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The following information is available for Fairmount Industries from year 1 operations: Sales revenue (64,000 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) $ 1,730,000 $ 259,000 564,000 346,000 179,000 190,000 60,000 181,000 24,500 $ 1,803,500 $ (73,500) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $41,000 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: 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. Fairmount Industries Cash Basis Budgeted Income Statement Manufacturing costs: For Year 2 Total manufacturing costs $ 0 Marketing and administrative costs: Total cash marketing and administrative costs $ 0 Total cash costs S 0

The following information is available for Fairmount Industries from year 1 operations: Sales revenue (64,000 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) $ 1,730,000 $ 259,000 564,000 346,000 179,000 190,000 60,000 181,000 24,500 $ 1,803,500 $ (73,500) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $41,000 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: 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. Fairmount Industries Cash Basis Budgeted Income Statement Manufacturing costs: For Year 2 Total manufacturing costs $ 0 Marketing and administrative costs: Total cash marketing and administrative costs $ 0 Total cash costs S 0

FINANCIAL ACCOUNTING
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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The following information is available for Fairmount Industries from year 1 operations: Sales revenue (64,000 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) $ 1,730,000 $ 259,000 564,000 346,000 179,000 190,000 60,000 181,000 24,500 $ 1,803,500 $ (73,500) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $41,000 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: 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. Fairmount Industries Cash Basis Budgeted Income Statement Manufacturing costs: For Year 2 Total manufacturing costs $ 0 Marketing and administrative costs: Total cash marketing and administrative costs $ 0 Total cash costs S 0
Transcribed Image Text:The following information is available for Fairmount Industries from year 1 operations: Sales revenue (64,000 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) $ 1,730,000 $ 259,000 564,000 346,000 179,000 190,000 60,000 181,000 24,500 $ 1,803,500 $ (73,500) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $41,000 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: 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. Fairmount Industries Cash Basis Budgeted Income Statement Manufacturing costs: For Year 2 Total manufacturing costs $ 0 Marketing and administrative costs: Total cash marketing and administrative costs $ 0 Total cash costs S 0
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