The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors:
| a. Purchased $138,800 of materials. | |
| b. Used $94,780 of direct materials in production. | |
| c. Incurred $181,280 of direct labor wages. | |
| d. Incurred $213,200 of factory overhead. | |
| e. Transferred $428,060 of work in process to finished goods. | |
| f. Sold goods for $654,000. | |
| g. Sold goods with a cost of $360,750. | |
| h. Incurred $85,320 of selling expense. | |
| i. Incurred $70,650 of administrative expense. |
| Required: | |||||
Using the information given, complete the following:
|
| Accounts | |
| Administrative expenses | |
| Cost of goods sold | |
| Selling expenses | |
| Revenues | |
| Labels | |
| For the Month Ended January 31 | |
| For the Year Ended January 31 | |
| Amount Descriptions | |
| Gross profit | |
| Net income | |
| Net loss | |
| Total operating expenses |
a. Prepare the January income statement for Sorensen Manufacturing Company. Be sure to complete the statement heading. Refer to the list of Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive.
|
Sorensen Manufacturing Company |
|
Income Statement |
|
1 |
|||
|
2 |
|||
|
3 |
|||
|
4 |
Operating expenses: |
||
|
5 |
|||
|
6 |
|||
|
7 |
|||
|
8 |
b. Using the information given, determine the inventory balances at the end of the first month of operations.
| Materials | |
| Work in process | |
| Finished goods |
In: Accounting
An inexperienced accountant prepared this condensed income statement for Cullumber Company, a retail firm that has been in business for a number of years.
| CULLUMBER COMPANY Income Statement For the Year Ended December 31, 2017 |
||
|---|---|---|
|
Revenues |
||
|
Net sales |
$1,275,000 | |
|
Other revenues |
33,000 | |
| 1,308,000 | ||
|
Cost of goods sold |
832,500 | |
|
Gross profit |
475,500 | |
|
Operating expenses |
||
|
Selling expenses |
163,500 | |
|
Administrative expenses |
154,500 | |
| 318,000 | ||
|
Net earnings |
$157,500 | |
As an experienced, knowledgeable accountant, you review the statement and determine the following facts.
| 1. | Net sales consist of sales $1,366,500, less freight-out on merchandise sold $49,500, and sales returns and allowances $42,000. | |
| 2. | Other revenues consist of sales discounts $27,000 and rent revenue $6,000. | |
| 3. | Selling expenses consist of salespersons’ salaries $120,000; depreciation on equipment $15,000; advertising $19,500; and sales commissions $9,000. The commissions represent commissions paid. At December 31, $4,500 of commissions have been earned by salespersons but have not been paid. All compensation should be recorded as Salaries and Wages Expense. | |
| 4. | Administrative expenses consist of office salaries $70,500; dividends $27,000; utilities $18,000; interest expense $3,000; and rent expense $36,000, which includes prepayments totaling $9,000 for the first quarter of 2018. |
Prepare a correct detailed multiple-step income statement. Assume a 25% tax rate. (List other revenues before other expenses. Round answers to 0 decimal places, e.g. 5,125.)
In: Accounting
An inexperienced accountant prepared this condensed income
statement for Cullumber Company, a retail firm that has been in
business for a number of years.
| CULLUMBER
COMPANY Income Statement For the Year Ended December 31, 2017 |
||
| Revenues | ||
| Net sales | $901,000 | |
| Other revenues | 23,320 | |
| 924,320 | ||
| Cost of goods sold | 588,300 | |
| Gross profit | 336,020 | |
| Operating expenses | ||
| Selling expenses | 115,540 | |
| Administrative expenses | 109,180 | |
| 224,720 | ||
| Net earnings | $111,300 | |
As an experienced, knowledgeable accountant, you review the
statement and determine the following facts.
