Case Study-1 (1)

Budgeting Production, Direct Materials and Income Statement Lane Products manufactures a popular kitchen utensil. The company recently expanded, and the controller believes that it will need to borrow cash to continue operations. It opened negotiations with the local bank for a one-month loan of $42,000 starting March 1. The bank would charge interest at the rate of 0.5 percent per month and require the company to repay interest and principal on March 31. In considering the loan, the bank requested a projected income statement and cash budget for March. The following information is available: • The company budgeted sales at 13,000 units per month in February, April, and May and at 10,000 units in March. The selling price is $61 per unit. • The company offers a 2 percent discount for cash sales. The company's experience is that bad debts average 1 percent of credit sales. • The inventory of finished goods on February 1 was 2,500 units. The desired finished goods inventory at the end of…

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Budget Excel Project – Bloomfield Co. Bloomfield is an ice cream company, who makes homestyle ice creams using fresh and all-natural ingredients and sells to retail stores. In preparing the budget for the coming year, 2024, they forecasted the following expected sales and gathered the costs data from managers in various areas of the company. Sales Forecasted to sell 25,000 units in the 1st Quarter of 2024, and an additional 2,000 units each quarter. The 2,000 additional units per quarter are expected to continue through the end of 2nd quarter of 2025. The 2023 4th quarter sales were 24,000 units. Selling price for one unit of ice cream is $15. Bloomfield maintains 15% of the next quarter’s unit sales in ending inventory. All sales to retail stores are on account, with collections of 75% made in the quarter of sales and 25% collected in the quarter after sale. Accounts receivable on December 31, 2023 is $72,000.   Direct Materials Direct materials cost $3 per pound. 1.5 pounds of…

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Utah Utensil has developed a new kitchen utensil. The firm has conducted significant market research and estimated the following pattern for sales of the new product: Year Expected Volume (Units) Expected Price per Unit 1 41,280 $19 2 48,000 20 3 90,000 16 4 34,400 12 The firm wants to net a minimum of $3.50 per unit in profit over the product’s life, and selling and administrative expenses are expected to average $43,000 per year. Calculate the life cycle target cost per unit to produce the new utensil. Note: Round your answer to two decimal places (i.e., round 2.4555 to 2.46). $

Current Attempt in Progress     Concord Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2022, and relevant budget data are as follows.     Actual   Comparison with Budget Sales   $1,400,000   $101,000  favorable Variable cost of goods sold   680,000   55,000  unfavorable Variable selling and administrative expenses   124,000   24,000  unfavorable Controllable fixed cost of goods sold   169,000   On target   Controllable fixed selling and administrative expenses   79,000   On target   Average operating assets for the year for the Home Division were $2,000,000, which was also the budgeted amount. (a)     Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 2 decimal places, e.g. 1.57%.) CONCORD COMPANYHome…

As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you've been asked to do some what-if analyses. Following is the budgeted information regarding the coming year: Selling price per unit Variable cost per unit Fixed costs (per year) $ 100.00 70.00 1,200,000 Required: 1. What is the breakeven volume, in units and dollars, for the coming year? 2. Assume that the goal of the company is to earn a pretax (operating) profit of $300,000 for the coming year. How many units would the company have to sell to achieve this goal? 3. Assume that of the $70 variable cost per unit the labor-cost component is $25. Current negotiations with the employees of the company indicate some uncertainty regarding the labor cost component of the variable cost figure presented above. What is the effect on the breakeven point in units if selling price and fixed costs are as planned, but the labor cost for the coming year is…

5. Capital budgeting and the post-audit process Cramer Designs produces a wide range of women’s apparel. Three years ago, the company spent $1.2 million to launch its line of designer handbags. Brittany Cramer, the company’s CEO and founder, is conducting a post-audit on the handbag line to determine how the division’s performance compared to the company’s expectations. She has found that the revenue from the handbag division was much lower than expected; however, the company was able to produce the handbags for a much lower cost per unit than expected. Which of the following should be considered the main purpose(s) of the post-audit? Check all that apply. A. It helps improve operations.   B. It encourages managers to generate reasonable forecasts.   C. It helps project the firm’s tax liability.     When a firm a exhausts its retained earnings and must raise capital from external sources, its weighted average cost of capital (WACC) will   _________ .

