Question 2:  (a). From the given data, it can be seen that McDonald’s has a stronger profitability position in the market, as compared to Wendy’s, since McDonald’s has robust return on assets and on common stockholder’s equity. The net income percentage of sales of the company is also higher, against Wendy’s. Moreover, it debt equity ratio is also better than the rivalry company. Therefore, it can clearly be said that the profitability position of McDonald’s is better than Wendy’s.

(b). From the debt equity ratio, it can be said that McDonald’s is using more debt. The basic reason of using more debt by any company is to increase the owners’ profits. Basically, McDonald’s borrowed the money, either through a loan from the bank, or through the sale of bonds to investors, with a motive of expansion. The opening of new outlet, store of manufacturing unit must also be the reason for McDonald’s to borrow the money to finance its growth.

(c) The comparison of both the companies with the industry average is clear. It can be seen that both that both the companies are the market leaders, as their return on assets, return on stockholder’s equity, net income and debt-to equity ratios are clearly more than the industry average, and the company with data more than average is called as the market leader.

(d). According to me, there is no point comparing Wendy’s and McDonald’s with Dun and Bradstreet’s industry as the industry is a upper-quartile industry and Wendy’s  and McDonald’s are the part of medium-quartile industries. So, first of there can not by any loyal comparison in these two industries, and even if we compare, then the results will be depressing for the lower quartile industry companies. Therefore, we can compare Wendy’s with McDonald’s but not these two companies with any other company of higher quartile industry.

(e). No, the data of upper-quartile industry will not affect any of the company of medium or lower-quartile industry. Wendy’s and McDonald’s are the market leaders in their field and the level of market, therefore, any changes in the upper quartile industry does not affect any company that lies in the middle quartile industry.

Question 3: [a] (i). Basic standards (Maher, 2005): These are the considerations that are authorized by an authority, or by general consent on the basis comparison, and on approved model.

(ii). Ideal Standard: This is the type of the standard that offers no inefficiencies of any types, not possible to reach on a continuous basis.

(iii). Attainable Standards: These are the level of sets that is considered to be capable of being attained with the efforts that are reasonable.

(iv). Current Standard: Current Standard (Sapp, Rebishcke, 1990) is a standard that was founded over a short period of time related to present situation. It shows the performance that must be attained in the existing period.

[b]. Standard Cost

Question 4: (a).                                  Cash Flow Statement

As On September 30, 2011

(b). The five areas on which the industry should pay attention on, are:

• Determination Of selling price
• Determination of controlling efficiencies
• Facilitating the preparation of financial standards
• Providing operation policy basis
• Buying of resource from outside suppliers.

(c) The five areas of non-financial measures are:

• All material or components basically bought for controlling efficiencies
• Facilitating the preparation of financial standards
• Buying of resource from outside suppliers
• Determination of controlling efficiencies

The comparison of both the companies with the industry average is clear. It can be seen that both that both the companies are the market leaders, as their return on assets (Datar, 2003), return on stockholder’s equity, net income and debt-to equity ratios are clearly more than the industry average, and the company with data more than average is called as the market leader. There is no point comparing Wendy’s and McDonald’s with Dun and Bradstreet’s industry as the industry is a upper-quartile industry and Wendy’s  and McDonald’s are the part of medium-quartile industries. So, first of there can not by any loyal comparison in these two industries, and even if we compare, then the results will be depressing for the lower quartile industry companies. Therefore, we can compare Wendy’s with McDonald’s but not these two companies with any other company of higher quartile industry. No, the data of upper-quartile industry will not affect any of the company of medium or lower-quartile industry. Wendy’s and McDonald’s are the market leaders in their field and the level of market, therefore, any changes in the upper quartile industry does not affect any company that lies in the middle quartile industry. Basic standards: These are the considerations that are authorized by an authority, or by general consent on the basis comparison, and on approved model. Ideal Standard: This is the type of the standard that offers no inefficiencies of any types, not possible to reach on a continuous basis. Attainable Standards: These are the level of sets that is considered to be capable of being attained with the efforts that are reasonable. Current Standard: Current Standard is a standard that was founded over a short period of time related to present situation. It shows the performance that must be attained in the existing period. This is the type of the standard that offers no inefficiencies of any types, not possible to reach on a continuous basis, and Current Standard is a standard that was founded over a short period of time related to present situation.

REFERENCES

Maher, Lanen, “Fundamentals of Cost Accounting”, McGraw-Hill, 2005

Sapp, Richard and Steven Rebishcke, “Journal of Bank Cost and Management Accounting”, 1990

Horngren, Datar, “Cost Accounting – A Managerial Emphasis”, 2003)

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