| 1. | Net sales consist of sales $965,660, less freight-out on merchandise sold $34,980, and sales returns and allowances $29,680. | |
| 2. | Other revenues consist of sales discounts $19,080 and rent revenue $4,240. | |
| 3. | Selling expenses consist of salespersons’ salaries $84,800; depreciation on equipment $10,600; advertising $13,780; and sales commissions $6,360. The commissions represent commissions paid. At December 31, $3,180 of commissions have been earned by salespersons but have not been paid. All compensation should be recorded as Salaries and Wages Expense. | |
| 4. | Administrative expenses consist of office salaries $49,820; dividends $19,080; utilities $12,720; interest expense $2,120; and rent expense $25,440, which includes prepayments totaling $6,360 for the first quarter of 2018. |
Prepare a correct detailed multiple-step income statement. Assume a
25% tax rate. (List other revenues before other
expenses. Round answers to 0 decimal places, e.g.
5,125.)
In: Accounting
McDonald’s Corporation
When most firms were struggling in 2008, McDonald’s increased its revenues from $22.7 billion in 2007 to $23.5 billion in 2008. Headquartered in Oak Brook, Illinois McDonald’s net income nearly doubled during that time from $2.4 billion to $4.3 billion—quite impressive. Fortune magazine in 2009 rated McDonald’s as their 16th “Most Admired Company in the World” in terms of their management and performance.
McDonald’s added 650 new outlets in 2009 when many restaurants struggled to keep their doors open. McDonald’s low prices and expanded menu items have attracted millions of new customers away from sit-down chains and independent eateries. Jim Skinner, CEO of McDonald’s, says, “We do so well because our strategies have been so well planned out.” McDonald’s served about 60 million customers every day in 2009, 2 million more than in 2008. Nearly 80 percent of McDonald’s are run by franchisees (or affiliates).
McDonald’s in 2009 spent $2.1 billion to remodel many of its 32,000 restaurants and build new ones at a more rapid pace than in recent years. This is in stark contrast to most restaurant chains that are struggling to survive, laying off employees, closing restaurants, and reducing expansion plans. McDonald's restaurants are in 120 countries. Going out to eat is one of the first activities that customers cut in tough times. A rising U.S. dollar is another external factor that hurts McDonald’s. An internal weakness of McDonald’s is that the firm now offers upscale coffee drinks like lattes and cappuccinos in over 7,000 locations just as budget conscious consumers are cutting back on such extravagances.
About half of McDonald’s 31,000 locations are outside the United States. But McDonald’s top management team says everything the firm does is for the long term. McDonald’s for several years referred to their strategic plan as “Plan to Win.” This strategy has been to increase sales at existing locations by improving the menu, remodeling dining rooms, extending hours, and adding snacks. The company has avoided deep price cuts on its menu items. McDonald’s was only one of three large U.S. firms that saw its stock price rise in 2008.
The other two firms were Wal-Mart and Family Dollar Stores.
Other strategies being pursued currently by McDonald’s include replacing gasoline-powered cars with energy-efficient cars, lowering advertising rates, halting building new outlets on street corners where nearby development shows signs of weakness, boosting the firm’s coffee business, and improving the drive-through windows to increase sales and efficiency.
McDonald’s receives nearly two thirds of its revenues from outside the United States. The company has 14,000 U.S. outlets and 18,000 outlets outside the United States. McDonald’s feeds 58 million customers every day. The company operates Hamburger University in suburban Chicago. McDonald's reported that first quarter 2009 profits rose 4 percent and same-store sales rose 4.3 percent across the globe. Same-store sales in the second quarter of 2009 were up another 4.8 percent.
Questions:
1. Which theory of organizational adaptation is applied at McDonald's (Theories to choose from: Institution Theory, Strategic choice perspective, and Organizational Learning Theory) ? Discuss.
2. Conduct the environmental scanning of McDonald's through SWOT analysis.
3. Discuss any 2 strategies used at McDonald's ( Strategies to choose from : Corporate strategy, Business Strategy, and Functional Strategy) . Elaborate.
