Chapter IE, Problem 12IE

Master Budgeting, Statement of Cash Flows, Ratio Analysis, Cost-Volume-Profit Relationships, Variable Costing

Refer to the information pertaining to Endless Mountain Company that is provided in Integration Exercise 8 as well as the schedules that you prepared in answering Integration Exercises 8 through 11.

Required:

1. Assume that the company expects to collect all of its credit sales in the quarter of sale rather than the original assumption that it will collect 75% of credit sales in the quarter of sale and the remaining 25% in the subsequent quarter. Without changing any of the underlying assumptions in your budgeting assumptions tab, calculate the following revised figures

related to the 2017 budget:

a. Net income (absorption basis).

b. Accounts receivable turnover.

c. Net cash provided by operating activities.

2. Go to the Budgeting Assumptions tab in your Microsoft Excel worksheet. Change the percentage of sales that are collected in the quarter of sale to 100% and the percentage of sales that are collected in the quarter after sale to 0%. Do your answers to la through 1c match the numbers that appear in your Excel worksheet? If not. why?
3. Refer to the original budgeting assumptions from Integration Exercise 8. Assume that the company expects to pay its direct laborers $19 per hour instead of the original estimate of $ 18 per hour. Without changing any of the underlying assumptions in your budgeting assumptions tab, calculate the following revised figures related to the 2017 budget:

a. Ending finished goods inventory at December 31. 2017.

b. The Break-Even point in unit sales.

c. Variable costing net operating income.

4. Go to the Budgeting Assumptions tab in your Microsoft Excel worksheet. Change the direct labor cost per hour from $18 to $19. Do your answers to 3a through 3c match the numbers that appear in your Excel worksheet? If not, why?