Johnson Company is preparing budgets for the upcoming quarter ending October 31st. The marketing director has provided the following information to the Budget Committee. Currently the company sells one product, the korda, for $25 per unit. Budgeted sales (in units) for the next five months are as follows:

• To minimize the risk of stockouts, the company has a policy to maintain an ending inventory of 18% of the following month’s budgeted sales. At the beginning of the quarter, the company had 7,500 units of korda in inventory.
• • Each unit of korda requires 2 kilograms of direct materials. The company has a policy that materials on hand at the end of each month must be a minimum of 20% of the following month’s production. At the beginning of the quarter, the company has 15,600 kilograms of direct materials on hand. Each kilogram of direct material costs $3.00.
• • Each unit of korda requires 0.2 hours (12 minutes) of direct labour. The company pays employees a standard wage of $15.00 per hour.
• • The company applies overhead on the basis of direct labour hours. The variable manufacturing overhead rate is $12.00 per direct labour hour. Fixed overhead is $81,978 per month.
• • The company has variable selling and administrative costs that are equal to $0.75 per unit sold. Fixed selling and administrative costs are estimated to be $100,000 per month.
• • All sales are made on account. The company collects 65% of the sales revenue in the month of the sale, and the remaining 35% in the month following the sale. At the start of the quarter, the company has $45,000 in accounts receivable that are deemed to be fully collectible.
• • As stated, the company pays $3.00 per kilogram of direct materials. The company pays for 70% the direct materials purchases in the month of the purchase and pays the remaining 30% in the month following the purchase. At the beginning of the month, the company owes $20,000 to creditors.

1. (A) Prepare a sales budget for August, September, and October, and for the quarter.
2. (B) Prepare a production budget for August, September, and October, and for the quarter-end. (Note: You should also compute November’s production needs. That information is necessary for section (C).)
3. (C) Prepare the direct materials purchases budget for August, September, and October, and for the quarter-end.
4. (D) Prepare the direct labour budget for August, September, and October, and for the quarter-end.

Case #1

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:

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.

Case #1

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

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

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

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

Preparation of a complete master budget

The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:

To prepare a master budget for April, May, and June of 2015, management gathers the following information:

• Sales for March total 20,500 units. Forecasted sales in units are as follows: April, 20,500; May, 19,500; June, 20,000; and July, 20,500. Sales of 240,000 units are forecasted for the entire year. The product's selling price is $23.85 per unit and its total product cost is $19.85 per unit

• Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements. The March 31 raw materials inventory is 4,925 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.

• Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16,400 units, which complies with the policy.

• Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour.

• Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead.

• Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,000.

• Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.

• The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).

• All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month.

• The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.

• Dividends of $10,000 are to be declared and paid in May.

• No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter.

• Equipment purchases of $130,000 are budgeted for the last day of June.

Required

Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.

1. General and administrative expense budget.
2. Cash budget.

Check  

(2) Units to produce: April, 19,700; May, 19,900

(3) Cost of raw materials purchases, April, $198,000

(5) Total overhead cost, May, $46,865

(8) Ending cash balance: April, $83,346; May, $124,295

(10) Budgeted total assets, June 30: $1,299,440

Preparation of a complete master budget

The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:

To prepare a master budget for April, May, and June of 2015, management gathers the following information:

• Sales for March total 20,500 units. Forecasted sales in units are as follows: April, 20,500; May, 19,500; June, 20,000; and July, 20,500. Sales of 240,000 units are forecasted for the entire year. The product's selling price is $23.85 per unit and its total product cost is $19.85 per unit

• Company policy calls for a given month's ending raw materials inventory to equal 50% of the next month's materials requirements. The March 31 raw materials inventory is 4,925 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.

• Company policy calls for a given month's ending finished goods inventory to equal 80% of the next month's expected unit sales. The March 31 finished goods inventory is 16,400 units, which complies with the policy.

• Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour.

• Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead.

• Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,000.

• Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable.

• The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).

• All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month.

• The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.

• Dividends of $10,000 are to be declared and paid in May.

• No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter.

• Equipment purchases of $130,000 are budgeted for the last day of June.

Required

Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.

1. Raw materials budget.
2. Direct labor budget.

Check  

(2) Units to produce: April, 19,700; May, 19,900

(3) Cost of raw materials purchases, April, $198,000

(5) Total overhead cost, May, $46,865

(8) Ending cash balance: April, $83,346; May, $124,295

(10) Budgeted total assets, June 30: $1,299,440

Predetermined overhead rate __________

  net operating income will be_____ if the ___________

A paradox occurs when the government tries to influence full employment by utilizing the government budget as a surrogate with tax cuts, high tariffs, and increased government spending because increasing employment, government spending, and lower taxes will also drive up inflation and interest rates which will slow the economy. Discuss which one should be a government priority when setting the budget and why you believe that to be true.

You inherit $1000 from your Mother.

1) What do you do with the money? What do you spend it on? Do you save any of it?

2) Calculate your MPS and MPC. Show your work.

3) Calculate your Multiplier.    Show your work.

4) What effect does your spending have on GDP - how much additional spending is credited?

What is the proposed Budget deficit for Canada 2018? Why is the deficit currently so large and should the government be more focused on a balanced budget?

i)    As a Keynesian economist, defend the use of this deficit spending to help the economy. Use the AD/AS model in your answer.

ii)    As a Classical economist explain using the “crowding out” theory why you are opposed to this deficit spending. Use graphical support in your answer.

HISTORY- The Soviet Union collapsed for which of the following reasons?