Question

In: Accounting

The company provides some details for the period 2020 for preparing necessary budgets: (a) Sales Details...

The company provides some details for the period 2020 for preparing necessary budgets:

(a) Sales Details

The Company estimates that it can get maximum profits if it charges $ 200 (selling price) for one of its products. The marketing manager of the company had indicated that at $ 200 selling price, the company would be able to sell 1,000 units in the first quarter of 2020. The company also expects that sales would go up by 100 units over previous quarter sales (like 1000, 1100 and so on….) Selling price is expected to be same throughout the year.

(b) Inventory details

Alwyn Industries maintains at the end of each quarter an inventory of 10% of the next quarter’s sales. This allows the company to better meet its customers’ needs in case the customers experience a sudden surge in demand. The opening inventory for first quarter 2020 has been estimated to be 200 units

(c) Divisional Performance

Alwyn Industries has to divisions (A & B) working within the company. The CEO of the company is wondering whether divisional performance evaluation will be fruitful for them since the company has two divisions operating with certain targets. The head of those divisions report the following results for the quarter ending 2019, which is given below:

Particulars

Division A

Division B

Operating Income

900,000

1,951,600

Average Total Assets

2,500,000

6,500,000

Net Sales

7,500,000

5,243,600

Question : Evaluate the divisional performance (A & B) using ROI for the quarter ending 2019 stating which product is better and why

Solutions

Expert Solution

(a) Sales Budget
First Quarter Second Quarter Third Quarter Fourth Quarter Total
Sales in Units             1,000                    1,100               1,200                  1,300        4,600
x Selling price per unit                 200                       200                   200                      200           200
Budgeted Sales $       200,000              220,000         240,000            260,000 920,000
(b) Inventory Budget
First Quarter Second Quarter Third Quarter Fourth Quarter
Sales in Units             1,000                    1,100               1,200                  1,300
Add: Desired Ending Inventory @10% of next quarter sales                 110                       120                   130                      140
Total Needed             1,110                    1,220               1,330                  1,440
Less: Opening Inventory 200                       110                   120                      130
Budgeted Purchases in Units                 910                    1,110               1,210                  1,310
Working:-
Sales of First quarter of 2021             1,400 ( 1,300 + 100 )
Fouth quarter ending Inventory 140 ( 1,400 x 10% )
(c ) Division A Division B
Operating Income        900,000            1,951,600
/ Average total Assets      2,500,000            6,500,000
ROI 36.0% 30.0%
Division A is better because its ROI of 36% is more than Division B ROI of 30%.

