Bobcat Printing makes custom t---shirts and other promotional products for student organizations and businesses. It is beginning its first year of operations and needs to plan for its first quarter of operations. They would like to maximize their profits, and understand that accurate budgeting can help achieve that goal. The budgets will be prepared based on the following information: a. Sales are budgeted at $20,000 for Month 1, $25,000 for Month 2, and $27,000 for Month 3. All sales will be done on account. Company does not expect to have any cash sales. b. Sales are collected 60% in the month of the sale, and 40% in the month following the sale. c. Cost of Goods Sold is budgeted at 45% of Sales. d. Monthly selling, general, and administrative expenses are as follows: donations are 10% of sales; advertising is 3% of sales; miscellaneous is 1% of sales; and rent is $5,000 per month. All SG&A expenses are paid in the month they are incurred. e. Sincealloftheordersarecustommade,noinventoryiskeptonhandattheendofthe month. f. Inventory purchases are paid in full in the month following the purchase. g. BobcatPrinting is planning to purchase a building in Month 3 for $6,000 in cash. h. Theywouldliketomaintainaminimumcashbalanceof$2,500attheendofeachmonth. Thecompanyhasanagreementwithalocalbankthatallowsthemtoborrow,withatotalline ofcreditof$20,000.Theinterestrateontheseloansis1%permonth(12%annual).They wouldasfaras able,repaytheloanonthelastdayofthemonthwhenithasenoughcashto pay the full balance and maintain an adequate ending cash balance. i. The owner makes a draw of $3,000 every month. (Note: sole proprietors and partnerships take owner’s draws, while stockholders receive dividends). Based upon the information provided, complete the operating budgets provided in the excel template, and answer the questions in TRACS. When making calculations always round up (for example: 33 × 7% = 2.31, round up to 3.00). Check Figures: Gross Margin $39,600 Total assets $19,300 Ending Retained Earnings $5,507

Questions:

5)

To what can we attribute the difference between budgeted cost of goods sold and projected cash payments for inventory in the first quarter of operations?

A. Bobcat Printing sells its inventory in the month of purchase, and pays for its inventory one
month following purchase.

B. Customers do not pay for the goods it purchases until 30 days after the date of purchase.

C. Due to the Matching Concept, cash sales require payments for inventory in the month they occur.

D. There is no difference between the cost of goods sold and cash payments.

6)

What is the total budgeted SG&A expense for the quarter?

A. $8,780

B. $7,000

C. $13,440

D. $25,080

7)

What is the total projected cash payments for SG&A expense?

A. $25,080

B. $15,000

C. $8,780

D. $7,000

8)

Are there A/R cash collections during the first month of the Sales Budget?

A. It is the first month of operations, so there are no prior credit sales.

B. None of the above are true.

C. There should be A/R cash collections for the first month of the Sales budget.

D. Due to the cash method, cash collections from A/R do not begin until the second month of the quarter.

Shamrock Shades operates in mall kiosks throughout the southwestern United States. Shamrock purchases sunglasses from bulk discounters and sells the sunglasses in the mall kiosks. Shamrock is in the process of budgeting for the coming year and has projected sales of $360,000 for January, $440,000 for February, $600,000 for March, and $640,000 for April. Shamrock’s desired ending inventory is 55 percent of the following month’s cost of goods sold. Cost of goods sold is expected to be 45 percent of sales.

Required:

Compute the required purchases for each month of the first quarter (January, February and March).

TBA, Inc., manufactures and sells concrete block for residential and commercial building. TBA expects to sell the following in 20x1:

Quarter 1 Quarter 2 Quarter 3 Quarter 4

Units 2,000,0000 6,000,000 6,000,000 2,000,000

Unit Selling Price $0.70 $0.70 $0.80 $0.80

Quarter Units Sales Ending Inventory

1 2,000,000 500,000

2 6,000,000 500,000

3 6,000,000 100,000

4 2,000,000 100,000

Inventory on both January 1, 20x1, and January 1, 20x2, is expected to be 100,000 blocks.

Each block requires 26 pounds of raw materials (a mixture of cement, sand, gravel, shale, pumice, and water). TBA's raw materials inventory policy is to have 5 million pounds in ending inventory for the third and fourth quarters and 8 million pounds in ending inventory for the first and second quarters. Thus, desired direct materials inventory on both January 1, 20x1, and January 1, 20x2, is 5,000,000 pounds of materials. Each pound of raw materials costs $0.01.

Each block requires 0.015 direct labor hour; direct labor is paid $14 per direct labor hour.

Variable overhead is $8 per direct labor hour. Fixed overhead is budgeted at $320,000 per quarter ($100,000 for supervision, $200,000 for depreciation, and $20,000 for rent).

TBA also provided the information that beginning finished goods inventory is $55,000; and the ending finished goods inventory budget for ABT for the year $67,000.

