Question;PART III ? INCREMENTAL ANALYSIS (26 points);This problem consists of two independent mini-problems.;A. Pep Manufacturing produces Product K in batches of 4,000 gallons at $.60 per gallon. Product K can be sold without further processing for $0.80 per gallon. Product K can be processed further to yield Product G, which can be sold for $1.25 per gallon. Product G requires additional processing costs at $1,650 per batch.;Instructions;Compute the incremental income from further production of one batch of Product K.;B. Parker Manufacturers produces can openers. For the first six months of 2011, the company reported the following operating results while operating at 80% of plant capacity.;Sales $4,000,000;Cost of goods sold 2,500,000;Gross profit 1,500,000;Operating expenses 1,000,000;Net income $ 500,000;Cost of goods sold was 70% variable and 30% fixed. Operating expenses were 70% variable and 30% fixed. In September 2011, Parker Manufacturers receives a special order for 15,000 can openers at $7.50 from a foreign company. The can openers normally sell for $8.00. Acceptance of the special order would result in $5,000 of shipping costs but no increase in fixed operating expenses.;Instructions;Prepare an incremental analysis for the special order.;PART IV ? BUDGETARY PLANNING (32 points);This problem consists of four independent mini-problems. Omit headings other than those already given.;A. Dryer Manufacturing produces and sells containers designed to hold liquid beverages. The sales budget for 2011 is as follows;1st quarter ? 90,000 units 3rd quarter ? 135,000 units;2nd quarter ? 120,000 units 4th quarter ? 105,000 units;Dryer desires an ending inventory equal to 10% of the next quarter's sales. January 1, 2011 inventory is 9,000 units. Unit sales during the 1st quarter of 2012 are estimated at 90,000 units.;Instructions: Compute required production for the year, showing quarterly data.;B. Parker Manufacturers is preparing its direct labor budget for the second quarter of 2011 from the following budgeted production figures: April?70,000 units, May?100,000 units, and June?110,000 units. Each unit requires 2 hour of direct labor. The hourly wage rates are expected to be $14 in April and May and $16 in June.;Instructions: Prepare a direct labor budget for the quarter, showing monthly data.;C. Carson's Widget Works makes 70% of its sales on credit. Experience shows that 60% of the credit customers pay in the month of sale, 30% within the following month, the rest in the next month. Total sales for May, June, July, and August are estimated at $210,000, $240,000, $300,000, and $250,000, respectively.;Instructions: Determine budgeted cash receipts for July and August.;D. John's Sporting Goods is preparing its annual cash budget, showing quarterly data, for 2011. A $20,000 cash balance is desired at the end of each quarter. Borrowings and repayments are in $1,000 increments at 12% annual interest. The company borrows at the beginning of a quarter based on the estimated deficiency. Interest is paid only when principal is repaid at the end of a quarter with excess cash. The maximum amount of principal was repaid in the second quarter. The cash balance on December 31, 2010 is $21,000. Total receipts and disbursements, other than borrowings and principal or interest payments, are estimated at;Quarter 1 Quarter 2 Quarter 3 Quarter 4;Disbursements: $226,000 $226,000 $244,000 $260,000;Receipts: 216,000 230,000 245,000 253,000;Instructions: Prepare a schedule of estimated borrowings and repayments of principal and interest for 2008 and its quarters.
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