The budget director of Heads Up Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager

PR 22-3A The budget director of Heads Up Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for January 2010.

a. Estimated sales for January:
Batting helmet 3,700 units at $70 per unit
Football helmet 7,200 units at $142 per unit

AND SO ON

INSTRUCTIONS:
1. Prepare a sales budget for January.
2. Prepare a production budget for January.
3. Prepare a direct materials purchases budget for January.
4. Prepare a direct labor cost budget for January.
5. Prepare a factory overhead cost budget for January.
6. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimated to be $12,500, and work in process at the end of January is desired to be $13,500.
7. Prepare a selling and administrative expenses budget for January.
8. Prepare a budgeted income statement for January.


Click here for the solution: The budget director of Heads Up Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager

Two years ago your corporate treasurer purchased for the firm a 20-year bond at its par value of $1,000

16.9. (Interest rate risk) Two years ago your corporate treasurer purchased for the firm a 20-year bond at its par value of $1,000. The coupon rate on this security is 8 percent. Interest payments are made to bond holders once a year. Currently, bonds of this particular risk class are yielding investors 9 percent. A cash shortage has forced you to instruct your treasurer to liquidate the bond.

a. At what price will your bond be sold? Assume annual compounding.
b. What will be the amount of your gain or loss over the original purchase price?
c. What would be the amount of your gain or loss had the treasurer originally purchased a bond with a 4-year rather than a 20-year maturity?(Assume all the characteristics of the bonds are identical except their maturity periods.)
d. What do we call this type of risk assumed by your corporate treasurer?


Click here for the solution: Two years ago your corporate treasurer purchased for the firm a 20-year bond at its par value of $1,000

At Reyes Company, checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks

E7-5 At Reyes Company, checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks. Each signer has access to unissued checks kept in an unlocked file cabinet. The purchasing agent pays all bills pertaining to goods purchased for resale. Prior to payment, the purchasing agent determines that the goods have been received and verifies the mathematical accuracy of the vendor’s invoice. After payment, the invoice is filed by vendor and the purchasing agent records the payment in the cash disbursements journal. The treasurer pays all other bills following approval by authorized employees. After payment, the treasurer stamps all bills “paid,” files them by payment date, and records the checks in the cash disbursements journal. Reyes Company maintains one checking account that is reconciled by the treasurer.

Instructions
(a) List the weaknesses in internal control over cash disbursements.
(b) Identify improvements for correcting these weaknesses.


Click here for the solution: At Reyes Company, checks are not prenumbered because both the purchasing agent and the treasurer are authorized to issue checks

Integrative Case 7: Casa de Diseño

Integrative Case 7: Casa de Diseño
Casa de Diseño
In January 2012, Teresa Leal was named treasurer of Casa de Diseño. She decided that she could best orient herself by systematically examining each area of the company’s financial operations. She began by studying the firm’s short-term financial activities.

AND SO ON

TO DO
a. Assuming a constant rate for purchases, production, and sales throughout the year, what are Casa de Diseño’s existing operating cycle (OC), cash conversion cycle (CCC), and resource investment need?
b. If Leal can optimize Casa de Diseño’s operations according to industry standards, what will Casa de Diseño’s operating cycle (OC), cash conversion cycle (CCC), and resource investment need to be under these more efficient conditions?
c. In terms of resource investment requirements, what is the cost of Casa de Diseño’s operational inefficiency?
d. (1) If in addition to achieving industry standards for payables and inventory, the firm can reduce the average collection period by offering credit terms of 3/10 net 60, what additional savings in resource investment costs will result from the shortened cash conversion cycle, assuming that the level of sales remains
constant?
(2) If the firm’s sales (all on credit) are $40,000,000 and 45% of the customers are expected to take the cash discount, by how much will the firm’s annual revenues be reduced as a result of the discount?
(3) If the firm’s variable cost of the $40,000,000 in sales is 80%, determine the reduction in the average investment in accounts receivable and the annual savings that will result from this reduced investment, assuming that sales remain constant.
(4) If the firm’s bad-debts expenses decline from 2% to 1.5% of sales, what annual savings will result, assuming that sales remain constant?
(5) Use your findings in parts (2) through (4) to assess whether offering the cash discount can be justified financially. Explain why or why not.
e. On the basis of your analysis in parts a through d, what recommendations would you offer Teresa Leal?
f. Review for Teresa Leal the key sources of short-term financing, other than accounts payable, that she may consider for financing Casa de Diseño’s resource investment need calculated in part b. Be sure to mention both unsecured and secured sources.

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The treasurer anticipates the following costs for the event, which will be held at the Regency Hotel

The treasurer anticipates the following costs for the event, which will be held at the Regency Hotel:

Room rental $300
Dinner cost (per person) 25
Chartered buses 500
Favors and souvenirs (per person) 5
Band 900

Each person would pay $40 to attend; 200 attendees are expected.

a. Will the event be profitable for the sorority? Show computations.
b. How many people must attend for the sorority to break even?
c. Suppose the sorority encouraged its members to drive to the hotel and did not charter the buses. Further, a planned menu change will reduce the cost per meal by $2. If each member will still be charged $40, compute the contribution margin per person.

Click here for the solution: The treasurer anticipates the following costs for the event, which will be held at the Regency Hotel

The budget director of Feathered Friends Inc., with the assistance of the controller, treasurer, production manager, and sales manager

The budget director of Feathered Friends Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for October 2012

a. Estimated sales for December:
Bird House . . . . . . . . . . . . . . . . . . . . 3,500 units at $45 per unit
Bird Feeder. . . . . . . . . . . . . . . . . . . . 3,700 units at $65 per unit

AND SO ON

Instructions
1. Prepare a sales budget for October.
2. Prepare a production budget for October.
3. Prepare a direct materials purchases budget for October.
4. Prepare a direct labor cost budget for October.
5. Prepare a factory overhead cost budget for October.
6. Prepare a cost of goods sold budget for October. Work in process at the beginning of October is estimated to be $27,000, and work in process at the end of October is estimated to be $32,400.
7. Prepare a selling and administrative expenses budget for October.
8. Prepare a budgeted income statement for October.

Check: 4. Total Direct Labor Cost in Fabrication Dept., $32,760

Click here for the solution: The budget director of Feathered Friends Inc., with the assistance of the controller, treasurer, production manager, and sales manager