Deitz Corporation is projecting a cash balance of $36,900 in its
December 31, 2019, balance sheet. Deitz’s schedule of expected
collections from customers for the first quarter of 2020 shows
total collections of $227,550. The schedule of expected payments
for direct materials for the first quarter of 2020 shows total
payments of $52,890. Other information gathered for the first
quarter of 2020 is sale of equipment $3,690; direct labor $86,100,
manufacturing overhead $43,050, selling and administrative expenses
$55,350; and purchase of securities $17,220. Deitz wants to
maintain a balance of at least $30,750 cash at the end of each
quarter.
Prepare a cash budget for the first quarter.
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In: Accounting
Joan Hill, President of Hill & Hill Pens, was looking forward to receiving the company’s second quarter income statement. She knew that the sales budget of 20,000 units sold had been met during the second quarter and that this was an increase of 25% over the first quarter sales units (16,000 units in Q1). She was happy about the increase in sales, since Hill & Hill Pens was about to approach its bank for additional loan money for expansion purposes. She anticipated the strong second-quarter results would be a real plus in persuading the bank to extend the additional credit.
For this reason, Joan was shocked when she saw the first two quarters income statement below. Instead of increasing operating income, there was a decrease.
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Hill & Hill Pens Income Statements For the First Two Quarters |
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|
First Quarter |
Second Quarter |
|||
|
Sales |
$1,600,000 |
$2,000,000 |
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|
-COGS |
||||
|
Beg Inv |
$ 210,000 |
490,000 |
||
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COGM |
1,400,000 |
980,000 |
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-End Inv |
<490,000> |
< 70,000> |
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+/- Adj for PVV |
0 |
240,000 |
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|
1,120,000 |
1,640,000 |
|||
|
= Gross margin |
$ 480,000 |
$ 360,000 |
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|
-Selling & Admin |
||||
|
Variable |
80,000 |
100,000 |
||
|
Fixed |
230,000 |
230,000 |
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|
Operating Income |
$ 170,000 |
$ 30,000 |
||
Joan was certain there had to be an error somewhere and immediately called the controller into her office to find the problem. The controller stated, “The operating income is correct, Joan. Sales went up during the second quarter, but the problem is in production. You see, we budgeted to produce 20,000 units each quarter, but a strike in one of our supplier’s plants forced us to cut production back to only 14,000 units in the second quarter. That’s what caused the drop in operating income.”
Joan replied, “I don’t understand this! I know sales increased, yet you talk about production to explain the drop in income! What does this have to do with the sales that we made? If sales go up, then income ought to go up.”
Budgeted production and sales for the year, along with actual production and sales for the first two quarters are given below:
|
1st Quarter |
2nd Quarter |
3rd Quarter |
4th Quarter |
|
|
Planned (budgeted) sales |
16,000 |
20,000 |
20,000 |
24,000 |
|
Actual sales |
16,000 |
20,000 |
||
|
Planned (budgeted) production |
20,000 |
20,000 |
20,000 |
20,000 |
|
Actual production |
20,000 |
14,000 |
- |
- |
The company’s plant is heavily automated, so fixed manufacturing overhead costs total $800,000 per quarter. Variable manufacturing costs are $30 per unit. The fixed manufacturing overhead cost is applied to units at the rate of $40 per unit (based on the budgeted production shown above → $800,000/20,000 units = $40 per unit). Any Production Volume Variance is closed directly to COGS for the quarter.
The company had 3,000 units in inventory at the start of the first quarter. Variable selling and administrative expenses are $5 per unit.
Required:
In: Accounting
Badlands, Inc. manufactures a household fan that sells for $40 per unit. All sales are on account, with 35 percent of sales collected in the month of sale and 65 percent collected in the following month. The data that follow were extracted from the company’s accounting records. •Badlands maintains a minimum cash balance of $21,000. Total payments in January 20x1 are budgeted at $225,000. •A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:
Badlands maintains a minimum cash balance of $21,000. Total payments in January 20x1 are budgeted at $225,000.
A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:
| Cash Receipts | ||||||
| January | February | |||||
| From December 31 accounts receivable | $ | 130,000 | ||||
| From January sales | 88,000 | $ | 160,000 | |||
| From February sales | 74,900 | |||||
March 20x1 sales are expected to total 6,000 units.
Finished-goods inventories are maintained at 20 percent of the following month’s sales.
The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,700; accounts receivable, $130,000; and finished goods, $24,150.
Required:
Determine the number of units that Badlands sold in December 20x0.
Compute the sales revenue for March 20x1.
Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.
Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.
Calculate the number of units in the December 31, 20x0, finished-goods inventory.
Calculate the number of units of finished goods to be manufactured in January 20x1.
Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.
Badlands maintains a minimum cash balance of $21,000. Total payments in January 20x1 are budgeted at $225,000.
A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:
| Cash Receipts | ||||||
| January | February | |||||
| From December 31 accounts receivable | $ | 130,000 | ||||
| From January sales | 88,000 | $ | 160,000 | |||
| From February sales | 74,900 | |||||
March 20x1 sales are expected to total 6,000 units.
Finished-goods inventories are maintained at 20 percent of the following month’s sales.
The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,700; accounts receivable, $130,000; and finished goods, $24,150.
Required:
Determine the number of units that Badlands sold in December 20x0.
Compute the sales revenue for March 20x1.
Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.
Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.
Calculate the number of units in the December 31, 20x0, finished-goods inventory.
