Financial ratio data is listed below for Gallery of Dreams. Construct a list of strengths and weaknesses for the firm after analyzing the ratios. Gallery of Dreams Ratios Industry 2015 2014 2013 Ratio 4.48x 1.47x 4.06x 1.18x 3.48x 0.96x 9 days 2.50x 0.80x 11 days 2.30x 15 days 17.50x 2.80x 62.00% Current Quick Average collection period Inventory turnover Days payable outstanding Fixed asset turnover Total asset turnover Debt ratio Long term debt to total capitalization 16 days 15 days 1.24x 12 days 9.09x 1.37x 8 days 1.19x 11 days 9.74x 1.50x 29.47% 8.85x 1.82x 39.1 7% 1.67x 34.04% 22.33% 14.23x 18.91% 14.09% 22.02x 25.53% 9.93x 8.69x 31.10% 8.06% 4.32% 9.21% 11.34% 19.00x Times interest earned Fixed charge coverage Gross profit margin Operating profit margin Net profit margin Return on investment Return on equity 4.59x 59.21% 22.05% 11.89% 17.97% 24.14% 4.47x 59.39% 2 1.86% I 1.00% 18.28% 27.51% 4.25x 58.52% 20.52% 10.97% 18.35% 29.88%

Zachary company produces commercial gardening equipment. since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. the costs and cost drivers associated with the four overhead activity cost pools follow: activities unit level batch level product level facility level cost $ 64,800 $ 27,730 $ 15,000 $ 154,000 cost driver 2,400 labor hrs. 47 setups percentage of use 11,000 units production of 780 sets of cutting shears, one of the company’s 20 products, took 240 labor hours and 7 setups and consumed 15 percent of the product-sustaining activities. required: (a) had the company used labor hours as a company wide allocation base, how much overhead would it have allocated to the cutting shears? (b) how much overhead is allocated to the cutting shears using activity-based costing? (c) compute the overhead cost per unit for cutting shears first using activity-based costing and then using direct labor hours for allocation if 780 units are produced. if direct product costs are $150 and the product is priced at 30 percent above cost for what price would the product sell under each allocation system? (d) assuming that activity-based costing provides a more accurate estimate of cost, indicate whether the cutting shears would be over- or underpriced if direct labor hours are used as an allocation base. explain how over-or undercosting can affect vaulker's profitability. (e) comment on the validity of using the allocated facility-level cost in the pricing decision. should other costs be considered in a cost- plus pricing decision? if so, which ones? what costs would you include if you were trying to decide whether to accept a special order?