[The following information applies to the questions displayed below.j The following information is available for Fairmount Industries from year 1 operations: Sales revenue (47,000 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) $ 1,615,000 $ 242,000 547,000 329,000 162,000 173,000 43,000 164,000 16,000 $ 1,676,000 $ (61,000) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $24,000 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.

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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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 (47,000 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)
$ 1,615,000
$ 242,000
547,000
329,000
162,000
173,000
43,000
164,000
16,000
$ 1,676,000
$ (61,000)
All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $24,000 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 information [The following information applies to the questions displayed below.] The following information is available for Fairmount Industries from year 1 operations: Sales revenue (47,000 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) $ 1,615,000 $ 242,000 547,000 329,000 162,000 173,000 43,000 164,000 16,000 $ 1,676,000 $ (61,000) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $24,000 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.
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
$
GA
$
$
0
0
Transcribed Image Text: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 $ GA $ $ 0 0
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