pear Tree Company.
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2005
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2006
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2007
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Net Sales
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$112,000
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$136,000
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$158,000
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Accounts Receivable (net)
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$21,000
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$32,000
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$43,000
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Using 2005 as the base year, prepare a trend analysis on the above data and tell whether the results suggest a favorable or unfavorable trend and why. You may round your answer to one decimal point in making your analysis.