Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates: $1,575,000 Sales revenues (17,500 units) Manufacturing costs Materials Variable cash costs Fixed cash costs $ 281,000 153,000 .000'E8E Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs 000 6 000'961 188,000 $1,454,000 Operating profits 000'IZI $ All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $15,050 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $21,500. Sales volume and prices are expected to increase by 7 percent and 3 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 5 percent and variable manufacturing costs will decrease by 2 percent. Fixed cash manufacturing costs are expected to decrease by 3 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 3 percent. Inventories are kept at zero. Gulf States operates on a cash basis.

Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates: $1,575,000 Sales revenues (17,500 units) Manufacturing costs Materials Variable cash costs Fixed cash costs $ 281,000 153,000 .000'E8E Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs 000 6 000'961 188,000 $1,454,000 Operating profits 000'IZI $ All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $15,050 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $21,500. Sales volume and prices are expected to increase by 7 percent and 3 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 5 percent and variable manufacturing costs will decrease by 2 percent. Fixed cash manufacturing costs are expected to decrease by 3 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 3 percent. Inventories are kept at zero. Gulf States operates on a cash basis.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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