4. Under which strategic type (according to Miles and Snow) can McDonald’s be classified? Elaborate.
In: Operations Management
Waterways Continuing Problem-10 (Part Level Submission)
Waterways Corporation has recently acquired a small
manufacturing operation in British Columbia that produces one of
its more popular items. This plant will provide these units for
resale in retail hardware stores in British Columbia and Alberta.
Because the budget prepared by the plant was incomplete, Jordan
Leigh, Waterways’ CFO, was sent to B.C. to oversee the plant’s
budgeting process for the second quarter of 2017.
Jordan asked the various managers to collect the following
information for preparing the second-quarter budget.
| Sales | ||
| Unit sales for February 2017 | 99,000 | |
| Unit sales for March 2017 | 111,000 | |
| Expected unit sales for April 2017 | 119,000 | |
| Expected unit sales for May 2017 | 124,000 | |
| Expected unit sales for June 2017 | 129,000 | |
| Expected unit sales for July 2017 | 144,000 | |
| Expected unit sales for August 2017 | 169,000 | |
| Average unit selling price | $12 |
Based on the experience from the home plant, Jordan has suggested
that the B.C. plant keep 10% of the next month’s unit sales in
ending inventory. The plant has contracts with some of the major
home hardware giants, so all sales are on account; 50% of the
accounts receivable is collected in the month of sale, and the
balance is collected in the month after sale. This was the same
collection pattern from the previous year. The new plant has no bad
debts.
Direct Materials
The combined quantity of direct materials (consisting of metal,
plastic and rubber) used in each unit is 1.10 kg. Metal, plastic,
and rubber together amount to $1.50 per kg. Inventory of combined
direct material on March 31 consisted of 13,145 kg.
This plant likes to keep 10% of the materials needed for the next
month in its ending inventory. Fifty percent of the payables is
paid in the month of purchase, and 50% is paid in the month after
purchase.
Accounts Payable on March 31 will total $124,800.
Direct Labour
Labour requires 15 minutes per unit for completion and is paid at
an average rate of $12 per hour.
| Manufacturing Overhead | ||||
| Indirect materials | $0.50 | per labour hour | ||
| Indirect labour | $0.50 | per labour hour | ||
| Utilities | $0.60 | per labour hour | ||
| Maintenance | $0.30 | per labour hour | ||
| Salaries | $44,800 | per month | ||
| Depreciation | $14,400 | per month | ||
| Property taxes | $2,200 | per month | ||
| Insurance | $1,050 | per month | ||
| Janitorial | $2,400 | per month | ||
| Selling and Administrative | |||
| Variable selling and administrative cost per unit is $1.40. | |||
| Advertising | $12,000 | a month | |
| Depreciation | $2,600 | a month | |
| Insurance | $1,200 | a month | |
| Other fixed costs | $3,500 | a month | |
| Salaries | $60,000 | a month | |
Other Information
The Cash balance on March 31 will be $115,000, but Waterways has
decided it would like to maintain a cash balance of at least
$500,000 beginning on April 30. The company has an open line of
credit with its bank. The terms of the agreement require borrowing
to be in $1,000 increments at 2% interest. Borrowing is considered
to be on the first day of the month and repayments are on the last
day of the month. Assume interest is paid at the end of the
quarter.
In May, $880,000 of new equipment to update operations will be
purchased.
Three months’ insurance is prepaid on the first day of the first
month of the quarter.
For the second quarter of 2017, prepare a selling and administrative expenses budget. (Enter per unit expenses rounded to 2 decimal places, e.g. 1.25.)
April May June Total
Account name
Account name __________________________________________
Account name
add/lesss Account name ________________________________________________________
Account name
add/less Account Name __________________________________________________________________
Account name ________________________________________________________________________
In: Accounting
Waterways Continuing Problem-10 (Part Level Submission)
Waterways Corporation has recently acquired a small
manufacturing operation in British Columbia that produces one of
its more popular items. This plant will provide these units for
resale in retail hardware stores in British Columbia and Alberta.