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Budgets: Discussion question RD Ltd. is in the process of preparing its budgets for 2020. The...
Budgets: Discussion question RD Ltd. is in the process of preparing its budgets for 2020. The company produces and sells a single product, Z, which currently has a selling price of £100 for each unit. The budgeted sales units for 2020 are expected to be as follows: Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec 5,000 5,500 6,000 6,000 6,250 6,500 6,250 7,000 7,500 7,750 8,000 7,500 The company expects to sell 7,000 units in January...
ABC Company is preparing budgets for the third quarter ending Sept 30, 2019. Budgeted sales for...
ABC Company is preparing budgets for the third quarter ending Sept 30, 2019. Budgeted sales for the next five months are; · July 20,681 units · Aug 50,020 units · Sept 30,150 units · Oct 25,309 units · Nov 15,000 units The selling price is $15 per unit. All sales are on account. ABC’s collection pattern is 60% collected in the month of sale and remaining amount in the month following sale. The June 30 Accounts Receivable balance of $50,000...
Donahue Company is preparing budgets for the third quarter ending Sept 30, 2019. Budgeted sales for...
Donahue Company is preparing budgets for the third quarter ending Sept 30, 2019. Budgeted sales for the next five months are; · July 20,681 units · Aug 50,020 units · Sept 30,150 units · Oct 25,309 units · Nov 15,000 units The selling price is $15 per unit. All sales are on account. Donahue’s collection pattern is 60% collected in the month of sale and remaining amount in the month following sale. The June 30 Accounts Receivable balance of $50,000...
The following information provides details of the cost, volume and cost drivers for the particular period...
The following information provides details of the cost, volume and cost drivers for the particular period in respect of ABC & Co. Products X Y Z Total Production and sales (units) 30,000 20,000 8,000 Raw material usage (units) 5 5 11 Direct material cost GHS 25 GHS 20 GHS 11 GHS 1,238,000 Direct labour hours 1⅓ 2 1 88,000 Machine hours 1⅓ 1 2 76,000 Direct labour cost 8 12 6 Number of production run 3 7 20 30 Number...
Explain the main objectives of preparing budgets and critically evaluate the statement: “The sales budget is...
Explain the main objectives of preparing budgets and critically evaluate the statement: “The sales budget is the foundation of all other budgets? (300 words) Management Accounting
Sales, production, purchases, and cash budgets Freese, Inc., is in the process of preparing the fourth...
Sales, production, purchases, and cash budgets Freese, Inc., is in the process of preparing the fourth quarter budget for 2013, and the following data have been assembled: Problem 14.23 LO 4, 5, 8 The company sells a single product at a price of $60 per unit. The estimated sales volume for the next six months is as follows: September ................................................................13,000 units October .....................................................................12,000 units November...................................................................14,000 units December...................................................................20,000 units January........................................................................9,000 units February.....................................................................10,000 units All sales are on account. The company's collection...
Sales, production purchases, and cash budgets Freese, Inc., is in the process of preparing the fourth...
Sales, production purchases, and cash budgets Freese, Inc., is in the process of preparing the fourth quarter budget for 2013, and the following data have been assembled: • The company sells a single product at a price of $60 per unit. The estimated sales volume for the next six months is as follows: Problem 14.24 LO 4, 5, 8 September. ..................................13,000 units October. ..................................12,000 units November. ..................................14,000 units December. ..................................20,000 units January. ..................................9,000 units February. ..................................10,000 uhits All sales are...
Orange Inc. is preparing its annual budgets for the year ending December 31, 2020. Accounting assistants...
Orange Inc. is preparing its annual budgets for the year ending December 31, 2020. Accounting assistants furnish the data shown below. Product JB 50 Product JB 60 Sales budget:     Anticipated volume in units 401,600 203,100     Unit selling price $21 $27 Production budget:     Desired ending finished goods units 27,100 17,000     Beginning finished goods units 31,100 13,300 Direct materials budget:     Direct materials per unit (pounds) 2 3     Desired ending direct materials pounds 33,300 17,600     Beginning direct materials pounds 41,800 12,000     Cost per...
Deleon Inc. is preparing its annual budgets for the year ending December 31, 2020. Accounting assistants...
Deleon Inc. is preparing its annual budgets for the year ending December 31, 2020. Accounting assistants furnish the data shown below. Product JB 50 Product JB 60 Sales budget:     Anticipated volume in units 403,700 203,300     Unit selling price $23 $28 Production budget:     Desired ending finished goods units 27,900 19,300     Beginning finished goods units 31,600 12,600 Direct materials budget:     Direct materials per unit (pounds) 2 3     Desired ending direct materials pounds 33,600 16,700     Beginning direct materials pounds 43,200 14,800     Cost per...
Deleon Inc. is preparing its annual budgets for the year ending December 31, 2020. Accounting assistants...
Deleon Inc. is preparing its annual budgets for the year ending December 31, 2020. Accounting assistants furnish the data shown below. Product JB 50 Product JB 60 Sales budget:     Anticipated volume in units 401,600 203,100     Unit selling price $21 $27 Production budget:     Desired ending finished goods units 27,100 17,000     Beginning finished goods units 31,100 13,300 Direct materials budget:     Direct materials per unit (pounds) 2 3     Desired ending direct materials pounds 33,300 17,600     Beginning direct materials pounds 41,800 12,000     Cost per...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT