Questions
DATE: June 1, 2020 TO: CCSU Consulting FROM: Mark Swain, President, Tommy’s Box Cars SUBJECT: Master...

DATE: June 1, 2020
TO: CCSU Consulting
FROM: Mark Swain, President, Tommy’s Box Cars
SUBJECT: Master Budget for the fiscal year July 1, 2020 – June 30, 2021
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Our controller, Tommy Swain is negotiating with potential new Wood suppliers in Kentucky. We need the Large Box Car Division’s Master Budget for the fiscal year ended (36) June 30, 2021 for our corporate strategic planning process, and we cannot wait for Tommy’s return from Kentucky. We would like you to prepare the Large Box Car Division’s Master Budget for the fiscal year ended June 30, 2021.
The deliverables are as follows:
1. Sales budget, including a schedule of expected cash collections.
2. Production budget.
3. Direct materials budget, including a schedule of expected cash disbursements for materials.
4. Direct labor budget.
5. Manufacturing overhead budget.
6. Ending finished goods inventory budget calculating the expected value of the finished goods inventory as of (36) June 30, 2021. *
7. Selling and administrative expense budget.
8. Cash budget.
9. Budgeted income statement for the year ended (36) June 30, 2021. *
10. Budgeted balance sheet for (36) June 30, 2021. *
All the Master Budget schedules except those marked with an asterisk for the Large Box Car Division should include a column for each quarter and a total column for the fiscal year. We only need annual totals for the budgeted financial statements (schedules 9 and 10) and we only need a year-end total for the value of finished goods inventory (schedule 6).
The hard copies of these budget schedules should be delivered by the company deadline. You can print more than one schedule per page, but do not have a page break in the middle of a budget schedule. I like to be able to view an entire budget schedule without flipping back and forth between pages. Please also use a type font of between 10-12 points for printing. We also need you to submit (via e-mail) the Excel spreadsheet that you used to create the budget schedules you print so we can use the spreadsheet as a starting point for future budgets. Upload the Excel spreadsheet on Blackboard. We need that spreadsheet file the night before the meeting.
I’ve attached a brief description of the Large Box Car Division to the budget data Tommy gave me before he left for Kentucky. We eagerly await your results.
Sincerely,
Mark
Mark Swain
During 2019-20 fiscal year, the average selling price for large box cars is expected to be (1) $130 per car. The Large Box Car Division forecasts the following units of sales.
Quarter First Second Third Fourth
Box Car UNIT Sales (2-5) 65,000 70,000 55,000 60,000
The collection pattern for Accounts Receivable is as follows:
o (6) 30 percent of all sales are collected within the quarter in which they are sold
o (7) 70 percent of all sales are collected in the following quarter.
o There are no bad debts/uncollectible accounts.
Due to high demand last year, the Large Box Car Division expects to have (8) zero finished box cars in inventory on (35) July 1, 2020, the beginning of the first quarter of the new fiscal year (i.e. Beginning Finished Goods Inventory is (8) Zero). To avoid having that problem in the coming fiscal year, the Large Box Car Division would like to have the ending inventory of Box Car at the end of each of the first three quarters equal to (9) 30% of the budgeted sales for the next quarter. They would like to have (10) 35,000 finished Box Cars on hand on (36) June 30, 2021.
Quarter First Second Third Fourth
Ending FG inventory of Box Cars as a
% of the next quarter’s budgeted
sales (9) 30% 30% 30% ?
Ending FG inventory of Box Cars (10) ? ? ? 35,000
Each large box car requires an average of (11) 5.0 feet of wood. The Large Box Car Division buys wood for (13) $4.00 per foot and they expect the price to remain constant throughout the year. They expect to have (12) 50,000 feet of wood (RAW MATERIALS) on hand as of July 1, 2019 ((12) 50,000 * ((13) $4.00 = (14) $200,000 - This is beginning Direct Material Inventory), the beginning of the first quarter of the fiscal year. At the end of each of the first three quarters, the Large Box Car Division would like to have their direct materials inventory quantity to equal (15) 25 percent of the amount required for the following quarter’s planned production. On (33) June 30, 2020, the end of the fiscal year, Large Box Car Division would like to have (16) 60,000 feet of wood on hand (This is ending Direct Material Inventory)..