Because the budget prepared by the plant was incomplete, Jordan
Leigh, Waterways’ CFO, was sent to B.C. to oversee the plant’s
budgeting process for the second quarter of 2017.
Jordan asked the various managers to collect the following
information for preparing the second-quarter budget.
| Sales | ||
| Unit sales for February 2017 | 99,000 | |
| Unit sales for March 2017 | 111,000 | |
| Expected unit sales for April 2017 | 119,000 | |
| Expected unit sales for May 2017 | 124,000 | |
| Expected unit sales for June 2017 | 129,000 | |
| Expected unit sales for July 2017 | 144,000 | |
| Expected unit sales for August 2017 | 169,000 | |
| Average unit selling price | $12 |
Based on the experience from the home plant, Jordan has suggested
that the B.C. plant keep 10% of the next month’s unit sales in
ending inventory. The plant has contracts with some of the major
home hardware giants, so all sales are on account; 50% of the
accounts receivable is collected in the month of sale, and the
balance is collected in the month after sale. This was the same
collection pattern from the previous year. The new plant has no bad
debts.
Direct Materials
The combined quantity of direct materials (consisting of metal,
plastic and rubber) used in each unit is 1.10 kg. Metal, plastic,
and rubber together amount to $1.50 per kg. Inventory of combined
direct material on March 31 consisted of 13,145 kg.
This plant likes to keep 10% of the materials needed for the next
month in its ending inventory. Fifty percent of the payables is
paid in the month of purchase, and 50% is paid in the month after
purchase.
Accounts Payable on March 31 will total $124,800.
Direct Labour
Labour requires 15 minutes per unit for completion and is paid at
an average rate of $12 per hour.
| Manufacturing Overhead | ||||
| Indirect materials | $0.50 | per labour hour | ||
| Indirect labour | $0.50 | per labour hour | ||
| Utilities | $0.60 | per labour hour | ||
| Maintenance | $0.30 | per labour hour | ||
| Salaries | $44,800 | per month | ||
| Depreciation | $14,400 | per month | ||
| Property taxes | $2,200 | per month | ||
| Insurance | $1,050 | per month | ||
| Janitorial | $2,400 | per month | ||
| Selling and Administrative | |||
| Variable selling and administrative cost per unit is $1.40. | |||
| Advertising | $12,000 | a month | |
| Depreciation | $2,600 | a month | |
| Insurance | $1,200 | a month | |
| Other fixed costs | $3,500 | a month | |
| Salaries | $60,000 | a month | |
Other Information
The Cash balance on March 31 will be $115,000, but Waterways has
decided it would like to maintain a cash balance of at least
$500,000 beginning on April 30. The company has an open line of
credit with its bank. The terms of the agreement require borrowing
to be in $1,000 increments at 2% interest. Borrowing is considered
to be on the first day of the month and repayments are on the last
day of the month. Assume interest is paid at the end of the
quarter.
In May, $880,000 of new equipment to update operations will be
purchased.
Three months’ insurance is prepaid on the first day of the first
month of the quarter.
For the second quarter of 2017, prepare a manufacturing overhead budget. (Round variable overhead rate to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 2,275.)
April May June Total
Account name
Account name _________________________________________________
Account name
Add/Less Account name ------------------------------------------------------------------------------
Account name
Add/Less Account name ___________________________________________________
Account Name ____________________________________________________
In: Accounting
Review question?
What is a budget?
Benefits of budgeting?
3 barriers to effective budgeting?
Four primary component of master budgeting?
What is an operating budgeting?
What is a capital use budgeting?
Starting point of a budgeting process
What data sources do manager rely on to create sales budget?
What is an operating expense budget?
