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Question;Preparing a Sales BudgetPatrick Inc. sells industrial solvents in five-gallon drums. Patrick expects the following units to be sold in the first three months of the coming year:The average price for a drum is $35.HidePrepare a sales budget for the first three months of the coming year, showing units and sales revenue by month and in total for the quarter. Do not include a multiplication symbol as part of your answer.Patrick, Inc.Sales BudgetFor the Coming QuarterJanuaryFebruaryMarch1st QuarterTotalUnitsPrice$$$$Sales$$$$Preparing a Production BudgetPatrick Inc. makes industrial solvents. In the first four months of the coming year, Patrick expects the following unit sales:Patrick's policy is to have 25 percent of next month's sales in ending inventory. On January 1, it is expected that there will be 6,700 drums of solvent on hand.HidePrepare a production budget for the first quarter of the year. Show the number of drums that should be produced each month as well as for the quarter in total.Patrick, Inc.Production BudgetFor the Coming QuarterJanuaryFebruaryMarchTotalSalesDesired ending inventoryTotal needsLess: Beginning inventoryUnits producedPreparing a Selling and Administrative Expenses BudgetYou may use any of the Additional Resources listed in the drop-down menu above to help you complete this activity, but you are not required to do so. To access each resource, click on its name in the drop-down menu above.Fazel Company makes and sells paper products. In the coming year, Fazel expects total sales of $19,730,000. There is a 3 percent commission on sales. In addition, fixed expenses of the sales and administrative offices include the following:HidePrepare a selling and administrative expenses budget for Fazel Company for the coming year.Fazel CompanySelling and Administrative Expenses BudgetFor the Coming YearVariable selling expenses$Fixed expenses:Salaries$UtilitiesOffice spaceAdvertisingTotal fixed expensesTotal selling and administrative expenses$Preparing a Direct Materials Purchases BudgetPatrick Inc. makes industrial solvents sold in five-gallon drums. Planned production in units for the first three months of the coming year is:Each drum requires 5.5 gallons of chemicals and one plastic drum. Company policy requires that ending inventories of raw materials for each month be 15 percent of the next month's production needs. That policy was met for the ending inventory of December in the prior year. The cost of one gallon of chemicals is $2.00. The cost of one drum is $1.60.1. Calculate the ending inventory of chemicals in gallons for December of the prior year, and for January and February. What is the beginning inventory of chemicals for January? Round your answers to the nearest whole gallon.Ending inventory for December: gallonsEnding inventory for January: gallonsEnding inventory for February: gallonsBeginning inventory for January: gallonsHide 2. Prepare a direct materials purchases budget for chemicals for the months of January and February. Round Gallons per unit to one decimal place. Round Price per gallon to the nearest cent. Round Dollar purchases to the nearest dollar. Round all the other values to the nearest whole unit. Do not include a multiplication symbol as part of your answer.Patrick, Inc.Direct Materials Purchases Budget - Chemicals in GallonsFor the Months of January and FebruaryJanuaryFebruaryProduction in unitsGallons per unitGallons for productionDesired ending inventoryNeededLess: Beginning inventoryDirect materials to be purchasedPrice per gallon$$Dollar purchases$$3. Calculate the ending inventory of drums for December of the prior year, and for January and February. Round your answers to the nearest whole drum.Ending inventory for December: drumsEnding inventory for January: drumsEnding inventory for February: drumsHide 4. Prepare a direct materials purchases budget for drums for the months of January and February. Round Drums per unit to one decimal place. Round Price per drum to the nearest cent. Round Dollar purchases to the nearest dollar. Round all the other values to the nearest whole unit. Do not include a multiplication symbol as part of your answer.Patrick, Inc.Direct Materials Purchases Budget - DrumsFor the Months of January and FebruaryJanuaryFebruaryProduction in unitsDrums per unitDrums for productionDesired ending inventoryNeededLess: Beginning inventoryDirect materials to be purchasedPrice per drum$$Dollar purchases$$Preparing a Budgeted Income StatementYou may use any of the Additional Resources listed in the drop-down menu above to help you complete this activity, but you are not required to do so. To access each resource, click on its name