TBA's only variable marketing expense is a $0.05 commission per unit (block) sold. Fixed marketing expenses for each quarter include the following:

Salaries: $20,000

Depreciation: 5,000

Travel: 3,000

Advertising expense is $10,000 in Quarters 1, 3, and 4. However, at the beginning of the summer building season, TBA increases advertising; in Quarter 2, advertising expense is $15,000.

TBA has no variable administrative expenses. Fixed administrative expenses for each quarter include the following:

Salaries $35,000

Insurance 4,000

Depreciation 12,000

Travel 2,000

Income taxes are paid at the rate of 30 percent of operating income.

Of the sales on account, 70 percent are collected in the quarter of sale; the remaining 30 percent are collected in the quarter following the sale. Total sales for the fourth quarter of 20x0 totaled $2,000,000.

All materials are purchased on account; 80 percent of purchases are paid for in the quarter of purchase. The remaining 20 percent are paid in the following quarter. The purchases for the fourth quarter of 20x0 were $500,000.

TBA requires a $100,000 minimum cash balance for the end of each quarter. On December 31, 20x0, the cash balance was $120,000.

Money can be borrowed and repaid in multiples of $100,000. Interest is 12 percent per year. Interest payments are made only for the amount of the principal being repaid. All borrowing takes place at the beginning of a quarter, and all repayment takes place at the end of a quarter.

Budgeted depreciation is $200,000 per quarter for overhead, $5,000 for marketing expense, and $12,000 for administrative expense. (Remember that depreciation is not a cash expense and must be deleted from total expenses before the cash budget is prepared.)

The capital budget for 20x1 revealed plans to purchase additional equipment for $600,000 in the first quarter. The acquisition will be financed with operating cash, supplementing it with short-term loans as necessary.

Corporate income taxes of $20,700 will be paid at the end of the fourth quarter.

The balance sheet for the beginning of the year is given:

Balance Sheet

December 31, 20x0

Assets

Current assets:

Cash..................................................................... $ 120,000

Account receivable............................................... 300,000

Material inventory................................................. 50,000

Finished goods inventory..................................... 55,000

Total goods inventory....................................................................... $525,000

Property, plant, and equipment (PP&E):

Land..................................................................... $ 2,500,000

Buildings and equipment...................................... 9,000,000

Accumulated depreciation.................................... (4,500,000)

Total PP&E:.................................................................................... 7,000,000

Total Assets.............................................................................................. $ 7,525,000

Liabilities and Stockholders' Equity

Current Liabilities:

Account payable........................................................................................ $ 100,000   

Stockholders' equity:

Common Stock, no par....................................... $ 600,000

Retained earnings.............................................. 6,825,000

Total stockholders' equity.............................................................. 7,425,000

Total liabilities and stockholders' equity ................................................... $ 7,525,000

REQUIREMENTS (to be completed using Excel)

Total assets

1. Construct a budgeted income statement for the coming year.

2. Construct a cash receipts budget for each quarter of the coming year.

3. Construct a cash payments budget each quarter of the coming year.

4. Prepare a cash budget for each quarter of the coming year.

5. Prepare the Budgeted Balance Sheet for the coming year

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University. Tami’s Creations, Inc. Income Statement For the Quarter Ended March 31 Sales (22,000 units) $ 798,600 Variable expenses: Variable cost of goods sold $ 259,600 Variable selling and administrative 173,800 433,400 Contribution margin 365,200 Fixed expenses: Fixed manufacturing overhead 205,000 Fixed selling and administrative 221,000 426,000 Net operating loss $ ( 60,800) Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter. At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow: Units produced 25,000 Units sold 22,000 Variable costs per unit: Direct materials $ 7.10 Direct labor $ 2.90 Variable manufacturing overhead $ 1.80 Variable selling and administrative $ 7.90 Required: 1. Complete the following: a. Compute the unit product cost under absorption costing. b. What is the company’s absorption costing net operating income (loss) for the quarter? c. Reconcile the variable and absorption costing net operating income (loss) figures. 3. During the second quarter of operations, the company again produced 25,000 units but sold 28,000 units. (Assume no change in total fixed costs.) a. What is the company’s variable costing net operating income (loss) for the second quarter? b. What is the company’s absorption costing net operating income (loss) for the second quarter? c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 33,450 units but sold 38,450 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University. Tami’s Creations, Inc. Income Statement For the Quarter Ended March 31

Sales (28,600 units) $ 1,144,000

Variable expenses:

Variable cost of goods sold $ 420,420

Variable selling and administrative 198,770 619,190 Contribution margin 524,810

Fixed expenses:

Fixed manufacturing overhead 274,920

Fixed selling and administrative 262,940 537,860

Net operating loss $ ( 13,050)

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter. At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Units produced 31,600

Units sold 28,600

Variable costs per unit:

Direct materials $ 7.20

Direct labor $ 5.70

Variable manufacturing overhead $ 1.80

Variable selling and administrative $ 6.95

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 31,600 units but sold 34,600 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 32,000 units but sold 35,000 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 32,000 units but sold 35,000 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 25,000 units but sold 28,000 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 31,900 units but sold 34,900 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.