Budgeted Income Statement with CVP
Madison Booksellers is planning a budget for 2018. The estimate of sales revenue is $3,200,000 and of cost of goods sold is 70 percent of sales revenue. Depreciation on the office building and fixtures is budgeted at $120,000. Salaries and wages are budgeted at $200,000. Advertising has been budgeted at $180,000 and utilities should amount to $140,000. Income tax is estimated at 40 percent of operating income.

Required
a. Prepare a budgeted income statement for 2018.

Use a negative sign only to indicate a net loss for income. Otherwise, do not use negative sings with your answers.

b. Assuming management desired an after-tax income of $210,000 determine the necessary sales volume.

$Answer

We have decelerating inflation of 1.2% based on CPI index in Q2 2019-20 with declining growth in consumption, investment and net exports compared to Q2 2018-19. The growth rates of components of AD curve have shown sustained decline in the last few quarters.
The natural rate of unemployment has risen from 5.1% to 10.2% from Q2 2018-19 to Q2 2019-20.
The capacity utilization of core 8 industries has decreased from 96% to 76% from Q2 2018-19 to Q2 2019-20.
i) What can you tell about the character of such an economy? Please use the AD, SRAS and LRAS framework to display the movement in output and inflation levels in this economy.
ii) The government is worried about the situation of falling growth and it plans to conduct appropriate fiscal policy in the short run. However, it does not want the revenue deficit to increase. Suggest a specific action which ensures recovery of the economy while keeping revenue deficit unchanged. Show the effects using AD, SRAS, LRAS framework.

Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information:

Each T-shirt is expected to sell for $17.

The purchasing manager buys the T-shirts for $7 each.

The company needs to have enough T-shirts on hand at the end of each quarter to fill 27 percent of the next quarter’s sales demand.

Selling and administrative expenses are budgeted at $84,000 per quarter plus 14 percent of total sales revenue.

Required:
1. Determine budgeted sales revenue for each quarter.



2. Determine budgeted cost of merchandise purchased for each quarter.



3. Determine budgeted cost of good sold for each quarter.



4. Determine selling and administrative expenses for each quarter.



5. Complete the budgeted income statement for each quarter.

Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: Budgeted Unit Sales Quarter 1 47,000 Quarter 2 74,000 Quarter 3 37,000 Quarter 4 74,000 Each T-shirt is expected to sell for $22. The purchasing manager buys the T-shirts for $9 each. The company needs to have enough T-shirts on hand at the end of each quarter to fill 32 percent of the next quarter’s sales demand. Selling and administrative expenses are budgeted at $94,000 per quarter plus 10 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. 2.Determine budgeted cost of merchandise purchased for each quarter. 3. Determine budgeted cost of good sold for each quarter. 4.Determine selling and administrative expenses for each quarter. 5.Complete the budgeted income statement for each quarter.

McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 15 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost.

Manufacturing overhead for year 1 totaled $910,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following.

Required:

a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks.

a-2. Which of the two products should be dropped, chairs or desks?

b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $840,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2?

A company manufactures and sells x television sets per month. The monthly cost and​ price-demand equations are ​C(x)equals72 comma 000 plus 70 x and p left parenthesis x right parenthesis equals 300 minus StartFraction x Over 20 EndFraction ​, 0less than or equalsxless than or equals6000. ​(A) Find the maximum revenue. ​(B) Find the maximum​ profit, the production level that will realize the maximum​ profit, and the price the company should charge for each television set. ​(C) If the government decides to tax the company ​$4 for each set it​ produces, how many sets should the company manufacture each month to maximize its​ profit? What is the maximum​ profit? What should the company charge for each​ set? ​(A) The maximum revenue is ​$ nothing. ​(Type an integer or a​ decimal.) ​(B) The maximum profit is ​$ nothing when nothing sets are manufactured and sold for ​$ nothing each. ​(Type integers or​ decimals.) ​(C) When each set is taxed at ​$4​, the maximum profit is ​$ nothing when nothing sets are manufactured and sold for ​$ nothing each. ​(Type integers or​ decimals.)

Required information

[The following information applies to the questions displayed below.]
  
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

Infinity Designs, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Home and Garden Expo. The exhibit will cost the company $12,000 for space. At the show, Infinity Designs will present a slide show on a PC, pass out brochures that are printed previously, (the company printed more than needed), and show its portfolio of previous jobs. The company estimates that revenue will increase by $36,000 over the next year as a result of the exhibit. For the previous year, profit was as follows: Revenue $201,000 Less: Design supplies (variable cost) $17,000 Salary of Samantha Spade (owner) 80,000 Salary of Kim Bridesdale (full time employee) 55,000 Rent 18,000 Utilities 6,000 Depreciation of office equipment 3,600 Printing of advertising materials 700 Advertising in Middleton Journal 2,500 Travel expenses other than depreciation of autos (variable cost) $2,800 Depreciation of company cars 9,000 Required: Calculate the impact of the exhibit on company profit. Round to two decimal places.

Dolphin Plastics is considering replacing molding equipment used to make party cups. The current equipment was purchased two years ago for $95,000. At the time of purchase, it had a 7-year life with an expected salvage value of $10,000. If sold today Dolphin expects to receive $55,000 for the machine. Dolphin depreciates all assets using straight-line depreciation. Dolphin currently has revenue of $700,000 that is expected to grow at 5% per year. Dolphin currently has a gross profit margin of 17%.

New machinery today will cost $145,000. The new machinery is expected to last 5 years and has a salvage value of $15,000. The new machinery will lower annual operating costs by $5,000 per annum. In addition, the new machine is expected to increase expected revenue (shown below) and increase the firm’s gross profit margin to 19%. Year 1 120,000 Year 2 130,000 Yr. 4 125,000 Year 3 140,000 Yr. 5 125,000

Assume a tax rate of 25% and a cost of capital of 11%.

What is the project’s NPV?