Required information [The following information applies to the questions displayed below.] The following information is available for Fairmount Industries from year 1 operations: Sales revenue (51,000 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits (losses) $ 1,640,000 $ 246,000 551,000 333,000 166,000 177,000 47,000 168,000 18,000 $ 1,706,000 $ (66,000) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $28,000 will be fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent. Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or administrative depreciation.
Required information [The following information applies to the questions displayed below.] The following information is available for Fairmount Industries from year 1 operations: Sales revenue (51,000 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits (losses) $ 1,640,000 $ 246,000 551,000 333,000 166,000 177,000 47,000 168,000 18,000 $ 1,706,000 $ (66,000) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $28,000 will be fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent. Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or administrative depreciation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please solve both parts with explanation , computation , steps answer in text please show clearly calculations for numbers
![Required information
[The following information applies to the questions displayed below.]
The following information is available for Fairmount Industries from year 1 operations:
Sales revenue (51,000 units)
Manufacturing costs
Materials
Variable cash costs
Fixed cash costs
Depreciation (fixed)
Marketing and administrative costs
Marketing (variable, cash)
Marketing depreciation
Administrative (fixed, cash)
Administrative depreciation
Total costs
Operating profits (losses)
$ 1,640,000
$ 246,000
551,000
333,000
166,000
177,000
47,000
168,000
18,000
$ 1,706,000
$ (66,000)
All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $28,000 will be
fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to
specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a
per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will
increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent.
Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or
administrative depreciation.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5951bbf6-4ca5-44eb-8ed4-69cc07205cd6%2Fdba381d6-7c2b-4718-b55b-e2ae2e2402be%2F4b8nj4n_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
The following information is available for Fairmount Industries from year 1 operations:
Sales revenue (51,000 units)
Manufacturing costs
Materials
Variable cash costs
Fixed cash costs
Depreciation (fixed)
Marketing and administrative costs
Marketing (variable, cash)
Marketing depreciation
Administrative (fixed, cash)
Administrative depreciation
Total costs
Operating profits (losses)
$ 1,640,000
$ 246,000
551,000
333,000
166,000
177,000
47,000
168,000
18,000
$ 1,706,000
$ (66,000)
All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $28,000 will be
fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to
specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a
per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will
increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent.
Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or
administrative depreciation.
Transcribed Image Text:Required:
Required:
Prepare a budgeted income statement for year 2.
Estimate the cash from operations expected in year 2.
Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts. Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts
Fairmount Industries
Budgeted Income Statement
For Year 2
Sales revenue
Manufacturing costs:
Materials
Variable cash costs
Fixed cash costs
Total manufacturing costs
Marketing and administrative costs:
Marketing (variable, cash)
Administrative (fixed, cash)
Total marketing and administrative costs
Total costs
Operating profit
$
$
$
0
0
0
Fairmount Industries
Cash Basis Budgeted Income Statement
For Year 2
Manufacturing costs:
Total manufacturing costs
Marketing and administrative costs:
Total cash marketing and administrative costs
Total cash costs
$
$
$
0
0
0
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