VeeLance Company is a merchandiser that provided a balance sheet as of September 30 as shown below:

The company is in the process of preparing a budget for October and has assembled the following data:

1. Sales are budgeted at $620,000 for October and $630,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month’s credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October.
2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month’s cost of goods sold.
3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October.
4. Selling and administrative expenses for October are budgeted at $83,800, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,570 for the month.

Questions:

• Using the information provided, calculate or prepare a statement for each of the following:

a. Budgeted cash collections for October.

b. Budgeted merchandise purchases for October.

c. Budgeted cash disbursements for merchandise purchases for October.

d. Budgeted net operating income for October.

e. Budgeted balance sheet at October 31.

The following are the data regarding quarterly sales:

1. Find the forecast value of the sales for each quarter starting with Quarter 6, by using a 4-quarter moving average.

                  Evaluate this forecasting method using MAD.

                  Evaluate this forecasting method using MSE.

                  Evaluate this forecasting method using MAPE.

                  Evaluate this forecasting method using MPE.

2. Use exponential smoothing with a smoothing constant of 0.2 and an initial value of 500 to forecast the sales for Quarter 1.

X Co is identical in all operating and risk characteristics to Y Co, except that X Co is all equity financed and Y Co is financed by equity valued at RM2.1m and debt valued at RM0.9m based on market values. X Co and Y Co operate in a country where no tax is payable. The interest paid on Y Co’s debt is RM72,000 per annum, and it pays a dividend to shareholders of RM378,000 per annum. X Co pays an annual dividend of RM450,000.

Required:

(a) Calculate the value of X Co.

(b) Calculate the cost of capital for X Co.

(c) Calculate the cost of equity for Y Co, and the cost of debt for Y Co.

(d) Calculate the weighted average cost of capital for Y Co.

SOUTH DAKOTA CORPORATION(2-3)

SOUTH DAKOTA CORPORATION uses a job-order costing system with normal costing. At the start of the period, the company had the following balances:

At the start of the period, only Job Alpha was in finished goods.

During the month of February, the following transactions occurred:

Purchased raw materials on account for $24,500.

Requisitioned $23,000 of materials for use in production. Of the total, $9,000 was for Job Beta, $8,500 for Job Gamma and the remainder for Job Sigma.

Direct labor incurred for the month was $36,000. The average wage rate is $20 per hour. Direct labor was used for jobs as follows:

Job Beta – 800 hours

Job Gamma – 600 hours

Job Sigma – 400 hours

Actual overhead incurred for the period was $17,900 (credit various payables).

The company applied overhead to production at the rate of $10.00 per direct labor hour.

Job Beta and Job Gamma were completed during the period and transferred to finished goods.

Sold Job Alpha and Job Beta to their respective customers on account at cost plus 40%.

REQUIRED:

Prepare all journal entries for items a) through g)

Purchase                               $24,500

Account payable                              $24,500

Post all job costs to simplified job-cost sheets.

Post summary job-cost information and other transactions to T-accounts as appropriate.

Compute the ending raw materials, work in process and finished goods inventories.

Compute any misapplied overhead and journalize

Compute sales, cost of sales and gross profit as shown on the Income Statement.

it is July 2006 and you expect to receive ZAR 1 000 000 in October 2006 from a customer. While you believe that the $ will weaken in the next 3 months, you do not want to take chances, and therefore wish to hedge against the risk of a strengthening $. You gather the following information about the foreign currency and futures markets.

spot exchange rate                                                       $1.7640 per ZAR

Forecast spot rate in October                                        $1.7400 per ZAR

Contract size                                                                   ZAR 62500

Quoted spot buying price for October futures                $1.7310 par ZAR

Quoted spot selling price for October futures                 $1.7420 per ZAR

a) calculate the number of futures contracts you will buy or sell.

b) show how you can hedge against currency risk using the futures market hedge, assuming that in October 2006, you can close or cancel a short position at a price of $1.6890 per ZAR and a long position at a price of $1.6600 per ZAR and the forecast spot rate for October turned out to be the actual spot rate in October.