Exercise and problem
5. Shatz Fine Clothiers expects to make inventory purchases in the first quarter of 20X5 as follows: January February March $50,000 60,000 70,000 Historical data shows that the company pays for 70 percent of its purchases in the month of purchase and the remaining balance is paid in the month following the purchase. On January 1, 20X5, the company owed $20,000 for prior-year purchases. a. Prepare a schedule of cash payments for January , February, and March. b. What amount of accounts payable will be outstanding on March 31?
6. Major Drumstick Poultry Company expects to have the following sales in the f irst quarter of 20X5: January February March $70,000 80,000 90,000 Historical data shows that the company collects 80 percent of its sales in the month of the sale and the remaining balance is collected in the month following the sale. On January 1, 20X5, accounts receivable related to December sales totaled $10,000. a. Compute total sales for December 20X4. b. Prepare a schedule of cash receipts for January , February, and March. c. What amount of accounts receivable will be outstanding on March 31?
8. Seattle Brewing Company incurs the following fixed costs each quarter: Advertising Rent Salaries Insurance Depreciation $30,000 20,000 80,000 2,000 15,000. the company pays 80 percent of it cash expenses in the period incurred. The remaining 20 percent are paid in the following fiscal quarter . Accounts payable totaling $25,000 were outstanding at the beginning of the year. Using these data, complete the following requirements. a. Prepare a quarterly fixed cost budget for the coming year . b. Prepare a cash payments schedule for the coming year . c . Compute the total accounts payable expected to be outstanding at year end.
9. Heart & Soul Music Store expects to sell 20,000 CDs in the first four months of business in 20X1. Each CD sells for $12 and costs $8. Management wants to prepare an operating budget for the first fiscal quarter (Q1). Q1 consists of January, February, and March. Monthly sales are projected to be as follows: 20X1 Expected sales (in units) January 2,500 February 4,000 March 7,500 April 6,000 a. Prepare a monthly sales forecast in dollars for Q1 (January , February, and March). b. Prepare a monthly contribution margin statement for Q1. c. Assume that for Heart & Soul’ s operations, ending inventory is projected to be 80 percent of next month’s sales. Assume the company started 20X1 with 2,000 CDs in its inventory. How many CDs does the company need to buy in each month of Q1? d. What is the cost of inventory purchases for each month?
10. Eggs Cetera is new breakfast café. Based on a recent market analysis, the company expects the following quarterly demand (number of customers): Q1 10,000 Q2 15,000 Q3 20,000 Q4 18,000 The typical customer spends $10 per meal at the restaurant. Management estimates that food accounts for 80 percent of each customer’ s bill. The other 20 percent comes from beverages. Food costs the café 75 percent of its selling price, while beverages cost only 20 percent of their selling price. Based on these data, prepare the following: a. A quarterly sales forecast. b. A quarterly contribution margin forecast.
