Crane, LLC is a small company that sells decorative picture frames from local artisans. John, the chief financial officer (CFO), is in the process of compiling a Budgeted Income Statement for 2024 so that the company can apply for a loan at the local bank. John has budgeted for sales of 6,300 mugs at a sales price of $15.00 per mug. The company originally paid $5.00 per mug when it acquired them. The company has selling, general & admin (SG&A) expenses of $47,600 and an existing loan of $7,500 with an annual percentage rate (APR) of 3.0%. The tax rate is a flat 21%.

Crane, LLC is a small company that sells decorative picture frames from local artisans. John, the chief financial officer (CFO), is in the process of compiling a Budgeted Income Statement for 2024 so that the company can apply for a loan at the local bank. John has budgeted for sales of 6,300 mugs at a sales price of $15.00 per mug. The company originally paid $5.00 per mug when it acquired them. The company has selling, general & admin (SG&A) expenses of $47,600 and an existing loan of $7,500 with an annual percentage rate (APR) of 3.0%. The tax rate is a flat 21%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

2. Patterson Co. values, advertises and sells residential property on behalf of the customers. The co. has been in business for only a short time and is preparing a cash budget for the first four months of 2016. Expected sales of residential properties are as follows: 2016 Year Month Unit Sold 2015 December 10 January 10 2016 February 15 2016 Page 8 of 10 March 25 2016 April 30 The average price of each property is $180,000 and Patterson Co. charges a fee of 3% of the value of each property sold. Patterson Co. receives 1% in the month of sales and the remaining 2% in the month after sales. The Company has nine employees who are paid on a monthly basis. The average salary per employees is $35,000 per year. If more than 20 properties are sold in a given month, each employee is paid in that month a bonus of $140 for each additional property sold. Variable expenses are incurred at the rate of 0.5% of the value of each property sold and these expenses are paid in the month of sales. Fixed…
Another team member who is preparing the Budgeted Balance Sheet for the business for the same quarter ending March 31, 2023 and has asked you to furnish him with the figures for the expected trade receivables and payables to be included in the statement. Is that a reasonable request? If ves, what should these amounts be?
Sanjana's Sweet Shoppe operates on the boardwalk of a New England coastal town. The store only opens for the summer seaso the business is heavily dependent on the weather and the economy in addition to new competition. Sanjana Sweet, the owner, prepares a budget each year after reading long-term weather forecasts and estimates of summer tourism. The budget is a first ste planning whether she will need any loans and whether she needs to consider adjustments to store staffing. Based on expertise ar experience, she develops the following. Scenario Good Fair Poor Gross Margin per Customer (Price Cost of Poor Fair Good Poor Fair Good Poor Fair Good Sanjana assumes, for simplicity, that the gross margin and the estimated number of customers are independent. Thus, she has nine possible scenarios. In addition to the cost of the products sold, Sanjana estimates staffing costs to be $31,000 plus $2 for every customer in excess of 26,000. The marketing and administrative costs are estimated to be…
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 $40,000 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 12,000 units per month in February, April, and May and at 9,000 units in March. The selling price is $60 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 2,400 units. The desired finished goods inventory at the end of each month equals 25 percent of sales anticipated for the…
Boris runs a small manufacturing operation, producing and selling machine parts to European companies. At the start of April, his bank account had an overdrawn bank balance of $2,500. His bank has asked him to produce a budgeted bank balance for the end of April. Boris estimates that his customers will pay him $41,000 of what is owed while he will pay his suppliers $26,000 during the month. What is Boris's budgeted bank account balance at the end of April? $17,500 overdrawn $12,500 overdrawn $12,500 positive balance $17,500 positive balance
Prepare schedules for cash receipts and cash payments, and determine the ending balances for the relevant balance sheet accounts. E10.30 (LO 4, 5) Service Environmental Landscaping Inc. is preparing its budget for the first quarter of 2022. The next step is to prepare a cash receipts schedule and a cash payments schedule. The following information has been collected: 1. Clients usually pay 50% of their fee in the month when the service is provided, 40% the next month, and 10% in the second month after receiving the service. 2. Actual service revenues for 2021 and expected service revenues for 2022 are as follows: November 2021, $90,000; December 2021, $70,000; January 2022, $110,000; February 2022, $120,000; and March 2022, $130,000. 3. The company pays for purchases of landscaping supplies (direct materials) 60% in the month of purchase and 40% the following month. Actual purchases for 2021 and expected purchases for 2022 are: December 2021, $14,000; January 2022, $13,000; February…
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 $60,000 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 22,000 units per month in February, April, and May and at 19,000 units in March. The selling price is $70 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 3,400 units. The desired finished goods inventory at the end of each month equals 25 percent of sales anticipated for the…
Top executive officers of Zachary Company, a merchandising firm, are preparing the next year's budget. The controller has provided everyone with the current year's projected income statement. Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Cost of goods sold is usually 75 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $80,000. The president has announced that the company's goal is to increase net income by 15 percent. Required The following items are independent of each other: a. Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal? b. The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma income statement still assuming the…
Flora’s Flats produces comfortable and portable women’s shoes designed to be worn as a second pair of shoes after a formal event. The company has the following financial information: The company’s sales price is $20 per unit. The variable costs of producing flats is $6 per unit. The company expects to have fixed costs of $10,000 next year. The company expects to sell 1,000 pairs of flats next year. Assume no taxes a. Prepare a budgeted contribution format income statement. b. Compute the margin of safety in both dollar and percentage terms. c. Compute the degree of operating leverage. d. If sales increase by 20% in the following year, how much would net income increase (use the degree of operating leverage to compute your answer).
BTB (Pty) Limited is a distributor of PPE to rural health clinics in KZN. Turnover has been good and running expenses are under control, however the owner of the business, Mr Sam Jonas, is concerned that upcoming legal expenses and necessary vehicle repairs may negatively affect the business’ cash flow. He has hired you to prepare a cash budget for the next four months, from July to October 2022. All sales are made on credit and collected as follows: • 40% in the month of the sale; • 35% in the month after the sale; • 15% in the second month after the sale; • 10% will be written off as bad debts. All purchases are made on credit and paid for as follows: • 60% in the month of the purchase and • 40% in the month after the purchase. Total administration expenses (rent, rates stationary etc) will be R14 000 per month. The legal costs will be R34 000 in each of July and August 2022. Major repairs and maintenance to vehicles will cost R45 000 and this amount will be paid in three equal…
CarniTrin is a manufacturer of Carnival costumes in a highly competitive market. The company's management team is seeking guidance on the use of financial performance measures to identify the key drivers of the company's financial performance and develop a strategy to improve it. The following data relate to the company for the year 2022: In its clothing division, the company has $6,000,000 invested in assets. After-tax operating income from sales of clothing in 2022 is $900,000. Income for the clothing division has grown steadily over the last few years. The cosmetics division has $14,000,000 invested in assets and an after-tax operating income in 2022 of $1,900,000. The weighted-average cost of capital for CarniTrin is 10% and the 2021’s after-tax return on investment for each division was 15%. The general manager of CarniTrin has asserted that in the future, managers should have their compensation structure aligned with their performance measures with no fixed salaries. However,…
David works for Wool garments company as a production manager. He often participates in the annual budgeting process of the company. David is requested by the Chief Executive Officer Linda to submit his department’s budgeted production for the following year. Linda reviews and typically adds 10 percent to the production budget provide by David. The new amount becomes David’s target production level for the following year. David can receive a cash bonus if his department exceeds the projected production level. 2. Explain the impact David’s inaccurate production estimates could have on other company departments or employees.