The condensed income statement for the Blossom and Paul partnership for 2020 is as follows.

A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable.

1) Compute the break-even point in total sales dollars for 2020.

2) Blossom has proposed a plan to get the partnership “out of the red” and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.30 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Blossom estimates that sales volume will increase by 25%. Compute the net income under Blossom's proposal and the break-even point in dollars

1. Sales Budgets

2. Production Budget

3. Raw Materials Budget

4. Direct Labor Budget

5. Factory Overhead Budget

6. Selling Expense Budget

7, General and Administrative Expense Budget

8.. Cash Budget

9. Budgeted Income Statement for the entire first quarter

10. Budgeted Balance Sheet

Sienna Corporation is preparing budgets for the upcoming quarter ending June 30. Budgeted sales (in units) for the next five months are:

Below is additional information that may be relevant in preparing the budgets.

• The company produces professional quality bowls that sell for $31.50 per unit.
• To guard against inventory stockouts, the company has a policy of maintaining an ending inventory of 18 percent of the following month’s budgeted sales. At the beginning of April, Sienna Corp. had 15,000 units in inventory.
• Each unit of output requires 2 kilograms of direct material. To guard against stockouts of raw materials, the company has a policy of maintaining a raw materials inventory of 20 percent of the following month’s production. At the beginning of April, Sienna Corp. has 32,000 kilograms of direct materials on hand. Each kilogram of direct materials costs $1.00.
• Each unit of output requires 0.2 hours (12 minutes) of direct labour and employees are paid a standard rate of $22 per hour
• Sienna Corp. applies overhead using a variable rate of $15 per direct labour hour. The fixed overhead is $94,590 per month. Of that amount, $20,000 are non-cash costs, such as depreciation on assets.
• Sienna Corp. has both fixed and variable components to the selling and administrative expenses. Accountants at Sienna Corp. estimate that the variable selling and administrative expenses are $0.50 per unit sold. Fixed selling and administrative expenses are $140,000 per month, $20,000 are non-cash costs, such as depreciation on assets.
• Fifty percent of sales are made in cash. The remaining 50% of sales are made on account. The company collects 60% of sales made on account in the month of the sale, 20% in the month following the sale, and 15% in the second month following the sale. Sienna Corporation had total sales of $882,000 in February and $756,000 in March
• Sienna Corporation pays $1.00 per kilogram of direct materials. The company pays of half of its purchases in the month of the purchase and the remaining half in the month following the purchase. At the beginning of the quarter, Sienna Corporation owed its creditors $42,400 for purchases of direct materials.

Required:

1. Prepare a sales budget for the months of April, May, and June, and for the quarter.

2. Prepare a production budget for the months of April, May and June, and for the quarter-end. [Note: you might want to compute the production needs for July since you will need that information for subsection (C)]

3. Prepare the direct materials purchases budget for the months of April, May and June, and for the quarter-end.

4. Prepare the direct labour budget for the months of April, May and June, and for the quarter-end.

5. Prepare the overhead budget for the months of April, May and June, and for the quarter-end.

6. Prepare the ending finished goods inventory budget for the quarter ending June 30.

7. Prepare the accounts receivable collections schedule for the months of April, May and June.

8. Prepare the cash payments on accounts payable schedule for the months of April, May, and June.

The Production Department of Hruska Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

Each unit requires 0.30 direct labor-hours and direct laborers are paid $12.50 per hour.

In addition, the variable manufacturing overhead rate is $2.05 per direct labor-hour. The fixed manufacturing overhead is $90,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $30,000 per quarter.

Required: (SHOW ALL WORK)

1. Calculate the company’s total estimated direct labor cost for each quarter of the the upcoming fiscal year and for the year as a whole. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the estimated number of units produced.

2&3. Calculate the company’s total estimated manufacturing overhead cost and the cash disbursements for manufacturing overhead for each quarter of the the upcoming fiscal year and for the year as a whole.

The quarterly sales data (number of copies sold) for a college textbook over the past three years follow.

