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Problem l - Budgeting {formatting matters!) Eri alc Indus tri al Gas Corporation {E?GC) supplies acetylene and other compressed gases to industry . Data regarding the store 's operations follow : 1±] • Sales are b.Jdgeted at S3.2O,OOO tor November , $340 ,000 far December , and S33O,00O fa r January . • Collections are expected to be 75% in the mon th of sale, .20% in the month follow ing the sale, and 5% uncollect ible. • The cost of goocfs solcf is 65% of sales. • The comp any cfesires encfing merchancf ise inventory to eq ual 80% of the follow ing mon th's cost of goods sold. Paym ent for merchancfise is made in the month follow ing the pu rchase. • Othe r month ly expenses to be paid in casfl are $2 1,000 . • onth ly dep reciat ion is $16,000 . • Igno re taxes. Assets Cash Balance Sheet As at October 31 Accounts receivab le (net of allowance ror uncollec ti ole accounts) erct-ia ndise inven to r-y Property , plant and equipment (ne t of $658,000 acc dep) Tata I assets Liab ilities and Stockholders ' Equ ity Accoun ts payab le Common stock Reta ined earn ings Total liabilities ancf stocJcholders ' equity s 22 ,000 82 ,000 166,400 1, 170,000 s 1,440,400 s 199,000 840 ,000 40 1,400 s 1,440,400 (i) 5 poin ts Prepa re a Schedu le of Expectecf Cash Collect ions for 'ovember and Decembe r (i i) 5 poin ts Prepa re a Merchandise Purchases Budget for Novembe r and Decembe r . (i ii) 5 poin ts Prepa re Casfl Budgets for 'ovembe r and Decembe r. (iv) 5 poin ts Prepa re Budgetecf lncome Statements fa r November and Decembe r . □ Prob lem ll - Different i al Ana lys is Nivag Company is conside,;ng the add ition of a new product to its current product lines . The expected cost and reven ue data for the new prod uct are as follows : r Annual sales Selling pñce per nit Variab le costs per unit: P rod u ctio n SellinQ Avo id a ble fixed costs p er yea r : P rod u ctio n SellinQ 1 4,4 00 units S379 S144 S64 Unavo idable allocated ñxed coo,orate costs per vea r r $52 ,000 $76 ,000 SSS,40O !f the new product is added to the existing prod uct line , then sales of existing prod ucts will de cline. As a consequen ce, the contrio ution marg in of the othe r exist ing product lines is expected to drop $87 ,800 per yea r. Requ lred : (i) 10 points Prepa re a schedu le that you wou ld give to your boss indi cat ing how the net operat ing income of the firm will change if the new product is added . (i i) 5 points Give a few pros and a few consto adding the new prod uct . Prob lcm IU - Var la nc cs '{o l;i lls Com i: ;i nv ·s llll;i c;i ;, ;: nt prod .ices pre c.: st ln qots fo r lnc L st rl ;i I U$e. " er.: 4; r.:im Llek c;i h$, "'llo "';is recen llV .:ippo ln tec II e ,e r :i -n;i n;i lle • ll' the t th.: c;i P :i ,~ . h;: s ' U$l t: een h;i nd ed t ,e :il :int ·s c a,~ rl bLt on form;it ncorre st.:teme ,it for Oc!l:ier. he st;ite-nent Is s"low, be low : Sucq e~ed A=tu :i S.:iles ( c. ,o 1111 n ll ll:S.) s 24C,CCC s 24C,CCC V.:ir :i:, e ex pc nscs: V:i rl;i 1:l e CDSt o' 1j D1 1dsS 111 1• !°>7,5CO 74,2 to V:i rl;it: le se lin4; e>epense_.r. ll!.,CCC ll!.,CCC Tot;i l v;: r :ib lc ex:icnses 7 !°>,5CC 52,2 lC Cont rlbi; tton m :i rq In l&4,lCC l4 7 , 7 5C I' xcc e ,cpenses : r-';inuf:icur lnq ove r he:id &&,ceo &&,ceo Se ll n4; ;in 11; : e m ln lst r;i uve 11,4,e e e 11,4,e e e Tot;i 1 '>ecd e>epense_.r. lSC,CCC lSC,CCC He t o :ie r.:it ,q , ca -ne (loss ) s l4,lCC s 1i .i:o i • cont;i ns dl rcct m ;ite rl;i ls, dl rcct l :ibor , ;ind v;: r :ib lc m:i,.i•.:ct.i •ln4; llve r ,c;id . '{s . Ll e<c.:ihs ,..;i_.r. shockell to see ~he !IS$ fll • t hc montll, i:;irt lc.J :i •lv t:ec :i.isc s.:ilcs l'lere ex.:ict .:is b udqetell. He st:itcc , ·t si; rc hope tlle :, :i,~ ,:is .:i st:i nd;: rd c:is~ s-vs~e-n In oper;itlon l f lt doesn 't, J w11, t ,.:i..,e ~hes llhtest de.:i of l'lhere to s~:i •t 1011k ,q for the prot:lerr. T hc i:;l;int llllCS LSC ;i s~:i,d.:i rd c:,s~ S;'Stcm, l'l lt, t "lc ÍII 'º"' 'l Q st:ind;ird .. :i , 1;it:le CDSt :ic r nj¡o~ : S~:i;id.:ir ::I Qu:i;i: t\l or St ;i nc ;i rc Frlce S t:i ,id.:ir ::I HDJ"'~ or R:i~e Co!.t Dlr ec -n;:ter :i ls 3 .4 :io un ds $ 2.00 per pound i G.HII Dlr ec :i :ior 11. 