Budgets: Discussion question

RD Ltd. is in the process of preparing its budgets for 2020. The company produces and sells a single product, Z, which currently has a selling price of £100 for each unit.

The budgeted sales units for 2020 are expected to be as follows:

The company expects to sell 7,000 units in January 2021.

The selling price for each unit will be increased by 15% with effect from 1 March 2020.

1,000 units of finished goods are expected to be in stock at the end of 2019. It is company policy to hold a closing stock balance of finished goods equal to 20% of the following month’s sales.

Each unit of Z produced requires 3 kgs of material X, which currently costs £5 for each kg. The price for each kg is expected to increase by 10% on 1 June 2020.

Stock of raw material at the end of 2019 is expected to be 3,750 kgs. The company wishes to avoid any stock-outs and requires the closing stock of raw materials to be set at 20% of the following month’s production requirements.

A purchase of fixed asset will be made in March, £50,000 – payment will be made in four equal installments starting in June. Opening cash balance of £20, 000.

The production of each unit of Z requires 4 hours of skilled labour and 2 hours of unskilled labour. Skilled labour is paid at a rate of £10 for each hour and unskilled labour at £8 for each hour. Each worker is expected to work 40 hours each week, 48 weeks each year.

Taxation on 2019’s profit will be paid in March and this am­­­­ounts to £15, 000. Fixed overhead including depreciation of £550 is £3,000 per month and this is expected to increase in May to £3,500.

Required:

Prepare the following budgets for the first six months of 2020.

(a) The sales budget (in value)                                   

(b) The production budget (in units)                        

(c) The material usage budget (in value)                

(d) The material purchase budget (in value)         

(e) The direct labour budget (in hours)                                                   

(f) Cash budget                                                                

A stock is expected to pay the following dividends: $1 in 1 year, $1.5 in 2 years, and $1.8 in 3 years, followed by growth in the dividend of 7% per year forever after that point. The stock's required return is 14%. The stock's current price (Price at year 0) should be $____________.

A stock is expected to pay the following dividends: $1.3 four years from now, $1.5 five years from now, and $1.8 six years from now, followed by growth in the dividend of 5% per year forever after that point. There will be no dividends prior to year 4. The stock's required return is 13%. The stock's current price (Price at year 0) should be $____________.

A stock will pay no dividends for the next 3 years. Four years from now, the stock is expected to pay its first dividend in the amount of $2.4. It is expected to pay a dividend of $2.8 exactly five years from now. The dividend is expected to grow at a rate of 8% per year forever after that point. The required return on the stock is 14%. The stock's estimated price per share exactly TWO years from now, P₂ , should be $______.

If you could do them all, you would be a life saver! Thank you.

Let’s return to Tuftsville (Chapter 10) where everyone lives along Main Street, which is 10 miles long. There are 1,000 people uniformly spread up and down Main Street, and every day they each buy fruit smoothie from one of the two stores located at either end of the street. Customers ride their motor scooters to and from the store, using $0.50 worth of gas per mile. Customers buy their smoothies from the store offering the lowest price, which is the store’s price plus the customer’s travel expenses getting to and from the store. Ben owns the store at the west end of Main Street and Will owns the store at the east end of Main Street. The marginal cost of a smoothie is constant and equal to $1 for both Ben and Will. In addition, each of them pays Tuftsville $250 per day for the right to sell smoothies.

a. Ben sets his price p1 first and then Will sets his price p2. After the prices are posted consumers get on their scooters and buy from the store with the lowest price including travel expenses. What prices will Ben and Will set?

b. How many customers does each store serve and what are their profits?

Complete the t-accounts below using the transactions listed (1.5 pts). 4. Calculate the ending balance of each account (.5 pts). • styx. issues a $1,000 bond in order to raise cash • styx. issues $5,000 in stocks to raise cash • styx. spends $2,400 of its cash to purchase a new tuning machine Debits - + Credits Debits + - Credits Debits Credits 5. Complete the Accounting Equation below (.5 pts). 6. Circle the mathematical functions that complete the accounting equation (.5 pts). Assets: ____________ + / - / = Liabilities: ________________ + / - / = Owners Equity: _____________

The $5,000 stock sale from the first page was split into 500 shares. Calculate the price of a share of (a company called Styx). given the following information.

Please show your work.

Year 1 Profits: $3,500 Year 2 Profits: $4,250 Discount Rate: 3.25%

A. Share Price: ________________

B) What is the new share price if you decide that Year 2 profits will be $5,500 and you change your discount rate for all years to 5%?