Quarter First Second Third Fourth
Ending DM inventory as a % of the
next quarter’s production
requirement (15) 25% 25% 25% ?
Ending DM inventory in feet (16) ? ? ? 60,000
The Large Box Car Division buys its wood on account. It pays for (17) 35% of its purchases of direct materials in the quarter in which they were purchased and (18) 65% in the quarter after they were purchased.
Each large box car requires (19) 5 hours of direct labor. Employees engaged in direct labor will be paid an estimated (20) $10.00 per labor hour. Wages and salaries are paid on the 15th and 30th of each month.
Variable manufacturing overhead is estimated to be (21) $4.50 per direct labor hour for the coming fiscal year. All variable manufacturing overhead expenses are paid for in the quarter incurred.
Fixed manufacturing overhead is estimated to total (22) $120,000 each quarter, with (23) $40,000 out of the total amount of (22) $120,000 representing depreciation on machinery, equipment and the factory. All other fixed manufacturing overhead expenses are paid in cash in the quarter they occur. The fixed manufacturing overhead rate will be computed by dividing the year’s total fixed manufacturing overhead by the year’s budgeted direct labor hours. Round the fixed overhead rate to the nearest penny.
Variable selling and administrative expenses are estimated to be (24) $12.00 per box car sold. Fixed selling and administrative expenses are expected to total (25) $95,000 each quarter, with (26) $30,000 out of the total amount of (25) $95,000 representing depreciation on the office space, furniture and equipment. Other than depreciation, all selling and administrative expenses are paid for in the quarter they occur.
On (33) June 30, 2020 the Large Box Car Division plans to buy new machinery and equipment for (27) $1,000,000. The new machinery and equipment will be acquired at the very end of the fiscal year, so it will not be used in production and sales during the coming year and it will not be depreciated until the following year. The Large Box Car Division expects to pay (28) 40% down in cash and finance the remaining (29) 60% of the equipment cost with a note payable from a local bank with whom they do business with. No interest payable will accrue on the equipment note payable until after (33) June 30, 2020.
The Division must maintain a minimum cash balance of (30) $100,000. If after accounting for cash receipts and disbursements (including dividends) in the cash budget, the budgeted cash available cash falls below (30) $100,000 in any quarter, the Division will need to borrow cash. They have arranged a line of credit allowing it to borrow in $10,000 increments (i.e. they can borrow $10,000 or $20,000 etc. but not an odd amount). Assume borrowing will take place at the beginning of any quarter in which the available cash would otherwise be below (30) $100,000 so that at no time during the quarter will the cash balance fall below (30) $100,000 (after payment of interest). If there is extra cash at the end of the quarter and there is borrowing outstanding, the division should pay down principal (also in increments of $10,000). The bank charges the Division interest at the rate of (31) 3% per quarter. Interest accrued in the quarter will be paid the first day of the next quarter (e.g. Q1’s interest is not paid in cash until Q2 and Q2’s Interest will be paid in Q3).
As a fully owned subsidiary, the Large Box Car Division does not pay income taxes. All income taxes are charged to Tommy’s Box Car’s, the parent company. Large Box Car Division will pay dividends of (32) $50,000 each quarter to its corporate parent, Tommy’s Box Car’s. The dividends must be paid, even if the Large Box Car Division has to borrow on its line of credit to make the payment
The budgeted balance sheet for the Large Box Car Division on (34) June 30, 2020 (which is the same as the budgeted balance sheet at the beginning of business (35) July 1, 2020) is presented below. Tommy’s Box Cars owns 100% of the Capital Stock of the Large Box Car Division.
LARGE BOX CAR DIVISION – TOMMY’S BOX CARS
BUDGETED BALANCE SHEET
(34) JUNE 30, 2020
ASSETS LIABILITIES & EQUITY
Cash $1,450,000 Accounts Payable $450,000
Accounts Receivable 3,900,000 Notes Payable 0
Raw Material Inventory (14) 200,000 Capital Stock 3,500,000
Plant and Equipment 8,900,000 Retained Earnings 10,550,000
TOTAL ASSETS $14,450,000 TOTAL LIAB. & SE $14,550,000