In: Accounting
|
Herbal Care Corp., a distributor of herb-based sunscreens, is ready to begin its third quarter, in which peak sales occur. The company has requested a $40,000, 90-day loan from its bank to help meet cash requirements during the quarter. Since Herbal Care has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled: |
| a. | On July 1, the beginning of the third quarter, the company will have a cash balance of $48,500. |
| b. |
Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account): |
| May (actual) | $ | 310,000 |
| June (actual) | $ | 350,000 |
| July (budgeted) | $ | 470,000 |
| August (budgeted) | $ | 680,000 |
| September (budgeted) | $ | 350,000 |
|
Past experience shows that 25% of a month’s sales are collected in the month of sale, 70% in the month following sale, and 3% in the second month following sale. The remainder is uncollectible. |
| c. | Budgeted merchandise purchases and budgeted expenses for the third quarter are given below: |
| July | August | September | |||||||
| Merchandise purchases | $ | 282,000 | $ | 408,000 | $ | 210,000 | |||
| Salaries and wages | $ | 43,000 | $ | 54,000 | $ | 55,000 | |||
| Advertising | $ | 180,000 | $ | 131,000 | $ | 95,000 | |||
| Rent payments | $ | 7,800 | $ | 7,800 | $ | 7,800 | |||
| Depreciation | $ | 8,500 | $ | 8,500 | $ | 8,500 | |||
|
Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, total $210,000. |
|
| d. |
Equipment costing $10,000 will be purchased for cash during July. |
| e. |
In preparing the cash budget, assume that the $40,000 loan will be made in July and repaid in September. Interest on the loan will total $1,200. |
| Required: | |
| 1. |
Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. |
| 2. |
Prepare a cash budget, by month and in total, for the third quarter. (Cash deficiency, repayments and interest should be indicated by a minus sign.) |
In: Accounting
Herbal Care Corp., a distributor of herb-based sunscreens, is ready to begin its third quarter, in which peak sales occur. The company has requested a $40,000, 90-day loan from its bank to help meet cash requirements during the quarter. Since Herbal Care has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled:
| May (actual) | $ | 400,000 | |
| June (actual) | $ | 440,000 | |
| July (budgeted) | $ | 560,000 | |
| August (budgeted) | $ | 770,000 | |
| September (budgeted) | $ | 395,000 | |
Past experience shows that 25% of a month’s sales are collected in the month of sale, 70% in the month following sale, and 3% in the second month following sale. The remainder is uncollectible.
| July | August | September | |||||||||
| Merchandise purchases | $ | 336,000 | $ | 462,000 | $ | 237,000 | |||||
| Salaries and wages | $ | 43,000 | $ | 63,000 | $ | 64,000 | |||||
| Advertising | $ | 225,000 | $ | 144,500 | $ | 104,000 | |||||
| Rent payments | $ | 9,600 | $ | 9,600 | $ | 9,600 | |||||
| Depreciation | $ | 10,750 | $ | 10,750 | $ | 10,750 | |||||
Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, total $264,000.
Required:
1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total.
2. Prepare a cash budget, by month and in total, for the third quarter. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
In: Accounting
|
Herbal Care Corp., a distributor of herb-based sunscreens, is ready to begin its third quarter, in which peak sales occur. The company has requested a $40,000, 90-day loan from its bank to help meet cash requirements during the quarter. Since Herbal Care has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled: |
| a. | On July 1, the beginning of the third quarter, the company will have a cash balance of $49,500. |
| b. |
Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account): |
| May (actual) | $ | 330,000 |
| June (actual) | $ | 370,000 |
| July (budgeted) | $ | 490,000 |
| August (budgeted) | $ | 700,000 |
| September (budgeted) | $ | 360,000 |
|
Past experience shows that 25% of a month’s sales are collected in the month of sale, 70% in the month following sale, and 3% in the second month following sale. The remainder is uncollectible. |
| c. | Budgeted merchandise purchases and budgeted expenses for the third quarter are given below: |
| July | August | September | |||||||
| Merchandise purchases | $ | 294,000 | $ | 420,000 | $ | 216,000 | |||
| Salaries and wages | $ | 44,000 | $ | 56,000 | $ | 57,000 | |||
| Advertising | $ | 190,000 | $ | 134,000 | $ | 97,000 | |||
| Rent payments | $ | 8,200 | $ | 8,200 | $ | 8,200 | |||
| Depreciation | $ | 9,000 | $ | 9,000 | $ | 9,000 | |||
|
Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, total $222,000. |
|
| d. |
Equipment costing $10,000 will be purchased for cash during July. |
| e. |
In preparing the cash budget, assume that the $40,000 loan will be made in July and repaid in September. Interest on the loan will total $1,200. |
| Required: | |
| 1. |
Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. |
| 2. |
Prepare a cash budget, by month and in total, for the third quarter. (Cash deficiency, repayments and interest should be indicated by a minus sign.) |
In: Accounting