Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 8, Problem 10CE
Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of $15.9 million and cost of goods sold of $8.75 million. Advertising is a key part of Coral Seas’ business strategy, and total marketing expense for the year is budgeted at $2.8 million. Total administrative expenses are expected to be $675,000. Coral Seas has no interest expense. Income taxes are paid at the rate of 40 percent of operating income.
Required:
- 1. Construct a
budgeted income statement for Coral Seas Jewelry Company for the coming year. - 2. What if Coral Seas had interest payments of $500,000 during the year? What effect would that have on operating income? On income before taxes? On net income?
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Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of $16,300,000 and cost of goods sold of $8,965,000. Advertising is a key part of Coral Seas' business strategy, and total marketing expense for the year is budgeted at $2,934,000. Total administrative expenses are expected to be $652,000. Coral Seas has no interest expense. Income taxes are paid at the rate of 40 percent of operating income.
Required:
Question Content Area
1. Construct a budgeted income statement for Coral Seas Jewelry Company for the coming year.
Coral Seas Jewelry CompanyBudgeted Income StatementFor the Coming Year
$Sales
Less: Cost of goods sold
Gross margin
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Less:
$- Select -
- Select -
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Operating income
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$- Select -
Question Content Area
2. What if Coral Seas had interest payments of…
Top executive officers of Zachary Company, a merchandising firm, are preparing the next year's budget. The controller has provided
everyone with the current year's projected income statement.
Sales revenue
Cost of goods sold
Gross profit
Selling & administrative expenses
Net income
Cost of goods sold is usually 75 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus
a fixed cost of $80,000. The president has announced that the company's goal is to increase net income by 15 percent.
Required
The following items are independent of each other:
a. Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal?
b. The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production
manager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma income
statement still assuming the…
Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of $16,100,000 and cost of goods sold of $8,855,000. Advertising is a key part of Coral Seas' business strategy, and total marketing expense for the year is budgeted at $2,898,000. Total administrative expenses are expected to be $644,000. Coral Seas has no interest expense. Income taxes are paid at the rate of 40 percent of operating income.
Required:
Question Content Area
1. Construct a budgeted income statement for Coral Seas Jewelry Company for the coming year.
Coral Seas Jewelry CompanyBudgeted Income StatementFor the Coming Year
$- Select -
- Select -
Gross margin
$fill in the blank ade044f46060001_5
Less:
$- Select -
- Select -
- Select -
Operating income
$fill in the blank ade044f46060001_11
- Select -
$- Select -
Question Content Area
2. What if Coral Seas had interest payments of $483,000…
Chapter 8 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 8 - Define budget. How are budgets used in planning?Ch. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - What is the master budget? An operating budget? A...Ch. 8 - Explain the role of a sales forecast in budgeting....Ch. 8 - All budgets depend on the sales budget. Is this...Ch. 8 - What is an accounts receivable aging schedule? Why...Ch. 8 - Suppose that the vice president of sales is a...Ch. 8 - Suppose that the controller of your companys...Ch. 8 - Prob. 10DQ
Ch. 8 - Prob. 11DQCh. 8 - Discuss the shortcomings of the traditional master...Ch. 8 - Define static budget. Give an example that shows...Ch. 8 - What are the two meanings of a flexible budget?...Ch. 8 - What are the steps involved in building an...Ch. 8 - FlashKick Company manufactures and sells soccer...Ch. 8 - Refer to Cornerstone Exercise 8.1, through...Ch. 8 - Refer to Cornerstone Exercise 8.2 for the...Ch. 8 - Prob. 4CECh. 8 - Johnston Company cleans and applies powder coat...Ch. 8 - Play-Disc makes Frisbee-type plastic discs. Each...Ch. 8 - Refer to Cornerstone Exercise 8.6. Required: 1....Ch. 8 - Timothy Donaghy has developed a unique formula for...Ch. 8 - Green Earth Landscaping Company provides monthly...Ch. 8 - Coral Seas Jewelry Company makes and sells costume...Ch. 8 - Shalimar Company manufactures and sells industrial...Ch. 8 - Khloe Company imports gift items from overseas and...Ch. 8 - Nashler Company has the following budgeted...Ch. 8 - Refer to Cornerstone Exercise 8.13. In March,...Ch. 8 - Palmgren Company produces consumer products. The...Ch. 8 - Prob. 16ECh. 8 - Crescent Company produces stuffed toy animals; one...Ch. 8 - Audio-2-Go, Inc., manufactures MP3 players. Models...Ch. 8 - Tiger Drug Store carries a variety of health and...Ch. 8 - Rosita Flores owns Rositas Mexican Restaurant in...Ch. 8 - Prob. 21ECh. 8 - Janet Wooster owns a retail store that sells new...Ch. 8 - Historically, Ragman Company has had no...Ch. 8 - Del Spencer is the owner and founder of Del...Ch. 8 - Refer to Exercise 8.24. Del Spencers purchases...Ch. 8 - Ingles Corporation is a manufacturer of tables...Ch. 8 - In an attempt to improve budgeting, the controller...Ch. 8 - Refer to Exercise 8.27. At the end of the year,...Ch. 8 - Olympus, Inc., manufactures three models of...Ch. 8 - Refer to Exercise 8.29. Suppose Gene determines...Ch. 8 - Trumbull Co. plans to produce 100,000 toy cars...Ch. 8 - Which of the following describes the order in...Ch. 8 - A companys controller is adjusting next years...Ch. 8 - A companys sales for the coming months are as...Ch. 8 - The budget that adjusts unit sales for beginning...Ch. 8 - Ponderosa, Inc., produces wiring harness...Ch. 8 - Bernard Creighton is the controller for Creighton...Ch. 8 - Greiner Company makes and sells high-quality glare...Ch. 8 - Prob. 39PCh. 8 - The controller for Muir Companys Salem plant is...Ch. 8 - Refer to Problem 8.40 for data. Required: 1. Run a...Ch. 8 - Norton Company, a manufacturer of infant furniture...
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