Exercise 8-6 Selling and Administrative Expense Budget

Weller Company's budgeted unit sales for the upcoming fiscal year are provided below:

The company’s variable selling and administrative expense per unit is $2.50. Fixed selling and administrative expenses include advertising expenses of $8,000 per quarter, executive salaries of $35,000 per quarter, and depreciation of $20,000 per quarter. In addition, the company will make insurance payments of $5,000 in the first quarter and $5,000 in the third quarter. Finally, property taxes of $8,000 will be paid in the second quarter.

Required:

Prepare the company’s selling and administrative expense budget for the upcoming fiscal year. (Round "Per Unit" answers to 2 decimal places.)

Increases in government purchases of goods and services, G, and cuts in taxes, T, can have a larger effect on aggregate demand. This is called the ____________________________ effect. This effect will be greater, the (higher, lower) the marginal propensity to consume is. (2 points; 1 point each)

While an increase in G or a cut in T, by raising incomes and the demand for money, also raise interest rates and reduce investment spending. This effect of higher G or lower T is called __________________________________. (1 point)

Show the short run effects of an increase in consumer confidence on an open economy that is on a flexible exchange rate. (Hint: an increase in consumer confidence will increase autonomous consumption spending). To answer this question, draw the following five diagrams:

1. The goods market

2. The money market

3. The IS-LM curves

4. The interest parity condition

5. The AS-AD curves

Label the initial and new equilibrium points on each diagram. Provide brief explanations for the changes

Assume a consumer has the utility function U (x1 , x2 ) = ln x1 + ln x2 and faces prices p1 = 1 and p2 = 3 . [He,She] has income m = 200 and [his,her] spending on the two goods cannot exceed her income.

Write down the non-linear programming problem. Use the Lagrange method to solve for the utility maximizing choices of x1 , x2 , and the marginal utility of income λ at the optimum.

The government has a budget surplus if

When government outlays exceed tax receipts, the situation is called a budget

The national debt is the amount

Social Security benefits and expenditures on Medicare and Medicaid are classified as

Discretionary fiscal policy is a fiscal policy action, such as

Needs-tested spending ________ during recessions and ________ during expansions.

Milo Company manufactures beach umbrellas. The company is preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation:

a. The Marketing Department has estimated sales as follows for the remainder of the year (in units):

     July                  30,000               October                  20,000

     August             70,000               November              10,000

     September       50,000               December              10,000

             The selling price of the beach umbrellas is $12 per unit.

b. All sales are on account. Based on past experience, sales are collected in the following pattern:

          30% in the month of sale

          65% in the month following sale

            5% uncollectible

            Sales for June totaled $300,000.

c. The company maintains finished goods inventories equal to 15% of the following month’s sales. This requirement will be met at the end of June.

d. Each beach umbrella requires 4 feet of Gilden, a material that is sometimes hard to acquire. Therefore, the company requires that the ending inventory of Gilden be equal to 50% of the following month’s production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be:

             June 30                    72,000 feet

             September 30                ?    feet

e. Gilden costs $0.80 per foot. One-half of a month’s purchases of Gilden is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $76,000.


Required:

1. Calculate the estimated sales (prepare a sales budget), by month and in total, for the third quarter. (Show your budget in both units and dollars.)

2. Calculate the expected cash collections (prepare a schedule of expected cash collections), by month and in total, for the third quarter.

3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October (prepare a production budget for each of the months July–October).

4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter (this goes into the direct materials budget for Gilden, by month and in total, for the third quarter).

5.) Calculate the cost of the raw material (Gilden) purchases, by month and in total, for the third quarter (this goes into the direct materials budget for Gilden, by month and in total, for the third quarter).

6.) Calculate the expected cash disbursements for raw material (Gilden) purchases (prepare a schedule of expected cash disbursements), by month and in total, for the third quarter.

A report states that the cost of repairing a hybrid vehicle is falling even while typical repairs on conventional vehicles are getting more expensive. The most common hybrid​ repair, replacing the hybrid inverter​ assembly, had a mean repair cost of $3,927 in 2012. Industry experts suspect that the cost will continue to decrease given the increase in the number of technicians who have gained expertise on fixing​ gas-electric engines in recent months. Suppose a sample of 100 hybrid inverter assembly repairs completed in the last month was selected. The sample mean repair cost was $3,890 with the sample standard deviation of ​$300.

Complete parts​ (a) and​ (b) below.

a. Is there evidence that the population mean cost is less than $3,927​? ​(Use a 0.1 level of​ significance.)

1. A football player comes to you complaining of pain on his left side after falling on it while diving for a ball. He complains of some soreness over the lower thoracic ribs but most of the pain is just below that. He also noticed some pain in the left shoulder. After evaluating the athlete, you determine that his tenderness is centralized over the left flank (upper abdomen and back).

1. What structures can be involved and in what region and quadrant are they located?
2. What pathologies would you rule out?
3. Does this athlete demonstrate any referred pain patterns? If so, explain.
4. What do you think is wrong with this football player?
5. What are some red flags that this individual can experience?

Course Project: Master Budget

Milo-Freeze Company

This course contains a Course Project, where you will be required to submit the final completed project at the end of Week 7. Using the budgeting assumptions provided for Milo-Freeze Company, you will prepare a sales budget, a production budget, a direct materials budget and a schedule of expected cash payments for purchases of materials. An Excel template will be provided and required to use to complete and submit.

Milo-Freeze Company manufactures and sells a product that has seasonal variations in demand, with peak sales coming in the third quarter. The following information concerns operations for Year 2- the coming year- and for the first two quarters of Year 3:

1. The company’s single product sells for $10 per unit. Budgeted sales in units for the next six quarters are as follows:

2. Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining 25% in the following quarter. On January 1, Year 2, the company’s balance sheet showed $65,000 in accounts receivable, all of which will be collected by the end of first quarter. Bad debts are negligible and can be ignored.
3. The company desires an ending inventory of finished units on hand at the end of each quarter equal to 30% of the budgeted sales for the next quarter. On December 31, Year 1, the company had 12,000 units on hand.

4. Six pounds of raw materials are required to complete one unit of product. The company requires an ending inventory of raw materials on hand at the end of each quarter equal to 10% of the production needs of the following quarter. On December 31, Year 1, the company had 23,000 pounds of raw materials on hand.

5. The raw material costs $0.80 per pound. Purchases of raw material are paid for in the following pattern: 60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter. On January 1, Year 2, the company’s balance sheet showed $81,500 in accounts payable for raw material purchases, all of which will be paid for in the first quarter of the year.

Prepare the following budgets and schedules for the year, showing both quarterly and total figures:

1. A sales budget.
2. A cash collections budget.
3. A production budget.
4. A direct materials budget.
5. Cash payments for purchases of materials schedule.

Your final project should be completed and submitted as an Excel file.

The entire project will be graded by the instructor at the end of the final submission in Week 7, and one grade will be assigned for the entire project. The project will count for 20% of your overall course grade.

Excel Sheets Needed:

Sales Budget page, Cash Collections Budget, Production Budget, Direct Materials Budget, Cash Payments