3 ioJ r~ $ /.~O per hour 2. 2 !, V.:ir :i:, e m;inu f.:ic:.ir1n4; ovc r ,e.:c 11. 2 , o J r~• $3.00 per hour 11. Gil Tot;i l st;in::l:i r ll v;:r :ib lc cost • S;i$ed on m:i c:i ne -hou r s. DJ•lnt; Octobe r t "'lc plant pro llu cell E,,000 ic¡ot:: ;:ne lncJrrell :he follow n;i co ::~ · .:i. ?urch :ised is , 400 pound:: of m ate ri al:: at :i co::t of $ 2 .4 !. pcr :,ound . i he •e 1,ere no , :,,. m.:itcr &:i.s. n nvcntorv at the :icq lnn n;i of th e -nonth :i . U::cc 2c,2cc poJids of m:itcr la.s. n prog uctlon c~1n1::icd t;oo;!s .:ind wor k , procc::s , ventor<::: ;: re In:: ~ i í c:i ,: .:ind can be qnorcd . 1 c. Wor<ed 2,411111d rect lab or-ioJr:; :i:.:, co ::t of $ / .20 pcr hoLr. d . ln cu rred tot;:1 y:,rla t: le -n;:ndactu r ic¡ o-.erh e:id co ::t of $ !.,11111 'or tic moi:h. A un:i l of l! .SOO m achine · iours ,., a:: rcco rdcc lt Is th e co-np anv·s po ocv ~o e o::c a I v:ir lances :11 co::t of ;i11od :: ::old on :i mon thlv b:is.s . Rcqu lrcd : U) 5 po lnts Com ¡:ut e :ic o •cct rr;:tcr :i ls :ir ce :ind cLantl t ', v.:ir lan ces Cil )s po lnts Com ¡:ut e :ic o •ect 1.1::ior rate ;:ne ef le eicy -.:i,1ance$ ( ill) 5 po l nts Corrputc the Va r •:ib lc ovcric;:c r;ite :ind eff -c:lencv va r •:incc:: ( ) 5 po l nts Prepare :i ::J-n m ary o' the slx va r :incc ::. (v)S po lnts Dli.cJ:::: tic tw o mo st !.lt;nlflc:int -.arl;:ncei. aill ,,..hat :he pl;:nt ::"'loLld co :iboLt them. Problem IV - cost Volume Proflt t, elg o ecor manJfact res oecoratlve ral lngs ln prepanng ar next year's operat lons, managemert has de11elop:e{! the o lowlng estlmates : Sales ( 20 .0 00 ur lr.s) Dlrect mater ia Is Dlrect labor (varlable) 1a r uractur lng ove me 3CI: va r lable Flxed Sel lng & aa mlnlsi:rai:lve: va r lable Flxed Requlred: Total Per Untt !.1, 00 0, 00 0 !.50.00 !. 20 0, 0 00 !. 10 .00 !. 5 0, 00 0 !. 2 .50 !. 70, 00 0 !. 3.50 !. 8 0, 0 00 !. 4 .00 !. 10 0, 0 00 !. 5 .00 !. 3 0, 00 0 !. 1.50 (1) 5 polnts compute the unlt: coni:rtbut lon marglr and contr lbLtlor mar gln rati o. (1) 5 polnts oe: erm ne tlle break-even polnt In sales dollars anc the margln or sate:v percenr.a ge (11) 5 polnts lt t l'e sate:s vol;.1me lncreases by 20% wlt l' no cl'ange In to:a l rixed exper ses, ,.,hat ,,.,,.11b e t l'e charge In net op:erat lng lncome? (1\1) 5 polnts lt t l'e per un t var ia ble prodLct lon coses lncrease bV 15% , ard 1 1,)(4?(1 sel lng and admlnlstrattve expenses 1ncre:1se by 12 '1&, v.l'at wl ll be t l'e new break-ever polrt In dallar sales, Problem V - Process costl ng - - - .. .... - - - - - - - - - - - - ._... - Dlcalp Ju ces. Ud. , ot Flor ida malees blended tr opical rrLlt crt r ks r two sr.ages. fr ult JLlces are eJ«racted tr om rresh rules and then blendet1 In che Blendlng Oepartme nt. The blended JLlces are then oott rec and packed or shlppl r g In the Sott llng Depart ment . Tf'e tollo.-1 ng 1r rorm atlon perta lns to t e operat lons or the Bler dlng Deparrment or June. Ur lts DI'-' ce \ 1/ ot1e In process, beQ lnn, nQ 19, 000 100% BO~ Sta rteCI lnto proa uct lon 76 ,500 com pletec anCI tra nSlerred 0Jt 87, 000 \ 1/ ot1eI n process, enClIn Q 8 ,500 100% 40~ DM ce \ 1/ ot1e In process, beg lnn, ng !.76 ,0 00 !.33 ,250 co sts acded dun rQ June $1 48 ,9 75 $ 133 ,9 90 Assume chat che company uses ttl e ,.,elghted-a11erage methoo . Requlred : Each sectlon should be prepared uslng the standard rormat , Do a 3-llne headlng Just ONCE at the ~glnnlng (Process Costlng Statements } (1) 5 pol nts Determine the eqLlvalent unlt.s for June for er e Blend ng Oepartmenc. (1) 5 pol nts Compute the costs per eqLlva e r t url t or June or t e B er elrg Department. (11) 5 pol nts Determine the cotal cost of erd lng v.ot1C r process lnver tory and er e total cosi: ot Lnlts tra nsrerred to the nexc c epartment In Jur e ( IV) 5 pol nts Prepare a repon that reconcJles the total costs ass gned to the endlng .-1ork In process lnventory and the Lnlts tra nsrerred out v.lth the total costs In begln r lng lnventory ar d tota I costs a dded d L r lng t f' e month .

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