Arco Is an Integrated Manufacturer in Capital-Intensive Industry Industry Analysts Anticipate the Following Annual Changes in Sales for Commodity-Level

question 16

Essay

Arco is an integrated manufacturer in capital-intensive industry.Nuwak manufactures more commodity-level products in the same industry at the lower end of the market and uses less capital-intensive processes.The following data describe sales and cost of products sold for both firms for Years 3 and 4.
$\begin{array}{|l|r|r|}\hline \text { Aamounts in millions) } & \text { Year 3 } & \text { Year 4 } \\\hline \text { Arco } & & \\\hline \text { Sales } & \$ 4,042 & \$ 5,217 \\\hline \text { Cost of Products Sold } & 3,887 & 4,554 \\\hline \text { Gross Profit } & \$ 155 & \$ 663 \\\hline \text { Gross Margin } & 3.8 \% & 12.7 \% \\\hline & & \\\hline \text { Nuwak } & & \\\hline \text { Sales } & \$ 6,266 & \$ 11,377 \\\hline \text { Cost of Products Sold } & 5,997 & 9,129 \\\hline \text { Gross Profit } & \$ 269 & \$ 2,248 \\\hline \text { Gross Margin } & 4.3 \% & 19.8 \%\\\hline\end{array}$
Industry analysts anticipate the following annual changes in sales for the next five years:
Year +1,5 percent increase; Year +2,10 percent increase; Year +3,20 percent increase; Year +4,10 percent decrease; Year +5,20 percent decrease.
Required
a.The analyst can sometimes estimate the variable cost as a percentage of sales for a
particular cost (for example,cost of products sold)by dividing the amount of the
change in the cost item between two years by the amount of the change in sales for
those two years.The analyst can then multiply the variable-cost percentage times
sales to estimate the total variable cost.Subtracting the variable cost from the total
cost yields an estimate of the fixed cost for that particular cost item.Follow this procedure
to estimate the manufacturing cost structure (variable cost as a percentage of
sales,total variable costs,and total fixed costs)for cost of products sold for both Arco and Nuwak in Year 4.
b.Discuss the structure of manufacturing cost (that is,fixed versus variable)for each
firm in light of the manufacturing process and type of product produced.
c.Using the analysts' forecasts of sales changes,compute the projected sales,cost of
products sold,gross profit,and gross margin (gross profit as a percentage of sales)
of each firm for Year +1 through Year +5.
d.Why do the levels and variability of the gross margin percentages differ for these two
firms for Year +1 through Year +5?

Identify chemical agents used for sterilization and recognize non-standard agents.

Understand the applications of various surgical instruments such as Adson forceps, operating scissors, and needle holders.

Define and differentiate between sanitizing, disinfection, cleansing, and sterilization in the context of medical procedures.

Recognize common surgical positions and identify any non-traditional positions.

---

Definitions:

Shareholders Plan

A strategy or arrangement developed to protect the interests of shareholders, often used in the context of mergers and acquisitions to ensure fair treatment and value.

Corporate Veil

A legal concept that separates the actions of a corporation from the personal liabilities of its shareholders, protecting them from being personally liable for the company's debts and obligations.

Controlling Shareholder

An individual or entity that owns a majority of a company's shares, granting them significant influence or control over the company's operations and decisions.

Separate Corporate Boundaries

A principle that maintains the legal independence between a corporation and its shareholders, protecting personal assets from business liabilities.