in the drop-down menu above.Oliver Company provided the following information for the coming year:Hide Prepare a budgeted income statement for Oliver Company for the coming year. (Note: Round all income statement amounts to the nearest dollar.)Oliver CompanyBudgeted Income StatementFor the Coming Year$$$$Total Materials VarianceLata Inc., produces aluminum cans. Production of 12-ounce cans has a standard unit quantity of 4.7 ounces of aluminum per can. During the month of April, 350,000 cans were produced using 1,150,000 ounces of aluminum. The actual cost of aluminum was $0.2 per ounce and the standard price was $0.11 per ounce. There are no beginning or ending inventories of aluminum.Calculate the total variance for aluminum for the month of April.$Materials VariancesLata Inc., produces aluminum cans. Production of 9-ounce cans has a standard unit quantity of 4.4 ounces of aluminum per can. During the month of April, 297,000 cans were produced using 1,245,000 ounces of aluminum. The actual cost of aluminum was $0.19 per ounce and the standard price was $0.1 per ounce. There are no beginning or ending inventories of aluminum.Calculate the materials price and usage variances using the columnar and formula approaches.Materials Price Variance: $Material usage Variance: $Total Labor VarianceBotella, Inc. produces plastic bottles. Each bottle has a standard labor requirement of 0.015 hours. During the month of April, 470,000 bottles were produced using 13,000 labor hours @ $10.25. The standard wage rate is $7.75 per hour.Calculate the total variance for production labor for the month of April. If required, round your answer to the nearest cent.$Labor Rate and Efficiency VariancesBotella, Inc. produces plastic bottles. Each bottle has a standard labor requirement of 0.023 hours. During the month of April, 502,000 bottles were produced using 14,100 labor hours @ $8.5. The standard wage rate is $7.5 per hour.Calculate the labor rate and efficiency variances using the columnar and formula approaches. If required, round your answers to the nearest cent.Labor Rate Variance: $Labor Efficiency Variance: $Flexible Budget With Different Levels of ProductionBowling Company budgeted the following amounts:Variable costs of production:Direct materials 4 pounds @ 0.6 per poundDirect labor 0.8 hr. @ $15.5 per hourVOH: 0.3 hr. @ $2.00FOH:Materials handling $6,400Depreciation $2,600Hide Prepare a flexible budget for 2,500 units, 3,000 units, and 3,500 units.Bowling CompanyFlexible Budget2500 units3000 units3500 unitsDirect materialsDirect laborVariable overheadFixed overhead:Materials handlingDepreciationTotalPerformance ReportBowling Company budgeted the following amounts:Variable costs of production:Direct materials 7 pounds @ 0.5 per poundDirect labor 0.5 hr. @ $17.00 per hourVOH 0.2 hr. @ $2.30FOH:Materials handling $6,250Depreciation $2,580At the end of the year, Bowling had the following actual costs for production of 3,800 units:Direct materials $6,800Direct labor 30,500Variable overhead 4,200Fixed overhead:Materials handling 6,300Depreciation 2,580Hide Prepare a performance report using a budget based on the actual level of production. In the variance type column, type "F" for favorable and "U" for unfavorable. If the variance is zero, enter ("0") in the variance amount column and "N" for neither in the variance type column. (Note: Be sure to use capital letters.)Performance ReportActualBudgetedVariance:Amount Type (F,U,N)Units producedDirect materialsDirect laborVariable overheadFixed overhead:Materials handlingDepreciationTotalMargin, Turnover, Return on Investment, Average Operating AssetsElway Company provided the following income statement for last year:At the beginning of last year, Elway had $44,500 in operating assets. At the end of the year, Elway had $33,900 in operating assets.1. Compute average operating assets.$2. Compute the margin (as a percent) and turnover ratios for last year.Margin: %Turnover:3. Compute ROI as a percent.%4. Conceptual Connection: Briefly explain the meaning of ROI.5. Conceptual Connection: Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company).Residual IncomeThe Tuxedo Division of Shamus O'Toole Company had operating income last year of $340,000 and operating assets of $3,500,000. O'Toole's minimum acceptable rate of return is 7 percent.1. Calculate the residual income for the Tuxedo Division.$2. Was the ROI for the Tuxedo Division greater than, less than, or equal to 7 percent?Transfer PricingLinks to learning objectives referenced by this question can be accessed in the "Additional Resources" drop-down menu above.Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. The Furniture Division can sell all of the dressers it makes to outside companies for $40. The Motel Division needs 10,000 dressers per year, the Furniture Division can make up to 50,000 dressers per year.Also, although the Furniture Division has been operating at capacity (50,000 dressers per year), it expects to produce and sell only 40,000 dressers for $40 each next year. The Furniture Division incurs variable costs of $14 per dresser. The company policy is that all transfer prices are negotiated by the divisions involved.1. What is the maximum transfer price?$Which division sets it?2. What is the minimum transfer price?$Which division sets it?3. Suppose that the two divisions agree on a transfer price of $35. What is the change in operating income for the Furniture Division? For the Motel Division? For Aulman Inc. as a whole?Benefit to Furniture Division $Benefit to Motel Division $Benefit to company $Structuring a Make-or-Buy ProblemFresh Foods, a large restaurant chain, needed to determine if it would be cheaper to produce 5,000 units of its main food ingredient for use in its restaurants or to purchase them from an outside supplier for $12 each. Cost information on internal production includes the following:Total Cost Unit CostDirect materials $25,000 $5.00Direct labor 15,000 3.00Variable manufacturing overhead 7,500 1.50Variable marketing overhead 12,000 2.40Fixed plant overhead 30,000 6.00Total $89,500 17.90Fixed overhead will continue whether the ingredient is produced internally or externally. No additional costs of purchasing will be incurred beyond the purchase price. If required, round your answers to the nearest whole number.1. What are the alternatives for Fresh Foods?2. List the relevant cost(s) of internal production and of external purchase.The input in the box below will not be graded, but may be reviewed and considered by your instructor.blank3. Which alternative is more cost effective and by how much? (Use total cost when giving your answer.)$4. Now assume that 40% of the fixed overhead can be avoided if the ingredient is purchased externally. Which alternative is more cost effective and by how much? (Use total cost when giving your answer.)$Structuring a Special-Order ProblemHarrison Ford Company has been approached by a new customer with an offer to purchase 10,000 units of its model IJ4 at a price of $3.80 each. The new customer is geographically separated from the company's other customers, and existing sales would not be affected. Harrison normally produces 75,000 units of IJ4 per year but only plans to produce and sell 60,000 in the coming year. The normal sales price is $12 per unit. Unit cost information for the normal level of activity is as follows:Fixed overhead will not be affected by whether or not the special order is accepted.1. What are the relevant costs and benefits of the two alternatives?The input in the box below will not be graded, but may be reviewed and considered by your instructor.blankAccept or Reject the special order?2. By how much will operating income increase or decrease if the order is accepted?by $Structuring a Keep-or-Drop Product Line ProblemShown below is a segmented income statement for Orzo Company's three laminated flooring product lines.Orzo's management is deciding whether to keep or drop the Parquet product line. Orzo's parquet flooring product line has a contribution margin of $50,000 (sales of $300,000 less total variable costs of $250,000). All variable costs are relevant. Relevant fixed costs associated with this line include $30,000 in machine rent and $4,700 in supervision salaries.1. List the alternatives being considered with respect to the parquet flooring line.2. List the relevant benefits and costs for each alternative.The input in the box below will not be graded, but may be reviewed and considered by your instructor.blank3. Which alternative is more cost effective and by how much?by $Structuring the Sell-or-Process-Further DecisionJack?s Lumber Yard receives 8,000 large trees each period that it subsequently processes into rough logs by stripping off the tree bark and leaves. Jack?s then must decide whether to sell its rough logs (for use in log cabin construction) at split-off or to process them further into refined lumber (for use in regular construction framing). Jack?s normally sells logs for a per-unit price of $500. Alternately, each log can be processed further into 800 feet of lumber at an additional cost of $0.05 per board foot. Also, lumber can be sold for $0.75 per board foot. (Note: One tree is equal to one rough log.)1. What is the total contribution to income from selling the logs for log cabin construction?$2. What is the total contribution to income from processing the logs into lumber?