Problem 1 -
Presented below are selected budget data items for Globe Corporation for a three-month period:
|
|
October
|
November
|
December
|
|
Sales
|
$895,000
|
$887,000
|
$882,000
|
|
Direct materials
|
125,200
|
126,100
|
128,000
|
|
Direct labor
|
88,000
|
89,000
|
85,800
|
|
Variable overhead
|
63,810
|
64,821
|
69,283
|
|
Fixed overhead
|
140,000
|
140,000
|
140,000
|
|
Selling and Administrative expenses
|
301,847
|
305,812
|
304,452
|
|
Fixed loan payments
|
137,000
|
137,000
|
137,000
|
Sales were $815,000 in August and $854,000 in September. Material usage was $119,500 in August and $123,300 in September. All sales are on account, and accounts receivable is historically collected 22% in the month of sale, 60% in the month following sales, and the remainder two months after the sale. Materials are paid for 37% in the month used and 63% the following month. All other expenses are paid in the month incurred. The cash balance was $38,000 at the beginning of 0ctober, and management wants to determine if the company will have enough cash to pay a year-end bonus.
Prepare a three month cash budget, including a schedule for cash collection and material payments.
Problem 2 -
Olympic Products Inc. manufactures and distributes barbecue grills. The company normally sells 2,100 of these grills each month for a price of $250 each. The material cost for a grill is $55 and the direct labor is $32. The variable overhead cost is $26 per grill, and the fixed overhead cost is $50,000 per month. A contract manufacturing has approached the company and offered to supply the grills ready to sell for $120 each. The company management believes that if it accepts this offer, Olympic Products will be able to lease unused factory space for $20,000 per month.
Perform a make-versus-buy analysis.