Answered: This comment is given by a small…

This comment is given by a small company president : “budgeting is a waste of time.i’ve been running this business for 40 years. I don’t need to plan”discuss.

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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You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Cost FormulaActual Cost in MarchUtilities$17,000 + $0.12 per machine-hour$ 21,080Maintenance$38,500 + $1.30 per machine-hour$ 57,000Supplies$0.60 per machine-hour$ 11,200Indirect labor$94,500 + $1.60 per machine-hour$ 125,800Depreciation$68,300$ 70,000 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000 machine-hours during March. Required:1.…
Discuss this comment by a small-town bank president:“Budgeting is a waste of time. I’ve been running this business for 40 years. I don’t need to plan.”
Hackshaw Co. was formed three years ago by Glenn Holding. It started as a very small company but began to expand rapidly. With the growth in the company, the owner decided to implement a formal budgetary control process. Glenn Holding provided some data and projections to the company’s Accountant which the Accountant used to prepare the master budget for the company. The master budget was then broken down into departmental budgets. These departmental budgets were distributed to the department managers with a cover letter explaining the new budgeting system and requesting the support of everyone in achieving the targets. Most of the department managers were displeased with the budget. They felt that the targets were not realistically attainable. Outline to the Managers of Hackshaw what is Budgeting and why Budgetary Control is vital to the success of the organization.
Your department head wants you to perform a cost analysis and provide data to the CFO next week. The budget information below comes directly from your accounting department and the figures are correct, however you know that your CFO's time is important and she often asks for ratios that are not calculated by your accounting department. Your department head has challenged you to present common ratios as he wants to mentor you for a potential assistant director position. Your figures need to be specific and accurate. Since you do not know "exactly" which figures to present, you decided to cover the Eight Basic Ratios Used in Health Care. This way, you can answer any question intelligently. Use the data listed below to calculate (show your work) each of the Eight Basic Ratios Used in Health Care. Explain for each ratio what your answer means to the company. (You should have 8 explanations.) Current Assets = $18,000,542.00 Current Liabilities = $12,240,543.00 Cash & Cash…
You recently began a job as an accounting intern at Raymond Adventures. Your first task was to help prepare the cash budget for February and March. Unfortunately, the computer with the budget file crashed, and you did not have a backup or even a hard copy. You ran a program to salvage bits of data from the budget file. After entering the following data in the budget, you may have just enough information to reconstruct the budget. Raymond Adventures eliminates any cash deficiency by borrowing the exact amount needed from State Street Bank, where the current interest rate is 8%. Raymond Adventures pays interest on its outstanding debt at the end of each month. The company also repays all borrowed amounts at the end of the month as cash becomes available. Complete the following cash budget: Raymond Adventures Cash Budget February and March…
Vaughn Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year. Revenues Direct materials costs Direct labor costs. Overhead costs Operating income (loss) Revenues Direct materials costs Direct labor costs. Overhead costs Operating income (loss) Activity Cost Pools Scheduling and travel Setup time Supervision The controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a more accurate…
he Pacific Division of Cullumber Industries reported the following data for the current year. Sales $4,179,930 Variable costs 2,625,000 Controllable fixed costs 825,000 Average operating assets 5,034,000 Top management is unhappy with the investment center’s return on investment. It asks the manager of the Pacific Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 1. Increase sales by $425,000 with no change in the contribution margin percentage. 2. Reduce variable costs by $145,986. 3. Reduce average operating assets by 4% (a) Compute the return on investment for the current year. (Round answers to 1 decimal place, e.g. 52.7%.) Return on investment enter the return on investment in percentages %
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Cost Formula Actual Cost in March Utilities $20,600 + $0.10 per machine-hour $ 24,200 Maintenance $40,000 + $1.60 per machine-hour $ 78,100 Supplies $0.30 per machine-hour $ 8,400 Indirect labor $130,000 + $0.70 per machine-hour $ 149,600 Depreciation $70,000 $ 71,500 During March, the company worked 26,000 machine-hours and produced 15,000 units. The company had originally planned to work 30,000…
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Cost Formula Actual Cost in March Utilities $16,600 + $0.11 per machine-hour $ 20,270 Maintenance $38,300 + $1.50 per machine-hour $ 57,600 Supplies $0.80 per machine-hour $ 13,400 Indirect labor $94,600 + $1.80 per machine-hour $ 126,100 Depreciation $68,000 $ 69,700 During March, the company worked 15,000 machine-hours and produced 9,000 units. The company had originally planned to work 17,000…
You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control. After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March: Cost Formula Actual Cost in March Utilities $16,200 + $0.14 per machine-hour $ 20,660 Maintenance $38,300 + $1.60 per machine-hour $ 62,500 Supplies $0.30 per machine-hour $ 5,500 Indirect labor $94,700 + $2.10 per machine-hour $ 135,500 Depreciation $68,100 $ 69,800 During March, the company worked 17,000 machine-hours and produced 11,000 units. The company had originally planned to work 19,000…
Executive officers of Adams Company are wrestling with their budget for the next year. The following are two different sales estimates provided by two difference sources. Source of Estimate First Quarter Second Quarter Third Quarter Fourth Quarter Sales manager $ 378,000 $ 316,000 $ 271,000 $ 480,000 Marketing consultant 512,000 469,000 403,000 648,000 Adams’s past experience indicates that cost of goods sold is about 60 percent of sales revenue. The company tries to maintain 15 percent of the next quarter’s expected cost of goods sold as the current quarter’s ending inventory. This year’s ending inventory is $30,000. Next year’s ending inventory is budgeted to be $31,000. Required Prepare an inventory purchases budget using the sales manager’s estimate. Prepare an inventory purchases budget using the marketing consultant’s estimate.
The management of Furrow Corporation is considering dropping product L07E. Data from the company’s budget for the upcoming year appear below: Sales $ 980,000 Variable expenses $ 383,000 Fixed manufacturing expenses $ 365,000 Fixed selling and administrative expenses $ 245,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $223,000 of the fixed manufacturing expenses and $184,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be: Multiple Choice $(13,000) $13,000 $(190,000) $190,000