15. Texas Company has begun selling new chili recipe and they want you to help with next year's budgeted financial statements. Using the worksheet below, complete Texas Company forecast and answer the questions which follow. Assumptions: To begin with, Texas Company is sure sales will grow 40% next year. Assume that is true. Then assume that COGS, Current Assets, and Current Liabilities all vary directly with Sales (that means if sales grow a certain percentage, then the account in question will grow by that same percentage). Assume that fixed expenses will remain unchanged, and that $3,000 worth Lastly, the current dividend policy will be continued next year. new Fixed Assets will be obtained next year. Texas Company Financial Forecast Estimated This Year for next year $45,000 $5,000 40,000 Sales COGS Gross Profit Fixed Expenses 3,000 Before-Tax Profit 37,000 Tax @ 33.3333% Net Profit 12.332 24,668 Dividends $0 Current Assets $30,000 20,000 $50,000 Net Fixed Assets Total Assets $18,000 3,000 9,000 13,000 $43,000 Current Liabilities Long-term debt Common Stock Retained Earnings Total Liabilities $ Equity Amounts need to balance the balance sheet (Projected total assets minus projected total liabilities & equity*)_ *If this number is positive, it means Texas Company need additional external funding to finance their projected asset growth. If this number is negative, then it means Texas Company has programmed too much financing for the amount of assets they project.
15. Texas Company has begun selling new chili recipe and they want you to help with next year's budgeted financial statements. Using the worksheet below, complete Texas Company forecast and answer the questions which follow. Assumptions: To begin with, Texas Company is sure sales will grow 40% next year. Assume that is true. Then assume that COGS, Current Assets, and Current Liabilities all vary directly with Sales (that means if sales grow a certain percentage, then the account in question will grow by that same percentage). Assume that fixed expenses will remain unchanged, and that $3,000 worth Lastly, the current dividend policy will be continued next year. new Fixed Assets will be obtained next year. Texas Company Financial Forecast Estimated This Year for next year $45,000 $5,000 40,000 Sales COGS Gross Profit Fixed Expenses 3,000 Before-Tax Profit 37,000 Tax @ 33.3333% Net Profit 12.332 24,668 Dividends $0 Current Assets $30,000 20,000 $50,000 Net Fixed Assets Total Assets $18,000 3,000 9,000 13,000 $43,000 Current Liabilities Long-term debt Common Stock Retained Earnings Total Liabilities $ Equity Amounts need to balance the balance sheet (Projected total assets minus projected total liabilities & equity*)_ *If this number is positive, it means Texas Company need additional external funding to finance their projected asset growth. If this number is negative, then it means Texas Company has programmed too much financing for the amount of assets they project.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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Transcribed Image Text:15. Texas Company has begun selling new chili recipe and they want you to help with next year's
budgeted financial statements. Using the worksheet below, complete Texas Company forecast and
answer the questions which follow.
Assumptions:
To begin with, Texas Company is sure sales will grow 40% next year. Assume that is true. Then assume
that COGS, Current Assets, and Current Liabilities all vary directly with Sales (that means if sales grow a
certain percentage, then the account in question will grow by that same percentage). Assume that fixed
expenses will remain unchanged, and that $3,000 worth of new Fixed Assets will be obtained next year.
Lastly, the current dividend policy will be continued next year.
Texas Company
Financial Forecast
Estimated
This Year
for next year
$45,000
$5,000
40,000
Sales
COGS
Gross Profit
3,000
37,000
Fixed Expenses
Before-Tax Profit
Tax @ 33.3333%
Net Profit
12.332
24,668
Dividends
$0
Current Assets
$30,000
20,000
$50,000
Net Fixed Assets
Total Assets
Current Liabilities
$18,000
Long-term debt
Common Stock
Retained Earnings
Total Liabilities $ Equity
3,000
9,000
13,000
$43,000
Amounts need to balance the balance sheet
(Projected total assets minus projected total liabilities & equity*)__
*If this number is positive, it means Texas Company need additional external funding to finance their
projected asset growth. If this number is negative, then it means Texas Company has programmed too
much financing for the amount of assets they project.
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