Part -1:
Ballywide Company, operating at full capacity, sold 96,125 units at a price of $125 per unit during 2013. Its income statement for 2013 is as follows:
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sales
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12,015,625
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Cost of goods sold
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5,000,000
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Gross profit
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7,015,625
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|
Expenses:
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|
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Selling expenses
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2,800,000
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|
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Administrative expenses
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1,720,000
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|
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Total expenses
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4,520,000
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Income from operations
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2,495,625
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The division of costs between fixed and variable is as follows:
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fixed
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variable
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Cost of sales
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45%
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55%
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Selling expense
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55%
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45%
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Administrative expenses
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65%
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35%
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Management is considering a plant expansion program that will permit an increase of $1,300,000 in yearly sales. The expansion will increase fixed costs by $140,000, but will not affect the relationship between sales and variable costs.
a. Determine for 2013 the total fixed costs and the total variable costs.
b. Determine for 2013 (1) the unit variable cost and (2) the unit contribution margin.
c. Compute the break-even sales in units for 2013.
d. Compute the break-even sales in units under the proposed program.
e. Determine the amount of sales in units that would be necessary under the proposed program to realize the $2,495,625 of income from operations that was earned in 2013.
f. Determine the maximum income from operations possible with the expanded plant.
g. If the proposal is accepted and sales remain at the 2013 level, what will the income or loss from operations be for 2014?
h. Based on the data given, would you recommend accepting the proposal?
Part -2:
At the beginning of the 2013 school year, Robert Logan decided to prepare a cash budget for the months of September, October, November and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget:
Cash balance, September 1 (from a summer job) $7,500 Purchase season football tickets in September 150 Additional entertainment for each month 180 Pay fall semester tuition on September 3 4,250 Pay rent at the beginning of each month 385 Pay for food each month 250 Pay apartment deposit on September 2 (to be returned December 15) 520 Part-time job earnings each month (net of taxes) 1,000
a. Prepare a cash budget for September, October, November, and December
b. Are the four monthly budgets that are presented prepared as static or flexible budgets?
c. What are the budget implications for Robert Logan?
Part -3:
Mesa Bottle Company (MBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:
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Cost Category
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Standard cost per 100 Two-Liter Bottles
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Direct labor
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$1.38
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Direct materials
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5.75
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Factory overhead
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0.38
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Total
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$7.51
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At the beginning of July, MBC management planned to produce 680,000 bottles. The actual number of bottles produced for July was 770,000 bottles. The actual costs for July of the current year were as follows:
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Cost Category
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Actual Cost for the month ended July 31, 2013
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Direct labor
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$10,500
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Direct Materials
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40,925
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Factory overhead
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3,350
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Total
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$54,775
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a. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for WBC, assuming planned production.
b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July.
c. Interpret the budget performance report.