Problem 20-05A a, b1-b3, c (Part Level Submission)

Brislin Company has four operating divisions. During the first quarter of 2020, the company reported aggregate income from operations of $212,000 and the following divisional results.

Analysis reveals the following percentages of variable costs in each division.

Discontinuance of any division would save 50% of the fixed costs and expenses for that division.

Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.

Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II’s unavoidable fixed costs are allocated equally to the continuing divisions. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Moody Farms just paid a dividend of $2.65 on its stock. The growth rate in dividends is expected to be a constant 3.8 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the next three years, and a return of 11 percent thereafter. What is the current share price?

The Diesel Dynamo Company is a high-tech diesel subsystem production business that produces technology accessories for trucks and other transport. The design of Diesel Dynamo products are unique and represent a breakthrough in the industry. The units Diesel Dynamo produces claim to provide for greater dependability, quality and longevity. The company is completing its third year of operations and is preparing to create a master budget for next year, 2017. The budget will detail each quarter’s activities and the activity for the year in total.

Through connections at the Rotary Club, the CEO was able obtain a template for use in creating a master budget and has provided it to you along with financial information from the corporate controller. Your job is to create the initial documents for the master budget:

sales budget

production budget

direct materials purchases budget

direct labor budget

overhead budget

selling and administrative expense budget

cash budget include a schedule of cash collections and payments

finished goods inventory calculation

At that point you will present your results at the budget committee meeting before continuing to complete all of the documents needed.

The Diesel Dynamo Company is a high-tech diesel subsystem production business that produces technology accessories for trucks and other transport. The design of Diesel Dynamo products are unique and represent a breakthrough in the industry. The units Diesel Dynamo produces claim to provide for greater dependability, quality and longevity. The company is completing its third year of operations and is preparing to create a master budget for next year, 2017. The budget will detail each quarter’s activities and the activity for the year in total.

Through connections at the Rotary Club, the CEO was able obtain a template for use in creating a master budget and has provided it to you along with financial information from the corporate controller. Your job is to create the initial documents for the master budget:

overhead budget

selling and administrative expense budget

cash budget include a schedule of cash collections and payments

finished goods inventory calculation

At that point you will present your results at the budget committee meeting before continuing to complete all of the documents needed.

a.

Navigator sells GPS trackers for $55 each. It expects sales of 5,900 units in quarter 1 and a 5% increase each subsequent quarter for the next 8 quarters. Prepare a sales budget by quarter for the first year. Round final answers to nearest whole dollar.

b.  

makes universal remote controls and expects to sell 550 units in January, 750 in February, 500 in March, 500 in April, and 550 in May. The required ending inventory is 10% of the next month’s sales. Prepare a production budget for the first four months of the year.

c. how much direct materials needs to be purchased?

Purchases required $

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter:

As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances:

Actual sales for December and budgeted sales for the next four months are as follows:

Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales.

The company’s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)

Monthly expenses are budgeted as follows: salaries and wages, $18,000 per month: advertising, $58,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,580 for the quarter.

Each month’s ending inventory should equal 25% of the following month’s cost of goods sold.

One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid in the following month.

During February, the company will purchase a new copy machine for $1,300 cash. During March, other equipment will be purchased for cash at a cost of $71,500.

During January, the company will declare and pay $45,000 in cash dividends.

Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

(1) outline your suggestions to save money for the company based on the results of the budget you prepared.

Q.1. The Acme Medical Equipment Company has used the Last-In First-Out (LIFO) inventory method for the 15 years they have existed. Acme's operation has grown substantially, and the CEO believes that the company should now use the FIFO inventory method for this coming year end. This action meets the requirements for consistency.

True

False

Q.2. If the euro is trading at 1.2500 in U.S. dollars (this exchange rate is for illustration only), and you were spending your U.S. dollar in Europe in part of the “euro area,” then to buy products priced in euros, it would take:

Q.3. True or False? The line chart is one of four basic chart styles.

True

False