Why is consumer spending so important to the economy? What will happen if there was no consumer spending?

rev: 11_13_2014_QC_59020

The production department of Zan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

Units to be produced:

1st Quarter = 5,400
2nd Quarter = 8,400
3rd Quarter = 7,400
4th Quarter = 6,400

In addition, 6400 grams of raw materials inventory is on hand at the start of the 1st Quarter and the beginning accounts payable for the 1st Quarter is 3280. Each unit requires 8.40 grams of raw material that costs $1.40 per gram. Management desires to end each quarter with an inventory of raw materials equal to 30% of the following quarter's production needs. The desired ending inventory for the 4th Quarter is 8400 grams. Management plans to pay for 50% of raw material purchases in the quarter acquired and 50% in the following quarter. Each unit requires 0.30 direct labor-hours and direct laborers are paid $10.70 per hour.

1.Prepare the company's direct materials budget for the upcoming fiscal year (Round "Unit cost of raw materials" answers to 2 decimal places).
2.Prepare a schedule of expected cash disbursements for purchases of materials for the upcoming fiscal year.
3.Prepare the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced. (Round "Direct labor-hours per unit" and "Direct labor cost per hour" answers to 2 decimal places.)

Alpha-Tech, a rapidly growing distributor of electronic components, is formulating its plans for 20x5. Carol Jones, the firm’s marketing director, has completed the following sales forecast.

Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. The following information will be used in preparing the cash flow projection.

• Alpha-Tech’s excellent record in accounts receivable collection is expected to continue. Sixty percent of billings are collected the month after the sale, and the remaining 40 percent two months after.
• The purchase of electronic components is Alpha-Tech’s largest expenditure, and each month’s cost of goods sold is estimated to be 35 percent of sales. Seventy percent of the parts are received by Alpha-Tech one month prior to sale, and 30 percent are received during the month of sale.
• Historically, 70 percent of accounts payable has been paid one month after receipt of the purchased components, and the remaining 30 percent has been paid two months after receipt.
• Hourly wages and fringe benefits, estimated to be 30 percent of the current month’s sales, are paid in the month incurred.
• General and administrative expenses are projected to be $15,770,000 for the year. The breakdown of these expenses is presented in the following schedule. All cash expenditures are paid uniformly throughout the year, except the property taxes, which are paid in four equal installments at the end of each quarter.

  20x5 Forecasted General and Administrative Costs
  (in thousands)
  Salaries and fringe benefits	$	3,200
  Promotion		3,700
  Property taxes		1,390
  Insurance		2,170
  Utilities		1,700
  Depreciation		3,610
  Total	$	15,770

• Income-tax payments are made at the beginning of each calendar quarter based on the income of the prior quarter. Alpha-Tech is subject to an income-tax rate of 40 percent. Alpha-Tech’s operating income for the first quarter of 20x5 is projected to be $3,200,000. The company pays 100 percent of the estimated tax payment.
• Alpha-Tech maintains a minimum cash balance of $530,000. If the cash balance is less than $530,000 at the end of each month, the company borrows amounts necessary to maintain this balance. All amounts borrowed are repaid out of the subsequent positive cash flow. The projected April 1, 20x5, opening balance is $530,000.
• Alpha-Tech has no short-term debt as of April 1, 20x5.
• Alpha-Tech uses a calendar year for both financial reporting and tax purposes.

Required:

1. Prepare a cash budget for Alpha-Tech by month for the second quarter of 20x5. For simplicity, ignore any interest expense associated with borrowing. (Negative amounts should be indicated by a minus sign.)

Alpha-Tech, a rapidly growing distributor of electronic components, is formulating its plans for 20x5. Carol Jones, the firm’s marketing director, has completed the following sales forecast.

Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. The following information will be used in preparing the cash flow projection.

• Alpha-Tech’s excellent record in accounts receivable collection is expected to continue. Seventy percent of billings are collected the month after the sale, and the remaining 30 percent two months after.
• The purchase of electronic components is Alpha-Tech’s largest expenditure, and each month’s cost of goods sold is estimated to be 30 percent of sales. Seventy percent of the parts are received by Alpha-Tech one month prior to sale, and 30 percent are received during the month of sale.
• Historically, 70 percent of accounts payable has been paid one month after receipt of the purchased components, and the remaining 30 percent has been paid two months after receipt.
• Hourly wages and fringe benefits, estimated to be 30 percent of the current month’s sales, are paid in the month incurred.
• General and administrative expenses are projected to be $15,670,000 for the year. The breakdown of these expenses is presented in the following schedule. All cash expenditures are paid uniformly throughout the year, except the property taxes, which are paid in four equal installments at the end of each quarter.

  20x5 Forecasted General and Administrative Costs
  (in thousands)
  Salaries and fringe benefits	$	3,000
  Promotion		3,500
  Property taxes		1,330
  Insurance		2,830
  Utilities		1,500
  Depreciation		3,510
  Total	$	15,670

• Income-tax payments are made at the beginning of each calendar quarter based on the income of the prior quarter. Alpha-Tech is subject to an income-tax rate of 40 percent. Alpha-Tech’s operating income for the first quarter of 20x5 is projected to be $3,000,000. The company pays 100 percent of the estimated tax payment.
• Alpha-Tech maintains a minimum cash balance of $510,000. If the cash balance is less than $510,000 at the end of each month, the company borrows amounts necessary to maintain this balance. All amounts borrowed are repaid out of the subsequent positive cash flow. The projected April 1, 20x5, opening balance is $510,000.
• Alpha-Tech has no short-term debt as of April 1, 20x5.
• Alpha-Tech uses a calendar year for both financial reporting and tax purposes.

Required:

1. Prepare a cash budget for Alpha-Tech by month for the second quarter of 20x5. For simplicity, ignore any interest expense associated with borrowing. (Negative amounts should be indicated by a minus sign.)

2. ALPHA-TECH
   Cash Budget
   For the Second Quarter of 20x5
   	April	May	June
   Beginning balance
   Collections:
   February sales
   March sales
   April sales
   May sales
   Total receipts	$0	$0	$0
   Total cash available	$0	$0	$0
   Disbursements:
   Accounts payable
   Wages
   General and administrative
   Property taxes
   Income taxes
   Total disbursements	$0	$0	$0
   Cash balance	$0	$0	$0
   Cash borrowed
   Cash repaid
   Ending balance	$0	$0	$0

   This is a numeric cell, so please enter numbers only.

Which one of the following statements is accurate in explaining the expenditure multiplier effect?

-A cash infusion into an economy has a larger impact than an increase is spending.

-There is no impact from an increase in spending.

-A cash infusion has less of an impact on an economy than an increase in spending.

Test 4 #1-5

What is the mid-quarter convention?