Jesper Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to JesperJesper Manufacturing's operations:
Data Table
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Current Assets as of December 31 (prior year): |
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Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . |
$4,640 |
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Accounts receivable, net. . . . . . . . . . . . . . . |
$51,000 |
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Inventory. . . . . . . . . . . . . . . . . . . . . . . . |
$15,400 |
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Property, plant, and equipment, net. . . . . . . . . . . . |
$120,500 |
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Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . |
$42,800 |
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Capital stock. . . . . . . . . . . . . . . . . . . . . . . . . . |
$123,500 |
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Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . |
$23,100 |
Information
a. Actual sales in December were $72,000. Selling price per
unit is projected to remain stable at $12 per unit throughout the
budget period. Sales for the first five months of the upcoming year
are budgeted to be as follows:
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b. |
Sales are 20% cash and 80% credit. All credit sales are collected in the month following the sale. | |||||||||
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c. |
Jesper Manufacturing has a policy that states that each month's ending inventory of finished goods should be 10% of the following month's sales (in units). |
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d. |
Of each month's direct material purchases, 20% are paid for in the month of purchase, while the remainder is paid for in the month following purchase. Three kilograms of direct material is needed per unit at $2.00/kg. Ending inventory of direct materials should be 30% of next month's production needs. |
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e. |
Monthly manufacturing conversion costs are $4,500 for factory rent, $2,800 for other fixed manufacturing expenses, and $1.10 per unit for variable manufacturing overhead. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred. |
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f. |
Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Jesper Manufacturing will purchase equipment for $6,000 (cash), while February's cash expenditure will be $12,800 and March's cash expenditure will be $15,600. |
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g. |
Operating expenses are budgeted to be $1.30 per unit sold plus fixed operating expenses of $1,800 per month. All operating expenses are paid in the month in which they are incurred. |
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h. |
Depreciation on the building and equipment for the general and administrative offices is budgeted to be $5,600 for the entire quarter, which includes depreciation on new acquisitions. |
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i. |
Jesper Manufacturing has a policy that the ending cash balance in each month must be at least $4,200. it has a line of credit with a local bank. The company can borrow in increments of $1,000 at the beginning of each month, up to a total outstanding loan balance of $140,000. The interest rate on these loans is22% per month simple interest (not compounded). Jesper Manufacturing pays down on the line of credit balance if it has excess funds at the end of the quarter. The company also pays the accumulated interest at the end of the quarter on the funds borrowed during the quarter. |
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j. |
The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $10,800 cash at the end of February in estimated taxes. |
Requirements
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1. |
Prepare a schedule of cash collections for January, February, and March, and for the quarter in total. |
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2. |
Prepare a production budget. (Hint: Unit sales = Sales in dollars / Selling price per unit.) |
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3. |
Prepare a direct materials budget. |
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4. |
Prepare a cash payments budget for the direct material purchases from Requirement 3. |
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5. |
Prepare a cash payments budget for conversion costs. |
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6. |
Prepare a cash payments budget for operating expenses. |
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7. |
Prepare a combined cash budget. |
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8. |
Calculate the budgeted manufacturing cost per unit. (Assume that fixed manufacturing overhead is budgeted to be $0.80 per unit for the year.) |
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9. |
Prepare a budgeted income statement for the quarter ending March 31. (Hint: Cost of goods sold = Budgeted cost of manufacturing each unit x Number of units sold.) |
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10. |
Prepare a partial budgeted balance sheet for March 31. Include Loans Payable and Income Tax Payable. |
In: Accounting
Herman Co. is considering a four-year project that will require an initial investment of $5,000. The base-case cash flows for this project are projected to be $12,000 per year. The best-case cash flows are projected to be $20,000 per year, and the worst-case cash flows are projected to be –$1,000 per year. The company’s analysts have estimated that there is a 50% probability that the project will generate the base-case cash flows. The analysts also think that there is a 25% probability of the project generating the best-case cash flows and a 25% probability of the project generating the worst-case cash flows.
What would be the expected net present value (NPV) of this project if the project’s cost of capital is 13%?
A. $25,627
B. $26,976
C. $31,022
D. $22,930
Herman now wants to take into account its ability to abandon the project at the end of year 2 if the project ends up generating the worst-case scenario cash flows. If it decides to abandon the project at the end of year 2, the company will receive a one-time net cash inflow of $3,000 (at the end of year 2). The $3,000 the company receives at the end of year 2 is the difference between the cash the company receives from selling off the project’s assets and the company’s –$1,000 cash outflow from operations. Additionally, if it abandons the project, the company will have no cash flows in years 3 and 4 of the project.
Using the information in the preceding problem, find the expected NPV of this project when taking the abandonment option into account.
A. $35,106
B. $30,894
C. $28,085
D. $26,681
What is the value of the option to abandon the project? ($1,109, $998, $721, $943, $832)
In: Finance
A survey of several 9 to 11 year olds recorded the following amounts spent on a trip to the mall: $22.91,$17.13,$13.60 Construct the 99% confidence interval for the average amount spent by 9 to 11 year olds on a trip to the mall. Assume the population is approximately normal. Step 3 of 4 : Find the critical value that should be used in constructing the confidence interval. Round your answer to three decimal places.
In: Math
Sunnyside Marine Products began the year with 10 units of marine floats at a cost of $11 each. During the year, it made the following purchases: May 5, 30 unit at $16; July 16, 15 units at $19; and December 7, 20 units at $23. Assuming there are 25 units on hand at the end of the period, determine the cost of goods sold under (a) FIFO, (b) LIFO, and (c) average-cost. Sunnyside uses the periodic approach.
