Near the end of 2017, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2017.

To prepare a master budget for January, February, and March of 2018, management gathers the following information.

The company’s single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 5,000 units on December 31, 2017, is more than management’s desired level, which is 20% of the next month’s expected sales (in units). Expected sales are: January, 7,000 units; February, 9,000 units; March, 11,000 units; and April, 10,000 units.

Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the December 31, 2017, accounts receivable balance, $125,000 is collected in January and the remaining $400,000 is collected in February.

Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2017, accounts payable balance, $80,000 is paid in January and the remaining $280,000 is paid in February.

Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $60,000 per year.

General and administrative salaries are $144,000 per year. Maintenance expense equals $2,000 per month and is paid in cash.

Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $36,000; February, $96,000; and March, $28,800. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month’s depreciation is taken for the month in which equipment is purchased.

The company plans to buy land at the end of March at a cost of $150,000, which will be paid with cash on the last day of the month.

The company has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $25,000 at the end of each month.

The income tax rate for the company is 40%. Income taxes on the first quarter’s income will not be paid until April 15.

Required:
Prepare a master budget for each of the first three months of 2018; include the following component budgets:

6. Monthly cash budgets.
7. Budgeted income statement for the entire first quarter (not for each month).
8. Budgeted balance sheet as of March 31, 2018.

A mining company has constructed a town near the site of a rich mineral discovery in a remote part of Australia. It is expected the mineral deposit will be exhausted in 10 years and mining operations will cease and the town will be abandoned after the 10-year period. You have been asked by an agricultural company to evaluate an associated project that involves supplying the mining town with meat and agricultural produce for the 10-year period by developing nearby land. Costs, sales and operating expenses relating to the project are: 1) Investment in land is $1,000,000, farm buildings $200,000 and farm equipment $400,000. 2) The land is expected to have a realisable value of $500,000 in 10 years. 3) The buildings have an estimated life of 20 years at which time their salvage value would be zero. They are to be depreciated on a straight line (prime cost) basis for tax purposes based on this life. The salvage value of the buildings after 10 years is expected to be $50,000. 4) The farm equipment has an estimated life of 10 years and a zero salvage value. The equipment is to be depreciated on a straight line (prime cost) basis for tax purposes based on this life. 5) Investment in working capital is $250,000. This will be recovered at the end of the project’s life. 6) Annual cash sales are estimated to be $3,000,000. 7) Annual cash operating costs are estimated to be $2,200,000 8) Assume tax is paid one year after the year of income 9) The company tax rate is 39 per cent 10) The company required rate of return after-tax is 10 per cent.

Required: Should the agricultural company undertake the project?

1. Igor Beaver is a salesman for Planet of the Grapes, a medium sized winery near Solvang. Igor is going on a sales trip visiting 10 restaurants throughout Southern California. Historically, Igor convinces 30% of the restaurants he visits to stock and sell his wine. a. What is the expected number of restaurants that Igor will close a sale on this trip? b. Find the variance. What is the probability that on this sales trip Igor make sales at c. 4 restaurants or less? d. Between 2 and 4 restaurants? e. Exactly 4 restaurants? f. At least 5 restaurants? g. Igor gives each new client a gift. How many gifts should he take on the trip to be at least 99% sure that he has enough? h. Find and plot the probability distribution and cumulative distribution using Excel.

[The following information applies to the questions displayed below.]

A mortar* crew is positioned near the top of a steep hill. Enemy forces are charging up the hill and it is necessary for the crew to spring into action. Angling the mortar at an angle of θ = 57.0o (as shown), the crew fires the shell at a muzzle velocity of 241 feet per second. How far down the hill does the shell strike if the hill subtends an angle φ = 36.0o from the horizontal? (Ignore air friction.)

How long will the mortar shell remain in the air?

How fast will the shell be traveling when it hits the ground?

Two fuel storage tanks will be placed at an oil refinery near Bakersfield. The tanks are 10 m in diameter, are spaced center-to-center at 15 m, and contain fuel that has a Gs=0.95. The height of the fuel in the tanks is 4 m. Determine the stress change in the soil below the tanks at 4 locations: a) beneath the centerline between the tanks, b) beneath the edge closest to the other tank, c) beneath the center of one tank, and d) beneath the far edge of the tank. These calculation need to be carried out for a depth of 10 m. Assume the base of the tanks rests on the ground surface (no embedment), that the water table is very deep, and the unit weight is 18 kN/m3 .

You boss expects prices to go up in the near future and wants to use an option strategy. Explain to your boss when he wants to use the following strategies:

1. A naked call option purchased
2. A naked put option sold
3. A bull money spread using calls starting at the same strike price as in Part 1
4. A bull money spread using puts starting at the same strike price as in Part 1

Pareto Chart and Cost of Quality Report for a Manufacturing Company

The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The result of the activity analysis is summarized as follows:

Required:

1. Classify the activities into prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Classify the activities into value-added and non-value added activities.

2. On paper or in a spreadsheet program, prepare a Pareto chart for each of the activities listed above. Answer the following:

What type of chart is a Pareto chart?

Which activity appears first, in order from left to right?

3. Use the activity cost information to determine the percentages of total department costs that are prevention, appraisal, internal failure, external failure, and not costs of quality. If required, round percentages to one decimal place.

4. Determine the percentages of total department costs that are value-added and non-value-added. If required, round percentages to one decimal place.

5. The department has 34% of its total costs as . costs represent 25% of the total costs. This means there is opportunity for cost savings. costs represent 9% of the total department costs.

Explain the relationship between the number of units sold in a day in a fast food restaurant and each of the following: total fixed costs per unit of activity, total variable costs, variable cost per unit of activity, total costs, and average total cost per unit of activity.