Exercise 1- Schedule of cash collections
Sugarland Company sells a single product and anticipates opening a new facility in Charlotte on May 1 of the current year. Expected sales during the first 3 months of activity are as follows: May, $60,000; June, $80,000; and July, $85,000.
Thirty percent of all sales are for cash; the remaining 70% are on account. Credit sales have the following collection pattern:
Collected in the month of sale 60%
Collected in the month following sale 35
Uncollectible 5
a. Prepare a schedule of cash collections for May through July.
b. Compute the expected balance in Accounts Receivable as of July 31.
Exercise 2 - Abbreviated cash budget;financing emphasis
An abbreviated cash budget for Big Chuck Enterprises follows:
___________________________________July August September
Beginning cash balance $10,000 $ ? $ ?
Add: Cash receipts 50,000 63,000 71,000
Deduct: Cash payments (64,000) (58,000) (64,000)
Cash excess (deficiency)
before financing $(4,000) $ ? $ ?
Financing
Borrowing to maintain ? ? ?
minimum balance
Principal repayment ? ? ?
Interest payment ? ? ?___
Ending cash balance $ ? $ ? $ ?
Big Chuck wants to maintain a $10,000 minimum cash balance at all times. Additional financing is available (and retired) in $1,000 multiples at a 12% interest rate. Assume that borrowings take place at the beginning of the month; retirements, in contrast, occur at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid.
a. Find the unknowns in Big Chuck's abbreviated cash budget.
b. Determine the outstanding loan balance as of September 30, after any repayments have been made.
Exercise 3 - Comprehensive budgeting
The balance sheet of Watson Company as of December 31, 20X1, follows:
WATSON COMPANY
Balance Sheet
___________________________________December 31, 20X1_____________________________
Assets
Cash $4,595
Accounts receivable 10,000
Finished goods (575 units 3 $7.00) 4,025
Direct materials (2,760 units 3 $0.50) 1,380
Plant & equipment $50,000
Less: Accumulated depreciation 10,000 40,000
Total assets $60,000
Liabilities & Stockholders' Equity
Accounts payable to suppliers $14,000
Common stock $25,000
Retained earnings 21,000 46,000
Total liabilities & Stockholders' equity $60,000
The following information has been extracted from the firm's accounting records:
1) All sales are made on account at $20 per unit. Sixty percent of the sales are collected in the month of sale; the remaining 40% are collected in the following month. Forecasted sales for the first 5 months of 20X2 are as follows:
January, 1,500 units; February, 1,600 units; March, 1,800 units; April, 2,000 units; and May, 2,100 units.
2) Management wants to maintain the finished goods inventory at 30% of the following month's sales.
3) Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next 6 months. Management wants to maintain the ending direct materials inventory at 60% of the following month's production needs.
4) Seventy percent of all purchases are paid in the month of purchase; the remaining 30% are paid in the subsequent month.
5) Watson's product requires 30 minutes of direct labor time. Each hour of direct labor costs $7.
Instructions
a. Rounding computations to the nearest dollar, prepare the following for January through March:
1) Sales budget
2) Schedule of cash collections
3) Production budget
4) Direct material purchases budget
5) Schedule of cash disbursements for material purchases
6) Direct labor budget
b. Determine the balances in the following accounts as of March 31:
1) Accounts Receivable
2) Direct Materials
3) Accounts Payable
Exercise 4 Overhead variances
Nova Manufacturing applies factory overhead to products on the basis of directlabor hours. At the beginning of the current year, the company's accountant madethe following estimates for the forthcoming period:
- Estimated variable overhead: $500,000
- Estimated fixed overhead: $400,000
- Estimated direct labor hours: 40,000
It is now 12 months later. Actual total overhead incurred in the manufacture of 7,900 units amounted to $895,100. Actual labor hours totaled 39,800. Assuming a direct labor standard of 5 hours per finished unit, calculate the following:
a. Variable overhead efficiency variance
b. Fixed overhead volume variance
c. Overhead spending variance
Exercise 5 - Straightforward variance analysis
Arrow Enterprises uses a standard costing system. The standard cost sheet for product No. 549 follows:
Direct materials: 4 units @$6.50 $26.00
Direct labor: 8 hours @ $8.50 68.00
Variable factory overhead: 8 hours @ $7.00 56.00
Fixed factory overhead: 8 hours @ $2.50 20.00
Total standard cost per unit $170.00
The following information pertains to activity for December:
1) Direct materials acquired during the month amounted to 26,350 units at $6.40 per unit. All materials were consumed in operations.
2) Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity.
3) Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the year.
4) Actual production amounted to 6,500 completed units.
Instructions
a. Compute Arrow's direct material variances.
b. Compute Arrow's direct labor variances.
c. Compute Arrow's variances for factory overhead.
Attachment:- speradsheet.xlsx