In: Accounting
A poll was taken this year asking college students if they considered themselves overweight. A similar poll was taken 5 years ago. Five years ago, a sample of 270 students showed that 120 considered themselves overweight. This year a poll of 300 students showed that 140 considered themselves overweight. At a 5% level of significance, test to see if there is any difference in the proportion of college students who consider themselves overweight between the two polls. What is your conclusion?
In: Math
There is a 9%, 23 year note bond which has a ytm of 9%. The ytm alters by one percent down. By how much does the price alter? If the ytm drops by 2%, by how much does the price change?
What is the exact percentage change of the bond in the 2 cases?
Please show all work and the formula(s) used.
In: Finance
| Early in the year, John Raymond founded Raymond Engineering Co. for the purpose of manufacturing a special flow control valve that he had designed. Shortly after year-end, the company’s accountant was injured in a skiing accident, and no year-end financial statements were prepared. However, the accountant had correctly determined the year-end inventories at the following amounts. | ||||||||||||||||||
| Ending Inventory | Beginning Inventory | |||||||||||||||||
| Materials | 46,000 | - | ||||||||||||||||
| Work in process | 31,500 | - | ||||||||||||||||
| Finished goods (3,000 units) | 88,500 | - | ||||||||||||||||
| As this was the first year of operations, there were no beginning inventories | ||||||||||||||||||
| While the accountant was in the hospital, Raymond improperly prepared the following income statement from the company's accounting records: | ||||||||||||||||||
| Net sales | 610,600 | |||||||||||||||||
| Cost of goods sold: | ||||||||||||||||||
| Purchases of direct materials | 181,000 | |||||||||||||||||
| Direct labor costs | 110,000 | |||||||||||||||||
| Manufacturing overhead | 170,000 | |||||||||||||||||
| Selling expenses | 70,600 | |||||||||||||||||
| Administrative expenses | 132,000 | |||||||||||||||||
| Total costs | 663,600 | |||||||||||||||||
| Net loss for year | (53,000) | |||||||||||||||||
| Raymond was very disappointed in these operating results. He stated, “Not only did we lose more than 50,000 this year, but look at our unit production costs. We sold 10,000 units this year at a cost of 663,600; that amounts to a cost of 66.36 per unit. I know some of our competitors are able to manufacture similar valves for about 35 per unit. I don’t need an accountant to know that this business is a failure.” | ||||||||||||||||||
| Instructions | ||||||||||||||||||
| If the company has earned any operating income, assume an income tax rate of 30 percent. (Omit earnings per share figures.) | ||||||||||||||||||
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d. Explain whether you agree or disagree with Raymond’s remarks that the business is unprofitable and that its unit cost of production (66.36, according to Raymond) is much higher than that of competitors (around 35). If you disagree with Raymond, explain any errors or shortcomings in his analysis.
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In: Accounting
1. If the interest rate is 7% and an asset pays 100 per year for 5 years, starting now, show the present value of the income stream (to 2 decimal places) is $438.72.
2. What is adverse selection?
3. Give an example of adverse selection.
4. What is moral hazard?
5. Give an example of moral hazard.
6. What are the assumptions/conditions of perfectly competitive capital markets? We assumed 2 periods but in practice people also assume other numbers, it is not critically important the exact number if there is more than 1 period.
7. Use the two period model of utility maximization (we will always assume perfectly competitve capital markets in this model) to show the impact on a borrower if the market interest rate increases. Hint: they are worse off.
8. Consider a world with two goods, X and Y. Please label all diagrams fully. a. Using an indifference curve diagram(s) derive the demand curve for X if the goods are: i. Complements ii. Substitutes b. Discuss the similarities and differences between the demand curves for the two cases in part (a).
9. Explain and discuss, using a diagram, the effect of a minimum wage above the market/equilibrium wage in a monopsony. Please label all diagrams fully.
In: Economics
What is the future value of $2,200 per year for 29 years at an interest rate of 6.39 percent?
In: Finance
(Please note that the problem starts by saying "Last year", this means that N will equal 18 (9x2) and not 20 (10x2).
Last year Carson Industries issued a 10-year, 12% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,060 and it sells for $1,150.
a)
a1. What is the bond's nominal yield to maturity? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
a2. What is the bond's nominal yield to call? Do not round
intermediate calculations. Round your answer to two decimal
places.
%
a3. Would an investor be more likely to earn the YTM or the
YTC?
-Select-: 1) Since the YTM is above the YTC, the bond is likely to
be called. 2)Since the YTC is above the YTM, the bond is likely to
be called 3) Since the YTM is above the YTC, the bond is not likely
to be called. 4) Since the YTC is above the YTM, the bond is not
likely to be called. 5)Since the coupon rate on the bond has
declined, the bond is not likely to be called.
b)
b1. What is the current yield? (Hint: Refer to Footnote 6 for
the definition of the current yield and to Table 7.1) Round your
answer to two decimal places.
%
b2. Is this yield affected by whether the bond is likely to be
called?
C)
C1. What is the expected capital gains (or loss) yield for the coming year? . Use amounts calculated in above requirements for calculation, if required. Negative value should be indicated by a minus sign. Round your answer to two decimal places.
%
C2. Is this yield dependent on whether the bond is expected to be called?
In: Finance