Share Price: ________________

c) If a company called Styx  is listed on the Dow Jones Industrial Average, and the Dos divisor is .1474, by how much will the Dow change if the price of a share of Styx. increases by $3.00? ________________

Cork price 16 10 15 10 17 11 14 13 11 14 11 16 18 16 10 17 14 14 16 7 10 12 19 15 16 14 9 12 21 13 10 16 12 16 13 17 17 13 14 18 11 12 15 16 13 18 16 17 12 12 14 9 11 14 19 13 11 17 11 13 15 14 18 18 18 12 10 11 13 14 11 14 18 13 13 19 17 14 17 17 18 19 21 12 15 16 15 10 10 17 12 14 16 12 13 17 17 13 15 12 14 16 15 15 15 12 18 13 12 15 10 13 11 16 14 10 15 14 15 12 16 11 17 16 10 15 11 19 15 20

Metal price 13 12 16 5 7 8 6 10 11 9 6 16 15 15 9 17 6 10 11 7 8 11 22 21 11 6 11 10 17 12 13 11 16 18 12 11 11 8 8 18 5 5 9 10 9 14 8 9 8 7 6 12 12 15 19 4 6 15 9 5 15 9 8 6 7 5 12 4 16 15 6 11 17 7 5 16 13 12 17 17 9 19 19 2 15 5 13 7 11 15 14 9 10 11 6 19 19 10 7 9 10 18 15 16 8 11 13 14 11 7 7 5 7 15 13 6 17 12 12 15 9 13 21 17 5 17 12 14 14 13

1. Mean price of a bottle of wine with a cork stopper: Mean price of a bottle of wine with a metal cap:

2. The variance of the price of a bottle of wine with a cork stopper: The variance of the price of a bottle of wine with a metal cap:

3. The standard deviation of the price of a bottle of wine with a cork stopper: The standard deviation of the price of a bottle of wine with a metal cap

4. The median price of a bottle of wine with a cork stopper: The median price of a bottle of wine with a metal cap:

5. The number of modes for the sample of bottles of wine with a cork stopper: The mode price of a bottle of wine with a cork stopper: The number of modes for the sample of a bottles of wine with a metal cap: The mode price of a bottle of wine with a metal cap:

6. WHAT IS THE SHAPE OF THE DISTRIBUTION OF THE CORK PRICE: WHAT IS THE SHAPE OF THE DISTRIBUTION OF THE METAL PRICE:

7. FIRST QUARTILE OF THE CORK PRICE SECOND QUARTILE OF THE CORK PRICE THIRTH QUARTILE OF THE CORK PRICE WHAT IS THE SHAPE OF THE middle 50% of the DISTRIBUTION OF THE CORK PRICE BASED ON Q1, Q2 and Q3: INTERQUARTILE RANGE OF THE CORK PRICE

8. FIRST QUARTILE OF THE METAL PRICE SECOND QUARTILE OF THE METAL PRICE THIRD QUARTILE OF THE METAL PRICE WHAT IS THE SHAPE OF THE middle 50% of the DISTRIBUTION OF THE METAL PRICE BASED ON Q1, Q2 and Q3: INTERQUARTILE RANGE OF THE METAL PRICE

9. Determine within what range of cork prices 95% of the cork prices fall Lower Limit Upper Limit Determine within what range of metal prices 95% of the metal prices fall: Lower Limit Upper Limit

Which is cheaper: eating out or dining in? The mean cost of a flank steak, broccoli, and rice bought at the grocery store is $13.04. A sample of 100 neighborhood restaurants showed a mean price of $12.60 and a standard deviation of $2 for a comparable restaurant meal.

Meridian Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 3,000 units of Prime and 1,000 units of Luxuria in 2016.The following estimates are given for 2016:

                                                                                  Prime    Luxuria

        Selling price                                                     $200        $500

        Direct materials                                                   20             50

        Direct labor                                                          40          150

        Manufacturing overhead                                  40          100

Meridian had an inventory of 200 units of Prime and 75 units of Luxuria at the end of 2015. It has decided that as a measure to counter stock outages it will maintain ending inventory of 350 units of Prime and 200 units of Luxuria. Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $10. There were 100 units of Crimpson in stock at the end of 2015.The management does not want to have any stock of Crimpson at the end of 2016.

How many units of Prime watches must be produced in 2016?

What is the amount budgeted for purchase of Crimpson in 2016?

What is the total budgeted cost of sold for Meridian Industries in 2016?