Nancy Company has budgeted sales of $300,000 with the following budgeted costs

Nancy Company has budgeted sales of $300,000 with the following budgeted costs:

Direct materials $60,000
Direct manufacturing labor 40,000
Factory overhead
Variable 30,000
Fixed 50,000
Selling and administrative expenses
Variable 20,000
Fixed 30,000

Question 1: Compute the average markup percentage for setting prices as a percentage of the full cost of the product (5 points)

Question 2: Compute the average markup percentage for setting prices as a percentage of the variable cost of the product (5 points)

Question 3: Compute the average markup percentage for setting prices as a percentage of the variable manufacturing costs (5 points)

Click here for the solution: Nancy Company has budgeted sales of $300,000 with the following budgeted costs

The budget director of Regal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month

The budget director of Regal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for August 2010 is summarized as follows:
a. Estimated sales of King and Prince chairs for August by sales territory:
Northern Domestic:
King.........................5,500 units at $750 per unit
Prince......................6,900 units at $520 per unit

Southern Domestic:
King.........................3,200 units at $690 per unit
Prince......................4,000 units at $580 per unit

International:
King........................1,450 units at $780 per unit
Prince......................900 units at $600 per unit

b. Estimated inventories at August 1:
Direct materials:
Finished Products
Fabric................4,500 sq. yds
King.....................950units
Wood.................6,000 lineal ft.
Prince..................280units
Filler...................2,800 cu, ft
Springs..............6,700 units

c. Desired inventories at August 31:
Direct Materials:
Finished Products:
Fabric..................4300 sq yds
King.............800units
Wood..................6,200 lineal ft.
Prince...........400units
Filler....................3,100 cu. ft
Springs................7,500 units

d. Direct materials used in production:
In manufacture of King:
Fabric..................5.0 sq. yds per unit of product
Wood ..................35 lineal ft. per unit of product
 Filler.................... 3.8 cu ft. per units of product
Springs.................14 units per units of product

In manufacture of Prince:
Fabric...............$12.00 per sq. yd.
Filler..............$3.50 per cu. ft.
Wood................ 8.00 per lineal ft.
Springs........... 4.50 per unit

f. Direct labor requirements:
King:
Framing Department............ 2.5hrs. at $12 per hr.
Cutting Department.............. 1.5 hrs. at $11 per hr.
Upholstery Department.......... 2.4hrs. at $14 per hr.
Prince: Framing Department............ 1.8 hrs. at $12 per hr.
Cutting Department............. 0.5 hrs. at $11 per hr.
Upholstery Department......... 2.0hrs. at $14 per hr.

3.) Prepare a direct materials purchases budget for August.

4.)Prepare a direct labor cost budget for August

Click here for the solution: The budget director of Regal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month

The beginning inventory for Waldo Co and data on purchases and sales for a three-month period are shown in Problem 7-1A

PR 7-2A LIFO Perpetual Inventory

The beginning inventory for Waldo Co and data on purchases and sales for a three-month period are shown in Problem 7-1A.

Instructions
1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the last-in, first-out method.
2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.
3. Determine the ending inventory cost.

Click here for the solution: The beginning inventory for Waldo Co and data on purchases and sales for a three-month period are shown in Problem 7-1A

The budget director of Outdoor Gourmet Grill Company requests estimates of sales, production, and other operating data

The budget director of Outdoor Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July 2010 is summarized as follows:

a. Estimated sales for July by sales territory:
Maine:
Backyard Chef...........................5000 units at $750 per unit
Master Chef..............................1800 units at $1,500 per unit
Vermont:
Backyard Chef..........................4200 units at $800 per unit
Master Chef.............................1600 units at $1,600 per unit
New Hampshire:
Backyard Chef..........................4600 units at $850 per unit
Master Chef.............................1900 units at $1,700 per unit

b. Estimated inventories at July 1:
Direct materials: Finished products:
Grates.....................1000 units Backyard chef........1400 units
Stainless steel...........1800 lbs Master Chef........... 600 units
Burner subassemblies....500 units
Shelves.................... 300 units

c. Desired inventories at July 31:
Direct materials: Finished products:
Grates..................... 800 units Backyard chef........1600 units
Stainless steel........... 2100 lbs Master Chef........... 500 units
Burner subassemblies....550 units
Shelves.................... 350 units