Click on the datafile logo to reference the data.

quarter year 1 year 2 year 3  

1 1690 1800 1850

2 940 900 1100

3 2625 2900 2930

4 2500    2360    2615

e. Deseasonalize the time series (to 3 decimals).

f. Compute the linear trend equation for the deseasonalized data (to 1 decimal if necessary).
Deseasonalized Value =____ +____ Period

Compute the forecast sales using the linear trend equation (to 1 decimal).

g. Adjust the linear trend forecasts using the adjusted seasonal indexes computed in part (c) (to the nearest whole number).

1. According to Keynes, what is the most important determinant of (or influence on) the level of Consumer Spending households undertake in a time period?

2. Use the following Consumption function data to answer the questions below: Real Disposable Income Consumption Saving MPC MPS $100 $150 $200 $200 $300 $250 $400 $300 $500 $350 A. What is Saving if Real Disposable Income = $400. What is Saving if Yd = 500? B. What is the marginal propensity to consume (MPC)? C. What is the marginal propensity to save (MPS)? D. What is the break-even income (level of income at which Saving = 0)? E. What is the mathematical relation between the MPC and the MPS?

3. Suppose most business executives expect a slowdown in the economy (slower sales growth for their firm). How might that affect the economy?

PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, g, h] Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted Unit Sales 36,000 56,000 28,000 56,000 Each T-shirt is expected to sell for $11. The purchasing manager buys the T-shirts for $4 each. The company needs to have enough T-shirts on hand at the end of each quarter to fill 21 percent of the next quarter’s sales demand. Selling and administrative expenses are budgeted at $72,000 per quarter plus 10 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. 2. Determine budgeted cost of merchandise purchased for each quarter. 3. Determine budgeted cost of good sold for each quarter. 4. Determine selling and administrative expenses for each quarter. 5. Complete the budgeted income statement for each quarter. rev: 10_28_2016_QC_CS-67902

PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, g, h] Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted Unit Sales 46,000 72,000 36,000 72,000 Each T-shirt is expected to sell for $21. The purchasing manager buys the T-shirts for $8 each. The company needs to have enough T-shirts on hand at the end of each quarter to fill 31 percent of the next quarter’s sales demand. Selling and administrative expenses are budgeted at $92,000 per quarter plus 20 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. 2. Determine budgeted cost of merchandise purchased for each quarter. 3. Determine budgeted cost of good sold for each quarter. 4. Determine selling and administrative expenses for each quarter. 5. Complete the budgeted income statement for each quarter. rev: 10_28_2016_QC_CS-67902 ReferenceseBook

Cerner Corporation announced a first-come, first-serve stock repurchase offer to its shareholders – the company agreed to repurchase 2,653,780 shares of its common stock in exchange for total consideration of $173,434,000. Cerner had 329,641,500 total shares outstanding before the redemption.

You acquired 16,482,075 shares of Cerner's stock two years ago for $20/share. You were the only shareholder to participate in the repurchase offer and Cerner agreed to redeem the total number of shares directly from you.

Using the applicable tax rates provided below, compute your after-tax savings if the redemption is treated as an exchange as opposed to a dividend distribution. Any dividend income amounts should be considered ordinary income in character.

For purposes of the after-tax savings calculation, you should assume you are liable for the net investment income tax on both capital gains and dividend income.

Applicable tax rates:

Individual - ordinary income - 34%

Individual - long-term capital gains - 20%

Individual - net investment income - 3.8%

Cerner Corporation announced a first-come, first-serve stock repurchase offer to its shareholders – the company agreed to repurchase 2,653,780 shares of its common stock in exchange for total consideration of $173,434,000. Cerner had 329,641,500 total shares outstanding before the redemption. You acquired 16,482,075 shares of Cerner's stock two years ago for $20/share. You were the only shareholder to participate in the repurchase offer and Cerner agreed to redeem the total number of shares directly from you. Using the applicable tax rates provided below, compute your after-tax savings if the redemption is treated as an exchange as opposed to a dividend distribution. Any dividend income amounts should be considered ordinary income in character. For purposes of the after-tax savings calculation, you should assume you are liable for the net investment income tax on both capital gains and dividend income. Applicable tax rates: Individual - ordinary income - 34% Individual - long-term capital gains - 20% Individual - net investment income - 3.8%