QUESTION: 2 (b)An incremental (sale – or – process – further) analysis for Loh Gear Bikes Company.Sales process further Net incomeIncrease (decrease)Sales per unit $400 $440 $40Cost per unit Direct materials 150 160 (10) Direct labor 70 80 (10) Variable overhead (70% of direct labor) 49 56 (7) Fixed overhead (30% of direct labor) 21 2 0Production costs per unit 290 317 13Net income per unit $110 $123 $13(b)Incremental revenue ($40) exceeds incremental processing costs ($27); revenue increase of $13 per unit. Decision: Loh Gear should proceed further. QUESTION: 3 (a) The financial report analysis for Landwehr Corporation is described below: Report 2014 20151- Profit margin (%) o.o4 o.o62- Asset turnover (times) 1.14 1.123- Profit per share ($) 0.95 1.404- Price – earnings (times) 5.25 5.705- Payout (%) 60 556- Debt to total assets (%) 0.28 0.251- Profit margin ratio = (net income )/ (net sales) Profit Margin Ratio (2014) = ($30,000)/($650,000) = 0.04% Profit Margin Ratio (2015) = ($45,000)/($700,000) = 0.06% 2- Asset turnover ratio = (net sales) /(average assets) Average assets = (current total assets+prior year total assets)/2= ($600,000+ $533,000)/2= $566,500 2014 average assets= ($640,000+ $600,000)/2= 620,000 Average Assets 2015Assets Turnover Ratio 2014 = $650,000/$566,500 = 1.14 TimesAssets Turnover Ratio 2015 = $700,000/$620,000 = 1.12 Times3- Earnings Per Share Ratio = (net income) /(weighted average common shares outstanding) Per share ratio = $30,000)/$31,000 = $0.95 per share (2014) Earnings per share ratio ...... half the paper ...... pay on market for every dollar of earnings, the high P/E ratio in 2015 has led to the company's growth and the fact that it is financially strong. The "blue chip" company has good future prospects. Payout Ratio: Gives the investor an idea of ​​management's dividend policy with dividends expressed as a percentage of profits available to common shareholders. Therefore the low ratio (2015) of 55% indicates that the management is reinvesting profits internally. Debt ratio: measures the margin of safety of the entity's creditors in the event of liquidation. For both years, approximately 26.5% of assets were financed by the company's creditors (long-term and current creditors). The fair value of the assets is expected to fall to 26.5% below their book value. Creditors would not be protected during liquidation. (Hoggett, 2012, p: 1062-1069).