d. Direct materials used in production:
In manufacture of Backyard Chef:
Grates.......................... 3 units per unit of product
Stainless steel................ 20 lbs per unit of product
Burner subassemblies....... 2 units per unit of product
Shelves......................... 5 units per unit of product
In manufacture of Master Chef:
Grates.......................... 6 units per unit of product
Stainless steel................ 45 lbs per unit of product
Burner subassemblies....... 4 units per unit of product
Shelves......................... 6 units per unit of product

e. Anticipated purchase price for direct materials:
Grates.............. $20 per unit Burner subassemblies...... $105 per unit
Stainless steel...... $6 per lb Shelves.........................$7 per unit

f. Direct labor requirements:
Backyard Chef:
Stamping Dept. 0.60 hr at $18 per hr
Forming Dept. 0.80 hr at $14 per hr
Assembly Dept. 1.50 hr at $12 per hr
Master Chef:
Stamping Dept. 0.80 hr at $18 per hr
Forming Dept. 1.50 hr at $14 per hr
Assembly Dept. 2.50 hr at $12 per hr

1. Prepare a sales budget for July.
2. Prepare a production budget for July.
3. Prepare a direct materials purchases budget for July.
4. Prepare a direct labor cost budget for July.

Click here for the solution: The budget director of Outdoor Gourmet Grill Company requests estimates of sales, production, and other operating data

Selected sales and operating data for three divisions of three different companies are given below

Selected sales and operating data for three divisions of three different companies are given below:

Division X Division Y Division Z
Sales $900,000 $750,000 $600,000
Average operating assets $600,000 $150,000 $200,000
Net operating income $54,000 $30,000 $10,000
Minimum required rate of return 10% 16% 8%

a. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. Show computations
b. Compute the residual income for each division. Show computations
c. Under which of these methods would they accept an opportunity with a 15% return. Show computations and details

Click here for the solution: Selected sales and operating data for three divisions of three different companies are given below

Twyla Enterprises uses a word processing computer to handle its sales invoices

ACC 560 Week 5 Assignment

E7-11 Twyla Enterprises uses a word processing computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.

Current Machine New Machine
Original purchase cost $15,000 $25,000
Accumulated depreciation 6,000 ---
Estimated operating costs 24,000 18,000
Useful life 5 years 5 years

If sold now, the current machine would have a salvage value of $5,000. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.

Complete the analysis to determine if the current machine should be replaced.

Click here for the solution: Twyla Enterprises uses a word processing computer to handle its sales invoices

Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000

ACC 560 Week 6 Assignment

P9-3A Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2009.

Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 5% from its 2008 level. Plan B would decrease the selling price per unit by $0.50.The marketing department expects that the sales volume would increase by 150,000 units.

At the end of 2008, Colt has 40,000 units of inventory on hand. If Plan A is accepted, the 2009 ending inventory should be equal to 5% of the 2009 sales. If Plan B is accepted, the ending inventory should be equal to 50,000 units. Each unit produced will cost $1.80 in direct labor, $1.25 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2009 should be $1,895,000.

Instructions
a) Prepare a sales budget for 2009 under each plan
b)Prepare a production budget for 2009 under each plan
c) Compute the production cost per unit under each plan. Why is the cost per unit different for each of the two plans? (Round to two decimals)
d) Which plan should be accepted (Hint: Compute the gross profit under each plan)

Click here for the solution: Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000

(ACC 560 Week 6) Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008)

ACC 560 Week 6 Assignment

E9-3 Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below.

Department Quarter 1 Quarter 2 Quarter 3 Quarter 4
Auditing 2,200 1,600 2,000 2,400
Tax 3,000 2,400 2,000 2,500
Consulting 1,500 1,500 1,500 1,500
Average hourly billing rates are: auditing $80, tax $90, and consulting $100.

Instructions
Prepare the service revenue (sales) budget for 2008 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue.

Click here for the solution: (ACC 560 Week 6) Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008)

Gardner Company currently makes all sales on credit and offers no cash discount

Gardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 2% cash discount for payment within 15 days. The firm’s current average collection period is 60 days, sales are 40,000 units, selling price is $45 per unit, and variable cost per unit is $36. The firm expects that the change in credit terms will result in an increase in sales to 42,000 units, that 70% of the sales will take the discount, and that the average collection period will fall to 30 days. If the firm’s required rate of return on equal-risk investments is 25%, should the proposed discount be offered? (Note: Assume a 365-day year.)