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Capital budgeting GAP, a retail chain, is considering buying a registered software from Microsoft so that it can more effectively deal with its retail sales. The software costs $750,000 and will be depreciated down to zero using the straight-line method over its five-year economic life. The marketing department predicts the sales will be $600,000 per year for the next three years, after which the market will cease to exist. The cost of one unit sold and operating expenses are predicted to be 25% of sales. After three years the software can be sold for $400,000. The GAP also needs to add net working capital of $25,000 immediately and maintain it for the next two years. The corporate tax rate is 35%. a) Compute the unlevered net income (EBIT minus taxes), and the free cash flows. Remember to consider the recovery value for the software program, and the tax benefit or cost. (Assume that GAP has other profitable businesses such that tax benefits become effective.) [25%] 3 Continued…

As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you've been asked to do some what-if analyses. Following is the budgeted Information regarding the coming year: Selling price per unit Variable cost per unit Fixed costs (per year) Required: $ 100.00 60.00 1,113,040 1. What is the breakeven volume, in units and dollars, for the coming year? 2. Assume that the goal of the company is to earn a pretax (operating) profit of $316,000 for the coming year. How many units would the company have to sell to achieve this goal? 3. Assume that of the $60 variable cost per unit the labor-cost component is $27. Current negotiations with the employees of the company indicate some uncertainty regarding the labor cost component of the variable cost figure presented above. What is the effect on the breakeven point in units if selling price and fixed costs are as planned, but the labor cost for the coming year is…

Using ROI and RI to evaluate investment centers XTreme Sports Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and inline skates. The company has found it beneficial to split operations into two divisions based on the climate required for the sport: Snow Sports and Non-snow Sports. The following divisional information is available for the past year: XTreme’s management has specified a 13% target rate of return. Calculate each division’s profit margin ratio. Interpret your results.

Return on Investment and Investment Decisions Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product-a weather radio that would put out a warning if the county in which the listener lived were under a severe thunderstorm or tornado alert. The budgeted income of the division was $825,000 with operating assets of $4,525,000. The proposed investment would add income of $640,000 and would require an additional investment in equipment of $4,000,000. The minimum required return on investment for the company is 12%. Required: 2. Compute the residual income of the following: a. The division if the radio project is not undertaken. $ b. The radio project alone. $ c. The division if the radio project is undertaken. 3. This depends on whether Leslie's division is evaluated on the basis of ROI or on the basis of residual income. Overall division ROI wills decrease ; so if ROI is the basis for evaluation, she will decline the investment. On the other hand,…

Return on Investment and Investment Decisions Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product-a weather radio that would put out a warning if the county in which the listener lived were under a severe thunderstorm or tornado alert. The budgeted income of the division was $825,000 with operating assets of $4,525,000. The proposed investment would add income of $640,000 and would require an additional investment in equipment of $4,000,000. The minimum required return on investment for the company is 12%. Required: 1. Compute the ROI of the following (round to the nearest whole percent): a. The division if the radio project is not undertaken. % b. The radio project alone. 0% c. The division if the radio project is undertaken. % 2. Compute the residual income of the following: a. The division if the radio project is not undertaken. b. The radio project alone. $ c. The division if the radio project is undertaken. 3. This depends on whether…

Edward Food Processing Company is a wholesale distributor of biscuits in Holborn. The Company has achieved steady growth over the past few years while Biscuit prices have been on the increase. The Company is planning its budget for the next financial year. Presented below are the data used to project the current year’s after- tax income of $110,400.                                                                                                         £ Average Sales Price per Box                                                      4.00 Average variable costs per BoxCost of Biscuits                                                                           2.00 Profit on sale                                                                               0.40Total                                                                                            2.40 Annual fixed cost Selling…

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Activity Capacity Management Uchdorf Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year: Activity supply: five purchasing agents capable of processing 2,400 orders per year (12,000 orders) Purchasing agent cost (salary): $45,600 per year Actual usage: 10,600 orders per year Value-added quantity: 7,000 orders per year Required: 1. Calculate the volume variance. $fill in the blank 12. Calculate the unused capacity variance. $fill in the blank 3 3. What if the actual usage drops to 9,000 orders? What effect will this have on capacity management? $fill in the blank 5

Check my work As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you've been asked to do some what-if analyses. Following is the budgeted information regarding the coming year: Selling price per unit Variable cost per unit Fixed costs (per year) Required: $ 100.00 63.00 1,227,327 1. What is the breakeven volume, in units and dollars, for the coming year? 2. Assume that the goal of the company is to earn a pretax (operating) profit of $332,001 for the coming year. How many units would the company have to sell to achieve this goal? 3. Assume that of the $63 variable cost per unit the labor-cost component is $29. Current negotiations with the employees of the company indicate some uncertainty regarding the labor cost component of the variable cost figure presented above. What is the effect on the breakeven point in units if selling price and fixed costs are as planned, but the labor cost for the…

A sports nutrition company is examining whether a new high-performance sports drink should be added to its product line. A preliminary feasibility analysis indicated that the company would need to invest $1 7.5 million in a new manufacturing facility to produce and package the product. A financial analysis using sales and cost data supplied by marketing and production personnel indicated that the net cash flow (cash inflows minus cash outflows) would be $6.1 million in the first year of commercialization, $7.4 million in year 2, $7 .0 million in year 3, and $ 5. 5 million in year 4. Senior company executives were undecided whether to move forward with the development of the new product. They requested that a discounted cash flow analysis be performed using two different discount rates: 20 percent and 15 percent. a. Should the company proceed with development of the product if the discount rate is 20 percent? Why? b. Does the decision to proceed with development of the…