50000
70000

120000
180000

350000
280000

400000
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-170000
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750000
730000

2500...

Question

50000
70000

120000
180000

350000
280000

400000
300000

-170000
-100000

750000
730000

250000
210000

40000
10000

240000
240000

220000
270000

750000
730000

1200000

800000

250000

70000

30000

100000

14.5

80000
5000

40000
5000

198000

191250

Cash 
Accounts receivable (net) 
Merchandise inventory 
Property plant, & equipment 
Less: Accumulated depreciation 
Total assets 
Income taxes payable 
Common stock 
Retained earnings 
Total liabilities & stock, equity 
Dec. 31,19X2 
Dec.
	
Document Preview: You’ve just been hired onto ABC Company as the corporate controller. ABC Company is a manufacturing firm that specializes in making cedar roofing and siding shingles. The company currently has annual sales of around $1.2 million, a 25% increase from the previous year. The company has an aggressive growth target of reaching $3 million annual sales within the next 3 years. The CEO has been trying to find additional products that can leverage the current ABC employee skill set as well as the manufacturing facilities.    As the controller of ABC Company, the CEO has come to you with a new opportunity that he’s been working on. The CEO would like to use the some of the shingle scrap materials to build cedar dollhouses. While this new product line would add additional raw materials and be more time-intensive to manufacture than the cedar shingles, this new product line will be able to leverage ABC’s existing manufacturing facilities as well as the current staff. Although this product line will require added expenses, it will provide additional revenue and gross profit to help reach the growth targets. The CEO is relying on you to help decide how this project can be afforded  Provide details about the estimated product costs, what is needed to break even on the project, and what level of return this product is expected to provide.In order to help out the CEO, you need to prepare a six- to eight-page report that will contain the following information (including exhibits, but excluding your references and title page). Refer to the accompanying Excel spreadsheet (available through your online course) for some specific cost and profit information to complete the calculations. HYPERLINK "http://vizedhtmlcontent.next.ecollege.com/pub/content/abc3ad4f-f6b4-4a8e-a8e9-3a5cc85354fa/Final_Paper_Spreadsheet._Student_Copy.xlsx" Final Paper SpreadsheetI. An overall risk profile of the company based on current economic and industry issues that it may be facing. II....

Robert · Accepted Answer

ABC Company- Expansion of product Line 
 
Introduction 
ABC Company is a manufacturing concern which is engaged in the production of cedar roofing 
and siding shingles. There is a sharp increase in the Company’s turnover by 25% as compared to 
previous year. Company has a growth target of $3 million to be achieved in the next three years.  
Company’s CEO is evaluating proposals for introduction of new product line to utilize the spare 
resources and capacity of production. 
Risk Profile of ABC Company 
Company is planning to introduce a new product line to utilize the spare capacity of production. 
The new product line will add up additional cost of raw material and labor cost. Although 
introduction of new product carries risk and cost but will also add up to the profitability and 
better utilization of company’s resources to meet the desired growth targets. Company needs to 
incur cost on advertising campaigns and for sales promotion to make new product marketable. 
Initially product may face down market as its new in the market and customers need time to get 
familiar with the product. But with the passage of time, company will earn huge profits due to 
the utilization of spare capacity.  
Company will have to plan strategy for meeting out the competition in market. As the product is 
new, initially it will cost more, company needs to analyze other revenue resources to meet out 
the cost of expansion. 
Current Company Cash Flow Statement Analysis 
The company’s current cash flow without expansion: 
Cash Flow Statement (Direct Method) 
For ABC Company 
For period ending Dec. 31,19X2
Particulars Amount
Cash Flow from Operating Activities:   
Cash receipts from customers $1,260,000.00  
Cash payment to suppliers $830,000.00  
Income Tax payments $0.00  
Dividend paid $100,000.00  
Cash paid for other expenses $250,000.00  
Cash Flow from Operating Activities $80,000.00
ABC Company- Expansion of product Line 
 
Cash Flow from Investing Activities:   
Purchase of Plant $100,000.00  
Sale of Plant $0.00  
Dividend Income $0.00  
Cash Flow from Investing Activities ($100,000.00)
Cash Flow from Financing Activities:   
Issue of Capital Stock $0.00  
Repayment of borrowings $0.00  
Proceeds from borrowings $0.00  
Cash Flow from Financing Activities $0.00
Net increase or decrease in cash or cash equivalents ($20,000.00) 
Beginning Cash Balance $70,000.00
Ending Cash Balance $50,000.00
Working 
Cash Receipts from customers:  
Net Sales  $ 1,200,000.00  
Add: Beginning Accounts Receivable  $    180,000.00  
Less: Ending Accounts Receivable  $    120,000.00  
Cash Receipts from customers  $ 1,260,000.00
Cash Payments to suppliers:  
Purchases  $    800,000.00  
Add: Ending Inventory  $    350,000.00  
Less: Beginning Inventory  $    280,000.00  
Add: Beginning Accounts Payable  $    210,000.

50000 70000 120000 180000 350000 280000 400000 300000 -170000 -100000 750000 730000 250000 210000 40000 10000 240000 240000 220000 270000 750000 730000 1200000 800000 250000 70000 30000 100000 14.5...

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