You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of $3,130,000 this year. Depreciation, the increase in net working capital, and capital spending were $239,000, $104,000, and $485,000, respectively. You expect that over the next five years, EBIT will grow at 20 percent per year, depreciation and capital spending will grow at 25 per year, and NWC will grow at 15 per year. The company currently has $17,900,000 in debt and 515,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5 percent indefinitely. The company’s WACC is 8.7 percent and the tax rate is 35 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $

You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of $3,230,000 this year. Depreciation, the increase in net working capital, and capital spending were $244,000, $109,000, and $510,000, respectively. You expect that over the next five years, EBIT will grow at 13 percent per year, depreciation and capital spending will grow at 18 percent per year, and NWC will grow at 8 percent per year. The company has $18,900,000 in debt and 395,000 shares outstanding. You believe that sales in five years will be $22,100,000 and the price-sales ratio will be 3.2. The company’s WACC is 9.4 percent and the tax rate is 25 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Share Price?

A government researcher is analyzing the relationship between retail sales (in $ millions) and the gross national product (GNP in $ billions). He also wonders whether there are significant differences in retail sales related to the quarters of the year. He collects 10 years of quarterly data. A portion is shown in the accompanying table. Retail sales (in millions) GNP (in billions) d1 d2 d3 2000 1 696048 9740.5 1 0 0 2 753211 9983.5 0 1 0 3 746875 10048.0 0 0 1 4 792622 10184.9 0 0 0 2001 1 704757 10206.2 1 0 0 2 779011 10350.9 0 1 0 3 756128 10332.2 0 0 1 4 827829 10463.1 0 0 0 2002 1 717302 10549.7 1 0 0 2 790486 10634.7 0 1 0 3 792657 10749.1 0 0 1 4 833877 10832.2 0 0 0 2003 1 741233 10940.2 1 0 0 2 819940 11073.6 0 1 0 3 831222 11321.2 0 0 1 4 875437 11508.3 0 0 0 2004 1 795916 11707.8 1 0 0 2 871970 11864.2 0 1 0 3 873695 12047.3 0 0 1 4 938213 12216.6 0 0 0 2005 1 836952 12486.3 1 0 0 2 932713 12613.0 0 1 0 3 940880 12848.7 0 0 1 4 987085 12994.1 0 0 0 2006 1 897180 13264.0 1 0 0 2 987406 13423.3 0 1 0 3 978211 13514.8 0 0 1 4 1018775 13683.2 0 0 0 2007 1 923997 13859.8 1 0 0 2 1016136 14087.6 0 1 0 3 1002312 14302.9 0 0 1 4 1062803 14489.9 0 0 0 2008 1 953358 14520.7 1 0 0 2 1032919 14647.3 0 1 0 3 1006551 14689.2 0 0 1 4 966329 14317.2 0 0 0 2009 1 839625 14172.2 1 0 0 2 919646 14164.2 0 1 0 3 926265 14281.9 0 0 1 4 985649 14442.8 0 0 0

a. Estimate y = β0 + β1x + β2d1 + β3d2 + β4d3 where y is retail sales, x is GNP, d1 is a dummy variable that equals 1 if quarter 1 and 0 otherwise, d2 is a dummy variable that equals 1 if quarter 2 and 0 otherwise, and d3 is a dummy variable that equals 1 if quarter 3 and 0 otherwise. Here the reference category is quarter 4. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)

d-1. Reformulate the model to determine, at the 5% significance level, if sales differ between quarter 2 and quarter 3. Your model must account for all quarters. Use quarter 3 as the reference category. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)

Please answer a and b

Durianx Inc. distributes a electronic chessboards The following information was gathered to prepare the budget for the third quarter.

• Each unit of chessboard is budgeted to sell for an average price of $175. Unit sales are expected to be as follows:

•Sales are made for cash and on credit. The following collection pattern is used to estimate monthly cash collections:

•The company tries to maintain an inventory of 20% of the following month's sales. The company expects to have 1,940 Units on hand on June 30. Durianx pays an average of $125 per Units.