Click here for the solution: Gardner Company currently makes all sales on credit and offers no cash discount

(Evaluating McGraw Industries Capital Structure) McGraw Industries, an established producer of printing equipment, expects its sales to remain flat

McGraw Industries, an established producer of printing equipment, expects its sales to remain flat for the next 3 to 5 years because of both a weak economic outlook and an expectation of little new printing technology development over that period. On the basis of this scenario, the firm’s management has been instructed by its board to institute programs that will allow it to operate more efficiently, earn higher profits, and, most important, maximize share value.

In this regard, the firm’s chief financial officer (CFO), Ron Lewis, has been charged with evaluating the firm’s capital structure. Lewis believes that the current capital structure, which contains 10% debt and 90% equity, may lack adequate financial leverage. To evaluate the firm’s capital structure, Lewis has gathered the data summarized in the following table on the current capital structure (10% debt ratio) and two alternative capital structures—A (30% debt ratio) and B (50% debt ratio)—that he would like to consider.
Capital structure*

Source of capital Current (10% debt) A (30% debt) B (50% debt)
Long-term debt $1,000,000 $3,000,000 $5,000,000
Coupon interest rate** 9% 10% 12%
Common stock 100,000 shares 70,000 shares 40,000 shares
Required return on equity*** 12% 13% 18%

*These structures are based on maintaining the firm’s current level of $10,000,000 of total financing.
**Interest rate applicable to all debt.
***Market-based return for the given level of risk.

Lewis expects the firm’s earnings before interest and taxes (EBIT) to remain at its current level of $1,200,000. The firm has a 40% tax rate.

Use the current level of EBIT to calculate the times interest earned ratio for each capital structure. Evaluate the current and two alternative capital structures using the times interest earned and debt ratios.


Click here for the solution: (Evaluating McGraw Industries Capital Structure) McGraw Industries, an established producer of printing equipment, expects its sales to remain flat

Toyco, a retail toy chain, honors two bank credit cards and makes daily deposits of credit card sales in two credit card bank accounts

12-42 Toyco, a retail toy chain, honors two bank credit cards and makes daily deposits of credit card sales in two credit card bank accounts. (Bank A and Bank B). Each day, Toyco batches its credit card sales slips, bank deposit slips and authorized sales return documents and sends them to data processing for data entry. Each week detailed computer printouts of the general ledger credit card cash accounts are prepared. Credit card banks have been instructed to make an automatic weekly transfer of cash to Toyco's general bank account. The credit card banks charge back deposits that include sales to holders of stolen or expired cards.

The auditor examining Toyco financial statements has obtained copies of the detailed general ledger cash account printouts, a summary of the bank statements and the manually prepared bank reconciliations, all for the week of December 31, as shown here. (see attachment)

Required:
Review the December 31 bank reconciliation and the related information contained in the following schedules and describe what actions the auditor should take to obtain satisfaction for each item on the bank reconciliation. Assume that all amounts are material and that all computations are accurate. Organize your answer sheet as follows, using the code contained on the bank reconciliation:

Code Number Actions to Be Taken by the Auditor to Gain Satisfaction


Click here for the solution: Toyco, a retail toy chain, honors two bank credit cards and makes daily deposits of credit card sales in two credit card bank accounts

The Sharpe Corporation’s projected sales for the first eight months of 2004 are as follows

4-6A (Cash budget) The Sharpe Corporation’s projected sales for the first eight months of 2004 are as follows:

January $90,000 February $120,000
March $135,000 April $240,000
May $300,000 June $270,000
July $225,000 August $150,000

Of Sharpe’s sales, 10 percent is for cash, another 60 percent is collected in the month following sales, and 30 percent is collected in the second month following sales. November and December sales for 2003 were $220,000 and $175,000, respectively. Sharpe purchases its raw material two months in advance of its sales equal to 60 percent of their final sales price. The supplier is paid one month after it makes delivery. For example, purchase for April sales are made in February and payment is made in March. In addition, Sharpe pays $10,000 per month for rent and $20,000 each month for other expenditures. Tax prepayments of $22,500 are made each quarter, beginning in March. The company’s cash balance at December 31, 2003, was $22,000; a minimum balance of $15,000 must be maintained at all times. Assume that any short-term financing needed to maintain the cast balance is paid off in the month following the month of financing if sufficient funds are available. Interest on short-term loans (12 percent) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month. Thus, if he month of April the firm expects to have a need for additional $60,500, these funds would be borrowed at the beginning of April with interest of $605 (.12 x ½ x $60,500) owed for April and paid at the beginning of May.