Calculate the number of units of finished goods to be manufactured in January 20x1.
Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.
Badlands maintains a minimum cash balance of $21,000. Total payments in January 20x1 are budgeted at $225,000.
A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:
| Cash Receipts | ||||||
| January | February | |||||
| From December 31 accounts receivable | $ | 130,000 | ||||
| From January sales | 88,000 | $ | 160,000 | |||
| From February sales | 74,900 | |||||
March 20x1 sales are expected to total 6,000 units.
Finished-goods inventories are maintained at 20 percent of the following month’s sales.
The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,700; accounts receivable, $130,000; and finished goods, $24,150.
Required:
Determine the number of units that Badlands sold in December 20x0.
Compute the sales revenue for March 20x1.
Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.
Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.
Calculate the number of units in the December 31, 20x0, finished-goods inventory.
Calculate the number of units of finished goods to be manufactured in January 20x1.
Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.
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Q1) December Sales
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In: Accounting
A comic book publisher must meet the following demand for a popular comic book on time or risk long term loss of revenue as schools change to another comic: quarter 1-60,000; quarter 2-40,000; quarter 3-50,000; quarter 4-15,000. The comic can be printed for $25 with regular-time labor and for $35 with overtime labor. At most 30,000 comics can be printed with regular-time labor in a single quarter. The publisher currently has 5,000 comics on hand. It costs $4 per quarter to hold a comic in inventory. Formulate an LP to meet the demand on time at minimum cost.
In: Operations Management
Samsung is interested in the elasticity of demand in the smart phones market, so it hired an economist to estimate the demand for smart phones. She found that, in the short run, demand is Qd=100-0.5P, and in the long run, demand is Qd=120-0.6P. In both the long run and the short run, P=$50
a. What is the price elasticity of demand in the short run?
b. What is the price elasticity of demand in the long run?
c. Given your answers to a. and b., is this more likely to be a durable good or a non-durable good?
In: Economics
From Tesla’s website in 2014: “A year ago, Tesla introduced a Resale Value Guarantee that gives customers the option to return their Model S after three years for a known value. When combined with a car loan provided by Tesla’s banking partners, this program gives customers the functional equivalent of a lease.” Discuss how this program might help Tesla to solve the durable good monopoly problem described by Ronald Coase. Carefully explain the durable good problem and how this type of policy might relate to it.
In: Economics
P10–15 Internal rate of return Peace of Mind, Inc. (PMI), sells extended warranties for durable consumer goods such as washing machines and refrigerators. When PMI sells an extended warranty, it receives cash up front from the customer, but later PMI must cover any repair costs that arise. An analyst working for PMI is considering a warranty for a new line of big-screen TVs. A consumer who purchases the 2-year warranty will pay PMI $200. On average, the repair costs that PMI must cover will average $106 for each of the warranty’s 2 years. If PMI has a cost of capital of 7%, should it offer this warranty for sale?
In: Accounting
The college wage premium is the ratio of median earnings of those with a bachelor’s degree compared to those with a high school degree. During what Robert Gordon calls “The Information Revolution,” the college wage premium increased rapidly rising from 40% in the 1980s to 70% in the 1990s and 80% through the 2000s. Gordon argues that productivity growth during this period was heavily concentrated in specific sectors such as Information Technology and durable goods manufacturing. Assume workers are paid according to their productivity. Could the sector specific productivity growth lead to the increasing college wage premium? Are Gordon’s arguments in his paper consistent with the trend of increased college wage premium? Briefly explain.
In: Economics
For the function, supply a valid technology formula.
r(x) = 30 (1 + 1/3.8)^4x
30*(1 + 1/3.8)^(−4*x)
30*(1 + 1/3.8)^(4*x)
30*(1 + 1/3.8)*(4*x)
30*(1 + 3.8)*(4*x)
30*(1 + 3.8)^(−4*x)
| x | −3 | −2 | −1 | 0 | 1 | 2 | 3 |
|---|---|---|---|---|---|---|---|
| r(x) |
Then use technology to compute the missing values in the table
accurate to four decimal places.
In: Advanced Math
Please read the following excerpt from an article:
" As President Barack Obama prepares to depart Thursday for his first Asia trip, Chinese premier Wen Jiabao is urging the U.S. to keep its deficit to an "appropriate size," a clear message to the leader of the world's largest debtor nation from its largest creditor.
China is the largest holder of U.S. government debt and has
invested an estimated 70% of its more than $2 trillion stockpile of
foreign-exchange reserves (the world's largest) in dollar assets,
Reuters reports. Further dollar weakness, brought on by enormous
U.S. deficit spending and near-zero interest rates, would erode the
value of China's huge U.S. holdings.
"Most importantly, we hope the United States will keep an
appropriate size to its deficit so that there will be basic
stability in the exchange rate, and that is conducive to stability
and the recovery of the global economy," Wen Jiabao said over the
weekend at a news conference in Egypt.
In contrast, the best strategy for the U.S. may be an inflationary stance. We need stimulus spending to jump start our economy and reduce the real value of our record budget deficit of $1.42 trillion in the fiscal year that ended Sept. 30. An improved U.S. economy also would mean more Americans buying up Chinese-made goods"
Please comment on the following questions:
Why is China concerned about the value of US dollar? What can they do to decrease their exposure to fluctuations in the value of US dollar? Is decreasing exposure to US dollar an easy task for China? Why?
In: Finance