•The company pays for 60% of its purchases in the month of purchase and the remaining 40% in the month after purchase.

•The following monthly selling and administrative expenses are planned for t­­he quarter.

•On August 1^st , the company plans to purchase $500,000 of new office equipment and a delivery truck. Additional depreciation is already accounted for in the above selling and administrative expenses.

• Durianx will collect the full $436,800 accounts receivable balance of June 30^th in July. Durianx will pay the $481,000 of June Accounts Payable in July.

•Durianx wants to maintain a minimum cash balance of $40,000. An open line of credit at a local bank allows the company to borrow up to $500,000 per quarter in $1,000 increments.

•All borrowing is done at the beginning of the month, and all repayments are made at the end of a month in $1,000 increments. Accrued interest on the loan is paid only when principal is repaid. The interest rate is 12% per year. This means that if the loan is not reimbursed during the quarter then no interest expense is paid during that time.

•Durianx's tax rate is 30%.

•The June 30 balance sheet is budgeted as follows:

Required

1. ( 34 marks ) Prepare all components of Durianx's master budget for the third quarter (Sales Budget, Selling and Administrative Expense Budget, Inventory Purchases Budget, Ending Inventory Budget, Cash Receipts Budget, Cash Payments for Inventory Budget, and Cash Budget)

Prepare a pro-forma income statement for the third quarter.

Prepare a pro-forma balance sheet as of September 30.

2. ( 8 marks ) Sales manager proposes to decrease the selling price of each unit by $20, to $155. The decrease in the selling price will result in an increase in the number of unit sold by 15%.
   1. Which type of expense do you expect to increase with 15% increase in number of units sold? Which type of expense do you expect to remain unchanged? Explain and give one example for each type of expense.
   2. What will be the net effect on Cash and Net income before income taxes for the quarter ending September 30th? Would you recommend management to implement this proposal? Explain

Durianx Inc. distributes a electronic chessboards The following information was gathered to prepare the budget for the third quarter.

• Each unit of chessboard is budgeted to sell for an average price of $175. Unit sales are expected to be as follows:

•Sales are made for cash and on credit. The following collection pattern is used to estimate monthly cash collections:

•The company tries to maintain an inventory of 20% of the following month's sales. The company expects to have 1,940 Units on hand on June 30. Durianx pays an average of $125 per Units.

•The company pays for 60% of its purchases in the month of purchase and the remaining 40% in the month after purchase.

•The following monthly selling and administrative expenses are planned for t­­he quarter.

•On August 1^st , the company plans to purchase $500,000 of new office equipment and a delivery truck. Additional depreciation is already accounted for in the above selling and administrative expenses.

• Durianx will collect the full $436,800 accounts receivable balance of June 30^th in July. Durianx will pay the $481,000 of June Accounts Payable in July.

•Durianx wants to maintain a minimum cash balance of $40,000. An open line of credit at a local bank allows the company to borrow up to $500,000 per quarter in $1,000 increments.

•All borrowing is done at the beginning of the month, and all repayments are made at the end of a month in $1,000 increments. Accrued interest on the loan is paid only when principal is repaid. The interest rate is 12% per year. This means that if the loan is not reimbursed during the quarter then no interest expense is paid during that time.

•Durianx's tax rate is 30%.

•The June 30 balance sheet is budgeted as follows:

Required

1. ( 34 marks ) Prepare all components of Durianx's master budget for the third quarter (Sales Budget, Selling and Administrative Expense Budget, Inventory Purchases Budget, Ending Inventory Budget, Cash Receipts Budget, Cash Payments for Inventory Budget, and Cash Budget)

Prepare a pro-forma income statement for the third quarter.

Prepare a pro-forma balance sheet as of September 30.

2. ( 8 marks ) Sales manager proposes to decrease the selling price of each unit by $20, to $155. The decrease in the selling price will result in an increase in the number of unit sold by 15%.
   1. Which type of expense do you expect to increase with 15% increase in number of units sold? Which type of expense do you expect to remain unchanged? Explain and give one example for each type of expense.
   2. What will be the net effect on Cash and Net income before income taxes for the quarter ending September 30th? Would you recommend management to implement this proposal? Explain

Durianx Inc. distributes a electronic chessboards The following information was gathered to prepare the budget for the third quarter.