In: Accounting

price of soybeans in august 2019 was $8.22 , july 2020 it was $8.50 , and...

price of soybeans in august 2019 was $8.22 , july 2020 it was $8.50 , and august 2020 it was $8.66. if the government placed a price ceiling or a price floor on this product, what would happen in the market? explain. (specify the price and state whether it is a price ceiling or a price floor in uour case).

In: Economics

Write the adjusting entry for the following transactions: Insurance expense: On February 28, 2020 Stark Industries...

Write the adjusting entry for the following transactions: Insurance expense: On February 28, 2020 Stark Industries paid $1,212 for a sixmonth insurance policy on the automobile purchased that date; on March 31, 2020, Stark Industries renewed and paid for the one-year policy on the equipment at a cost of $960.

In: Accounting

When creating a titration curve for a weak base, the pH of the initial solution requires...

When creating a titration curve for a weak base, the pH of the initial solution requires setting up a table showing the initial, change, and equilibrium values for each species and plugging these into the equilibrium constant expression. The expression for the bicarbonate ion is Ka1=[H2CO3][H+][HCO3−] For an anion that can both hydrolyze and produce H+, the pH of a concentrated solution can be more easily approximated using the equation pH=12(pKa1+pKa2) During the titration before the equivalence point, provided that the concentration of acid is significantly more than the concentration of base, the Henderson-Hasselbalch equation can be used to approximate the pH: pH=pKa+log[base][acid] At the equivalence point, the solution is no longer a buffer, but contains the weak acid H2CO3. The change in concentration of the bicarbonate ion is significant, and the equilibrium constant expression for Ka1 must again be used to find the concentration of hydronium ions. After the equivalence point, the strong acid will control the pH.

Part A

A 10.0-mL sample of 1.0 M NaHCO3 is titrated with 1.0 M HCl (hydrochloric acid). Approximate the titration curve by plotting the following points: pH after 0 mL HCl added, pH after 1.0 mL HCl added, pH after 9.5 mL HCl added, pH after 10.0 mL HCl added (equivalence point), pH after 10.5 mL HCl added, and pH after 12.0 mL HCl added.

In: Chemistry

AMC Corporation currently has an enterprise value of $450 million and $125 million in excess cash....

AMC Corporation currently has an enterprise value of $450 million and $125 million in excess cash. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the share​ repurchase, news will come out that will change​ AMC's enterprise value to either $650 million or $250 million.

a. What is​ AMC's share price prior to the share​ repurchase?  

b. What is​ AMC's share price after the repurchase if its enterprise value goes​ up? What is​ AMC's share price after the repurchase if its enterprise value​ declines?

c. Suppose AMC waits until after the news comes out to do the share repurchase. What is​ AMC's share price after the repurchase if its enterprise value goes​ up? What is​ AMC's share price after the repurchase if its enterprise value​ declines?

d. Suppose AMC management expects good news to come out. Based on your answers to parts ​(b​) and ​(c​), if management desires to maximize​ AMC's ultimate share​ price, will they undertake the repurchase before or after the news comes​ out? When would management undertake the repurchase if they expect bad news to come​ out?

e. Given your answer to ​(d​), what effect would you expect an announcement of a share repurchase to have on the stock​ price? Why?

In: Accounting

AMC Corporation currently has an enterprise value of $ 400 million and $ 125 million in...

AMC Corporation currently has an enterprise value of $ 400 million and $ 125

million in excess cash. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the share​ repurchase, news will come out that will change​ AMC's enterprise value to either $ 600 million or $ 200million.

a. What is​ AMC's share price prior to the share​ repurchase?  

b. What is​ AMC's share price after the repurchase if its enterprise value goes​ up? What is​ AMC's share price after the repurchase if its enterprise value​ declines?

c. Suppose AMC waits until after the news comes out to do the share repurchase. What is​ AMC's share price after the repurchase if its enterprise value goes​ up? What is​ AMC's share price after the repurchase if its enterprise value​ declines?

d. Suppose AMC management expects good news to come out. Based on your answers to parts​(b​) and ​(c​), if management desires to maximize​ AMC's ultimate share​ price, will they undertake the repurchase before or after the news comes​ out? When would management undertake the repurchase if they expect bad news to come​ out?

e. Given your answer to ​(d​), what effect would you expect an announcement of a share repurchase to have on the stock​ price? Why?

In: Finance

Question 1 – Payout Policy AMC Corporation currently has an enterprise value of $400 million and...

Question 1 – Payout Policy

AMC Corporation currently has an enterprise value of $400 million and $100 million in excess cash. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the share repurchase, news will come out that will change AMC’s enterprise value to either $600 million or $200 million.

Required:

  1. What is AMC’s share price prior to the share repurchase?
  2. What is AMC’s share price after the repurchase if its enterprise value goes up? What is AMC’s share price after the repurchase if its enterprise value declines?
  3. Suppose AMC waits until after the news comes out to do the share repurchase. What is AMC’s share price after the repurchase if its enterprise value goes up? What is AMC’s share price after the repurchase if its enterprise value declines?
  4. Suppose AMC management expects good news to come out. Based on your answers to requirements (2) and (3), if management desires to maximize AMC’s ultimate share price, will they undertake the repurchase before or after the news comes out? When would management undertake the repurchase if they expect bad news to come out?
  5. Given your answer to requirement (4), what effect would you expect an announcement of a share repurchase to have on the stock price? Why?
  6. do in the word file or excel file

In: Finance

AMC Corporation currently has an enterprise value of $400 million and $100 million in excess cash....

AMC Corporation currently has an enterprise value of $400 million and $100 million in excess cash. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the share repurchase, news will come out that will change AMC’s enterprise value to either $600 million or $200 million.

1. What is AMC’s share price prior to the share repurchase?

2. What is AMC’s share price after the repurchase if its enterprise value goes up? What is AMC’s share price after the repurchase if its enterprise value declines?

3. Suppose AMC waits until after the news comes out to do the share repurchase. What is AMC’s share price after the repurchase if its enterprise value goes up? What is AMC’s share price after the repurchase if its enterprise value declines?

4. Suppose AMC management expects good news to come out. Based on your answers to parts b and c, if management desires to maximize AMC’s ultimate share price, will they undertake the repurchase before or after the news comes out? When would management undertake the repurchase if they expect bad news to come out?

5. Given your answer to part d, what effect would you expect an announcement of a share repurchase to have on the stock price? Why?

In: Finance

Assume the following data for TONINO Corp: Expected EBIT = $160 million (in perpetuity) Cost of...

Assume the following data for TONINO Corp:

  • Expected EBIT = $160 million (in perpetuity)
  • Cost of unlevered equity = 8%
  • Market risk premium = 5%
  • Risk free rate = 4%
  • The corporate tax rate =25%
  • Currently TONINO is unlevered with twenty-million shares outstanding. Before the market opens TONINO will announce the change of capital structure from all equity finance to a debt-equity ratio of 0.5. Consol bonds (perpetuities) will be issued to repurchase shares of common stock 8 days after the announcement. The investment grade of Bonds is AAA and are considered riskfree. Assume markets are efficient in the semi-strong form.

Based on above information calculate:

  1. The value of the firm unlevered
  2. The share price of the firm unlevered
  3. The cost of equity of the levered firm.
  4. The weighted average cost of capital
  5. The value of the firm levered using rwacc
  6. The share price of the firm immediately after announcing the change of capital structure from unlevered to levered.
  7. Value of debt to be issued (8 days after the announcement)
  8. #shares to be repurchased with debt (8 days after the announcement)
  9. # shares outstanding after the repurchase
  10. Value of equity (SL)
  11. Price of stock after the share repurchase with bonds (6 days after the announcement)
  12. EPSL
  13. ROEL
  14. The value of the firm based on MM proposition I with corporate tax
  15. Which capital structure should the firm select when corporate taxes are included (unlevered or levered)? Explain.

In: Finance

Draw a network diagram and answer the questions below: (Please show all your workings or explanation;...

Draw a network diagram and answer the questions below:
(Please show all your workings or explanation; simple answers alone will not account for full marks)

• Activity 1 can start immediately and has an estimated duration of three weeks.
• Activity 2 can start after activity 1 is completed and has an estimated duration of three weeks.
• Activity 3 can start after activity 1 is completed and has an estimated duration of six weeks.
• Activity 4 can start after activity 2 is completed and has an estimated duration of eight weeks.
• Activity 5 can start after activity 4 is completed and after activity 3 is completed. This activity takes four weeks.
. The resource working on activity 3 is replaced with another resource who is less experienced. The activity will now take 10 weeks. How will this affect the project?
Questions are:
6. Using the original information, after some arguing between stakeholders, a new activity 6 is added to the project. It will take 11 weeks to complete and must be completed before activity 5 and after activity 3. Management is concerned that adding the activity will add 11 weeks to the project. Another stakeholder argues the time will be less than 11 weeks. Who is correct?

7. Based on the information in number 6 above, how much longer will the project take?

In: Operations Management