In: Accounting
Question 3
A- ABC company has two divisions--Women and Men. The divisions have the following revenues and expenses:
Women |
Men |
|||||
Sales |
$ |
500,000 |
$ |
550,000 |
||
Variable costs |
200,000 |
275,000 |
||||
Traceable fixed costs |
150,000 |
180,000 |
||||
Allocated common corporate costs |
135,000 |
170,000 |
||||
Net income (loss) |
$ |
15,000 |
$ |
(75,000) |
||
The management of ABC is considering the elimination of the Men Division. If the Men Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision.
Required:
Should the Company drop Men division? Explain. Support you answer with the necessary calculations. (7.5 marks)
B- XYZ Company manufactures and sell wooden product. It wants to prepare cash budget for the second quarter of the year. The company’s sales budget for the second quarter given below:
April |
May |
June |
Total |
|
Budgeted Credit Sales |
$470,000 |
$670,000 |
$230,000 |
$1,370,000 |
- Credit sales are collected as follows:
25% in the same month of sale, 65% in the month following sale, and 10% in the second month following sale
- February sales totaled $400,000, and March sales totaled $430,000.
Required:
1. Prepare the cash collection schedule for the second quarter.
2. What is the accounts receivable balance on June 30th? (7.5 marks)
C- ABC Corporation has estimated the following information for first quarter of 2020 for one of its products:
January |
February |
March |
||
Units to be produced |
128,000 |
140,000 |
152,000 |
|
Desired ending inventory of finished goods |
30,000 |
36,000 |
38,000 |
|
The ending inventory at December 2019 was 28,000 units.
Required:
Prepare the Production Budget and the Sales Budget for the first quarter of 2020, assuming selling price per unit is $20.
D- The following information has been take from a manufacturing company for the year 2019:
Sales revenues 36,000 – opening inventory of materials 10,000 – closing inventory of materials 8,000 – opening inventory of finished goods 6,000 – closing inventory of finished goods 4,000 – cost of goods produced 26,000
Required: Calculate cost of goods sold and gross profit for the year ended December 31, 2019.
A.
Loss of Contribution Margin | $ (275,000) |
Saving of Fixed Costs | $ 180,000 |
Financial Advantage (Disadvantage) | $ (95,000) |
Mens line should not be eliminated since contribution lost is higher than fixed costs avoided.
B.
1.
Cash collections schedule | ||||
April | May | June | Quarter | |
Feb Sales | $ 40,000 | $ 40,000 | ||
Mar Sales | $ 279,500 | $ 43,000 | $ 322,500 | |
April Sales | $ 117,500 | $ 305,500 | $ 47,000 | $ 470,000 |
May Sales | $ 167,500 | $ 435,500 | $ 603,000 | |
June Sales | $ 57,500 | $ 57,500 | ||
Total Cash Collections | $ 437,000 | $ 516,000 | $ 540,000 | $ 1,493,000 |
2.
Accounts Receivable Balance = $670000 x 10% + 230000 x 75% =
$239500
C.
Production Budget | ||||
July | August | September | Quarter | |
Sales units | 126000 | 134000 | 150000 | 410000 |
Add : Desired Ending Inventory | 30000 | 36000 | 38000 | 38000 |
Total Goods Required | 156000 | 170000 | 188000 | 448000 |
Less : Beginning Inventory | 28000 | 30000 | 36000 | 28000 |
Production Required | 128000 | 140000 | 152000 | 420000 |
Sales Budget | ||||
July | August | September | Quarter | |
Sales units | 126000 | 134000 | 150000 | 410000 |
Selling Price per unit | $ 20 | $ 20 | $ 20 | |
Sales Revenue | $ 2,520,000 | $ 2,680,000 | $ 3,000,000 | $ 8,200,000 |
D.
Cost of Goods Sold = Cost of goods produced + Opening inventory of
finished goods - ending inventory of finished goods
= 26000 + 6000 - 4000 = 28000 units
Gross Profit = Sales Revenue - Cost of Goods sold
= 36000 - 28000 = 8000