• Each unit of chessboard is budgeted to sell for an average price of $175. Unit sales are expected to be as follows:

•Sales are made for cash and on credit. The following collection pattern is used to estimate monthly cash collections:

•The company tries to maintain an inventory of 20% of the following month's sales. The company expects to have 1,940 Units on hand on June 30. Durianx pays an average of $125 per Units.

•The company pays for 60% of its purchases in the month of purchase and the remaining 40% in the month after purchase.

•The following monthly selling and administrative expenses are planned for t­­he quarter.

•On August 1^st , the company plans to purchase $500,000 of new office equipment and a delivery truck. Additional depreciation is already accounted for in the above selling and administrative expenses.

• Durianx will collect the full $436,800 accounts receivable balance of June 30^th in July. Durianx will pay the $481,000 of June Accounts Payable in July.

•Durianx wants to maintain a minimum cash balance of $40,000. An open line of credit at a local bank allows the company to borrow up to $500,000 per quarter in $1,000 increments.

•All borrowing is done at the beginning of the month, and all repayments are made at the end of a month in $1,000 increments. Accrued interest on the loan is paid only when principal is repaid. The interest rate is 12% per year. This means that if the loan is not reimbursed during the quarter then no interest expense is paid during that time.

•Durianx's tax rate is 30%.

•The June 30 balance sheet is budgeted as follows:

Required (Please answer A AND B)

1. Prepare all components of Durianx's master budget for the third quarter (Sales Budget, Selling and Administrative Expense Budget, Inventory Purchases Budget, Ending Inventory Budget, Cash Receipts Budget, Cash Payments for Inventory Budget, and Cash Budget)

Prepare a pro-forma income statement for the third quarter.

Prepare a pro-forma balance sheet as of September 30.

2. Sales manager proposes to decrease the selling price of each unit by $20, to $155. The decrease in the selling price will result in an increase in the number of unit sold by 15%.
   1. Which type of expense do you expect to increase with 15% increase in number of units sold? Which type of expense do you expect to remain unchanged? Explain and give one example for each type of expense.
   2. What will be the net effect on Cash and Net income before income taxes for the quarter ending September 30th? Would you recommend management to implement this proposal? Explain

Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $11 per hour. Iguana has the following inventory policies:

Ending finished goods inventory should be 40 percent of next month’s sales.

Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $9,600 ($800 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $850 per month plus $0.60 per unit sold.

     Iguana, Inc., had $12,800 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

     Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $3,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $200 in depreciation. During April, Iguana plans to pay $3,500 for a piece of equipment.

1.

value:
33.33 points

Required information

Required:
Compute the following for Iguana, Inc., for the second quarter (April, May, and June).     

References

eBook & Resources

WorksheetLearning Objective: 08-03b Prepare the following components of the operating budget: Production budget.Learning Objective: 08-03e Prepare the following components of the operating budget: Manufacturing overhead budget.

Difficulty: 3 HardLearning Objective: 08-03c Prepare the following components of the operating budget: Raw materials purchases budget.Learning Objective: 08-03f Prepare the following components of the operating budget: Cost of goods sold budget.

Learning Objective: 08-03a Prepare the following components of the operating budget: Sales budget.Learning Objective: 08-03d Prepare the following components of the operating budget: Direct labor budget.Learning Objective: 08-03g Prepare the following components of the operating budget: Selling and administrative expense budget.

Check my work

2.

value:
33.33 points

Required information

Required:
Complete Iguana's budgeted income statement for quarter 2. (Round cost per unit in intermediate calculations and final answers to 2 decimal places.)

[The following information applies to the questions displayed below.]

Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $3.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies:

Ending finished goods inventory should be 40 percent of next month’s sales.

Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,500 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold.

     Iguana, Inc., had $13,600 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

     Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $3,600. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $210 in depreciation. During April, Iguana plans to pay $3,600 for a piece of equipment.

1.

value:
21.00 points

Required information

Required:
Compute the following for Iguana, Inc., for the second quarter (April, May, and June).     

References

eBook & Resources

WorksheetLearning Objective: 08-03b Prepare the following components of the operating budget: Production budget.Learning Objective: 08-03e Prepare the following components of the operating budget: Manufacturing overhead budget.

Difficulty: 3 HardLearning Objective: 08-03c Prepare the following components of the operating budget: Raw materials purchases budget.Learning Objective: 08-03f Prepare the following components of the operating budget: Cost of goods sold budget.

Learning Objective: 08-03a Prepare the following components of the operating budget: Sales budget.Learning Objective: 08-03d Prepare the following components of the operating budget: Direct labor budget.Learning Objective: 08-03g Prepare the following components of the operating budget: Selling and administrative expense budget.

Check my work

2.

value:
4.00 points

Required information

Required:
Complete Iguana's budgeted income statement for quarter 2. (Round cost per unit in intermediate calculations and final answers to 2 decimal places.)

[The following information applies to the questions displayed below.]

Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $2.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies:

Ending finished goods inventory should be 40 percent of next month’s sales.

Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,800 ($650 per month) for expected production of 3,000 units for the year. Selling and administrative expenses are estimated at $700 per month plus $0.50 per unit sold.

     Iguana, Inc., had $10,900 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

     Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $2,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $160 in depreciation. During April, Iguana plans to pay $3,100 for a piece of equipment.

1.

value:
21.00 points

Required information

Required:
Compute the following for Iguana, Inc., for the second quarter (April, May, and June).     

References

eBook & Resources

WorksheetLearning Objective: 08-03b Prepare the following components of the operating budget: Production budget.Learning Objective: 08-03e Prepare the following components of the operating budget: Manufacturing overhead budget.

Difficulty: 3 HardLearning Objective: 08-03c Prepare the following components of the operating budget: Raw materials purchases budget.Learning Objective: 08-03f Prepare the following components of the operating budget: Cost of goods sold budget.

Learning Objective: 08-03a Prepare the following components of the operating budget: Sales budget.Learning Objective: 08-03d Prepare the following components of the operating budget: Direct labor budget.Learning Objective: 08-03g Prepare the following components of the operating budget: Selling and administrative expense budget.

Check my work

2.

value:
4.00 points

Required information

Required:
Complete Iguana's budgeted income statement for quarter 2. (Round cost per unit in intermediate calculations and final answers to 2 decimal places.)

High Kite is one of the foremost performance kite makers in Australia. The company has always prepared a budget that is calculated using only one estimated volume of sales. You recently joined the company as a junior accountant. You are required to set up a spreadsheet for sensitivity analysis in the budgeting process. This year it appears that the company may not meet expectations, which could result in a loss. Top manager is concerned that the company will incur a loss again next year, and he wants to develop a budget that will easily reflect changes in the assumptions.

The senior accountant provided you with the following data about the year 2021’s planned operations:

Required:

a) Prepare a sales budget (in dollars) for 2021.

b) Prepare a production budget (in units) for 2021.

c). Prepare a direct material purchases budget for all the required materials (in dollars) for 2021.

d) Prepare a direct labour budget (in dollars) for 2021.

e). Prepare a budgeted income statement for the year ending December 31, 2021. You are provided the following budgets: (1) Manufacturing overhead budget shows expected costs to be 100% of direct labour cost, (2) selling and administrative expenses are expected to be 12% of the expected sales revenue, and (3) expected interest expense is $200,000. The company’s income tax rate is expected to be 30% of its income before tax.

The top manager would like to prepare a budget for cash flows on a monthly basis so that they can plan short-term investments and borrowings.

The company’s sales are highest during the spring and summer. Sales are fairly even within each quarter (sales are even within 3 months of each quarter), but sales vary across quarters as follows:

Payments from customers are usually received as follows:

f) Prepare monthly budgets for cash receipts for 2021. (Hint: you may have to present a table of monthly sales, receipts of the month and from the prior month, and the monthly total receipts.)