A. Prepare a cash budget for Sharpe covering the first seven months of 2004.
B. Sharpe has a $200,000 in notes payable due in July that must be repaid or renegotiated for an extension. Will the firm have ample cash to repay the notes?


Click here for the solution: The Sharpe Corporation’s projected sales for the first eight months of 2004 are as follows

Garber, Inc. accounts for all sales of its merchandise on the installment basis

Garber, Inc. accounts for all sales of its merchandise on the installment basis. Following is the unadjusted trial balance at 12/31/12:

Cash $ 90,200
Installment Accounts Receivable—2010 170,000
Installment Accounts Receivable—2011 400,000
Installment Accounts Receivable—2012 750,000
Inventory, 1/1/12 78,000
Repossessed Merchandise 22,000
Accounts Payable $ 136,000
Deferred Gross Profit—2010 84,000
Deferred Gross Profit—2011 195,000
Capital Stock 600,000
Retained Earnings 406,200
Installment Sales 1,000,000
Purchases 758,000
Loss on Repossession 3,000
Operating Expenses 150,000
$2,421,200 $2,421,200

Additional Data: 2010 Gross Profit Rate = 30%; Inventory 12/31/12 = $158,000;
Repossessed merchandise 12/31/12 = $15,000;
Merchandise sold in 2011 was repossessed in 2012 and the following entry was prepared (assume correctly):
Deferred Gross Profit—2011 15,000
Repossessed Merchandise 22,000
Loss on Repossession 3,000
Installment Accounts Receivable—2011 40,000

Instructions
(a) Determine collections during 2012 on Installment A/R for each of the years 2010, 2011, and 2012.

(b) Without prejudice to your answer in Part (a), assume that total collections on Installment Accounts Receivable during 2012 were $1,060,000; $220,000 from 2010, $300,000 from 2011, and $540,000 from 2012. Prepare all necessary adjusting and closing entries at 12/31/12.


Click here for the solution: Garber, Inc. accounts for all sales of its merchandise on the installment basis

Data related to the expected sales of snowboards and skis for Winter Sports Inc. for the current year

PR 21-5A Data related to the expected sales of snowboards and skis for Winter Sports Inc. for the current year, which is typical of recent years, are as follows:

Snowboards $250.00 $170.00 40%
Skis 340.00 160.00 60%

The estimated fixed costs for the current year are $420,000.

INSTRUCTIONS:
1. Determine the estimated units of sales of the overall product necessary to reach the break even point for the current year.
2. Based on the break even sales (units) in part (1), determine the unit sales of both snowboards and skis for the current year.
3. Assume that the sales mix was 60% snowboards and 40% skis. Compare the break even point with that in part (1). Why is it so different?


Click here for the solution: Data related to the expected sales of snowboards and skis for Winter Sports Inc. for the current year

Last year, Douthett Inc. had sales of $2,400,000, based on a unit selling price of $600

PR21-4A Last year, Douthett Inc. had sales of $2,400,000, based on a unit selling price of $600. The variable cost per unit is $440, and fixed costs were $544,000. The maximum sales within Douthett's relevant range are 5,000 units. Douthett is considering a proposal to spend an additional $80,000 on billboard advertising during the current year in an attempt to increase sales and utilize and unused capacity.

INSTRUCTIONS:
1. Construct a cost volume profit chart indicating the break-even sales for last year. Verify your answer, using the break-even equation.
2. Using the cost volume profit chart prepared in part (1) determine (a) the income from operations for last year and (b) the maximum income from operations that could have been realized during the year. Verify your answers arithmetically.
3. Construct a cost volume profit chart indicating the break even sales for the current year, assuming that a noncancelable contract is signed price or other costs. Verify your answer, using the break-even equation.
4. Using the cost volume profit chart prepared in part (3), determine (a)the income from operations if sales total 4,00 units and (b) the maximum income from operations that could be realized during the year. Verify your answers arithmetically.


