SmithSmith

Foods produces specialty soup sold in jars. The projected sales in dollars and jars for each quarter of the upcoming year are as? follows:

SmithSmith

anticipates selling

226 comma 000226,000

jars with total sales revenue of

$ 266 comma 000$266,000

in the first quarter of the year following the year given in the preceding table.

SmithSmith

has a policy that the ending inventory of jars must be

3030?%

of the following? quarter's sales.

Requirement

Prepare a production budget for the year that shows the number of jars to be produced each quarter and for the year in total.

Prepare the production budget by first calculating the total units? needed, then calculate the units to produce.

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1. Given Q = 560 – 10P and TC = 6000 + 5Q for an oligopolistic firm, determine mathematically the price and output at which the firm:

a. Maximizes its total profits and calculate those profits

b. Maximizes its total revenues and calculate the profits are that price and quantity

c. Maximizes its total revenue in the presence of a $480 profit constraint (20 points)

• Reference Figure 10-6 on p. 442 •

See also Sales Maximization Model on pp. 467-468

• Part (a) is the standard MR = MC procedure.

• For part (b) you are looking for the turning point of the TR function. Note that the derivative of a function measures its rate of change and when a that derivative (the Marginal Revenue) equals 0 it is at its turning point (in this case, maximum)

• The profit constraint for the sales maximizer means that he must earn at least $480 and cannot maximize sales (he will come as close as he can given the constraint). To do this write a total profit equation (TR minus TC) and set it equal to $480

• Solve the equation by turning it into a quadratic equation and use the quadratic formula to find the quantities that satisfy the equation. Since the firm is a sales maximizer, the larger of the two will be the one chosen.

• Hint: Although the question doesn’t require that you find the profit for part (c), you can check to see if you’ve done it correctly by calculating the profit. You set it equal to $480 so it should be $480

a)   Asher Corporation's equipment had an original life of 140 months, and the straight-line depreciation method is used. As of January 1, the equipment was 40 months old. The equipment will be worthless at the end of its useful life.

b)   As of the end of the month, Asher Corporation has provided services to customers for which the earnings process is complete. Formal billings are normally sent out on the first day of each month for the prior month's work. January's unbilled work is $25,000.

c)   Utilities used during January, for which bills will soon be forthcoming from providers, are estimated at $1,500.

d)   A review of supplies on hand at the end of the month revealed items costing $3,500.

e)   The $2,400 balance in prepaid insurance was for a 6-month policy running from January 1 to June 30.

f)   The unearned revenue was collected in December of 20X7. Sixty percent of that amount was actually earned in January with the remainder to be earned in February.

g)   The loan accrues interest at 1% per month. No interest was paid in January.

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,860 pizzas at an average selling price of $17 per pizza and for 240 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,530 pizzas at an average selling price of $14 per pizza and for 210 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Compute the revenue and spending variances for the pizzeria for November. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

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Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,830 pizzas at an average selling price of $16 per pizza and for 230 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 61 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,700 per month plus $45 per course plus $7 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 59 students. The actual operating results for September appear below:

Required:

1. Prepare the company’s planning budget for September.

2. Prepare the company’s flexible budget for September.

3. Calculate the revenue and spending variances for September.

Badlands, Inc. manufactures a household fan that sells for $40 per unit. All sales are on account, with 30 percent of sales collected in the month of sale and 70 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 $14,000. Total payments in January 20x1 are budgeted at $220,000.
• 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	$	112,000
  From January sales		94,000		$	150,000
  From February sales					65,400

• March 20x1 sales are expected to total 5,000 units.
• Finished-goods inventories are maintained at 30 percent of the following month’s sales.
• The December 31, 20x0, balance sheet revealed the following selected figures: cash, $24,300; accounts receivable, $112,000; and finished goods, $25,050.

1. Determine the number of units that Badlands sold in December 20x0.

2. Compute the sales revenue for March 20x1.

3. Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.

4. Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.

5. Calculate the number of units in the December 31, 20x0, finished-goods inventory.

6. Calculate the number of units of finished goods to be manufactured in January 20x1.

7. Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.