$Determining the Optimal Product Mix with One Constrained ResourceCasual Essentials, Inc. manufactures two types of team shirts, the Homerun and the Goalpost, with unit contribution margins of $7 and $15, respectively. Regardless of type, each team shirt must be fed through a stitching machine to affix the appropriate team logo. The firm leases seven machines that each provide 1,000 hours of machine time per year. Each Homerun shirt requires 6 minutes of machine time, and each Goalpost shirt requires 30 minutes of machine time.Assume that there are no other constraints.If required, round your answers to the nearest whole number. If an amount is zero, enter "0".1. What is the contribution margin per hour of machine time for each type of team shirt?Homerun $Goalpost $2. What is the optimal mix of team shirt?Homerun unitsGoalpost units3. What is the total contribution margin earned for the optimal mix?$Payback PeriodKilebrew Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $2,400,000 and either has:Even cash flows of $200,000 per year orThe following expected annual cash flows: $300,000, $300,000, $800,000, $800,000, and $200,000.Calculate the payback period for each case.a. yearsb. yearsAccounting Rate of ReturnVanderhoort Company invested $10,150,000 in a new product line. The life cycle of the product is projected to be seven years with the following net income stream: $200,000, $600,000, $1,000,000, $1,200,000, $1,600,000, $2,200,000, and $1,600,000.Calculate the accounting rate of return. Enter your answer as a decimal, do not convert to a percent. Round your answer to two decimal places.Net Present ValueHolland, Inc., has just completed development of a new cell phone. The new product is expected to produce annual revenues of $1,350,000. Producing the cell phone requires an investment in new equipment, costing $1,440,000. The cell phone has a projected life cycle of five years. After five years, the equipment can be sold for $180,000. Working capital is also expected to increase by $180,000, which Holland will recover by the end of the new product's life cycle. Annual cash operating expenses are estimated at $810,000. The required rate of return is 8 percent.Hide 1. Prepare a schedule of the projected annual cash flows.Holland, Inc.Annual cash flowsFor Five YearsYears and ItemsCash FlowYear 0$Total$Year 1-4$Total$Year 5$Total$2. Calculate the NPV using only discount factors from Exhibit 14B-1. Round present value calculations and your final answer to the nearest whole dollar.$3. Calculate the NPV using discount factors from both Exhibit 14B-1 and Exhibit 14B-2. Round present value calculations and your final answer to the nearest whole dollar.$NPV and IRR, Mutually Exclusive ProjectsFollow the format shown in Exhibit 14B-1 and Exhibit 14B-2 as you complete the requirements below.Hardy Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is $3,000,000, and it has a net annual after-tax cash inflow of $750,000. The CAM Y model is more expensive, selling for $3,500,000, but it wil produce a net annual after-tax cash inflow of $875,000. The cost of capital for the company is 10 percent.1. Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar.CAM X: $CAM Y: $Net Present ValueUse the Exhibit 14B-1 and Exhibit 14B-2 to locate the present value of an annuity of $1, which is the amount to be multiplied times the future annual cash flow amount.Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows.Southward Manufacturing is considering the purchase of a new welding system. The cash benefits will be $400,000 per year. The system costs $2,250,000 and will last 10 years.Kaylin Day is interested in investing in a women?s specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own shop will be $35,000 per year. She estimates that the shop will have a useful life of six years.Goates Company calculated the NPV of a project and found it to be $21,300. The project's life was estimated to be eight years. The required rate of return used for the NPV calculation was 10 percent. The project was expected to produce annual after-tax cash flows of $45,000.1. Compute the NPV for Southward Manufacturing, assuming a discount rate of 12 percent. Round to the nearest dollar.$Should the company buy the new welding system?2. Conceptual Connection: Assuming a required rate of return of 8 percent, calculate the NPV for Kaylin Day's investment. Round to the nearest dollar.$Should she invest?Calculate the NPV assuming the estimated return was $45,000 per year. Round to the nearest dollar.$Would this affect the decision? What does this tell you about your analysis?blank3. What was the required investment for Goates Company?s project? Round to the nearest dollar.$

 

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