Click here for the solution: Last year, Douthett Inc. had sales of $2,400,000, based on a unit selling price of $600

Nafari Company's sales budget has the following unit sales projection for each quarter of the calendar year 2011

Nafari Company's sales budget has the following unit sales projection for each quarter of the calendar year 2011.

January -March 1,080,000
April-June 1,360,000
July-September 980,000
October-December 1,100,000
Total 4,520,000

Sales for the first quarter of 2012 are expected to be 1,200,000 units. Ending Inventory of finished goods for each quarter is scheduled to equal 10 percent of next quarter's budgeted sales. The company's ending inventory on December 31, 2010, is estimated at 94,500 units. Develop a quarterly production budget for 2011 and for the year in total.

Assignment Checklist:
1) Prepare the beginning inventory for the first quarter
2) Prepare the budgeted beginning inventory for the second - fourth quarters
3) Prepare the budgeted production for each quarter
4) Prepare the budgeted production for the year


Click here for the solution: Nafari Company's sales budget has the following unit sales projection for each quarter of the calendar year 2011

Broxholme Industries has sales of $40 million, equity totaling $27.5 million, and an ROS of 12%

Broxholme Industries has sales of $40 million, equity totaling $27.5 million, and an ROS of 12%. The sustainable growth rate has been calculated at 10.9%. What dividend payout ratio was assumed in this calculation?


Click here for the solution: Broxholme Industries has sales of $40 million, equity totaling $27.5 million, and an ROS of 12%

The management of Coker Corp. is doing a quick forecast of 20X9 using the modified percentage of sales method

The management of Coker Corp. is doing a quick forecast of 20X9 using the modified percentage of sales method in preparation for a more detailed planning exercise later in the month. The estimate is to assume a 10% growth in sales. All other line items are to be assumed to grow at the same rate except for fixed assets which is projected to increase by $88,000 due to an expansion program already underway. Approximate financial statements for the current year, 20X8, and a planning worksheet are shown below. The firm pays 9% interest on all of its debt. Assume the tax rate is a flat 25%. There are no plans for dividends or the sale of additional stock next year. Make a forecast of Coker’s complete income statement and balance sheet. Work to the nearest thousand dollars. (Hints: The easiest way to grow a number by 10% is to multiply it by 1.1 rather than taking 10% and adding. Do not grow subtotals. For example, to grow Revenue and COGS by 10%, round each to the nearest thousand and subtract for Gross Margin. Don’t grow interest, debt, or equity; use the debt/interest iteration technique.)


Click here for the solution: The management of Coker Corp. is doing a quick forecast of 20X9 using the modified percentage of sales method

Blue & Noble is a small law firm that does all of its business through billings (no cash sales)

Blue & Noble is a small law firm that does all of its business through billings (no cash sales). Historically, the firm has collected 40% of its revenue in the month of billing, 50% during the first month after billing, and 8% during the second month after billing. Two percent typically remains uncollectible. Revenue projections for the coming year are $47,500 for January and $50,000 for February. Cash receipts of $50,600 are expected in March. What revenues are projected for March?


Click here for the solution: Blue & Noble is a small law firm that does all of its business through billings (no cash sales)

Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales

P 6. Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales. DMI’s basic package of services includes the design of a mailing piece (either a Direct Mailer or a Store Mailer), creation and maintenance of marketing databases containing information about the client’s target group, and a production process that prints a promotional piece and prepares it for mailing. In its marketing strategies, DMI targets working women ages 25 to 54 who are married with children and who have an annual household income in excess of $50,000. DMI has adopted activity-based management, and its controller is in the process of developing an ABC system. The controller has identified the following primary activities of the
company:

Use database of customers Accounting
Service sales Mailer assembly
Deliver mailers to post office Process orders
Supplies storage Purchase supplies
Client follow-up Design mailer
Database research trends Building maintenance
Schedule order processing Processing cleanup
Personnel Mailer rework

Required
1. Identify the activities that do not add value to DMI’s services.
2. Assist the controller’s analysis by grouping the value-adding activities into the activity areas of the value chain shown in Figure 22-1.
3. State whether each non-value-adding activity is necessary or unnecessary. Suggest how each unnecessary activity could be reduced or eliminated.


Click here for the solution: Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales