PART II - BUDGETARY PLANNING (50 points)
This problem consists of four independent mini-problems. Omit headings other than those already given.

A. Kriter Kitchen Tools produces and sells insulated ice buckets. The sales budget for 2014 is as follows:

1st quarter - 8,000 units 3rd quarter - 13,000 units
2nd quarter - 11,000 units 4th quarter - 10,000 units

Kriter desires an ending inventory equal to 10% of the next quarter's sales. The January 1, 2014 inventory is 800 units. Unit sales during the 1st quarter of 2015 are estimated at 9,000 units.

Instructions: Compute required production for 2014, showing quarterly data.

Description Quarter 1 Quarter 2 Quarter 3 Quarter 4
Expected Units sales
Desired ending finished goods units
Total required units
Beginning finished goods units
Required production units

B. Shanigan's Manufacturers is preparing its direct labor budget for the second quarter of 2014 from the following budgeted production figures: April-8,000 units; May-7,000 units; and June-9,000 units. Each unit requires 3.25 hour of direct labor. The hourly wage rates are expected to be $15 in April, and $15.50 in May and June.

Instructions: Prepare a direct labor budget for the quarter, showing monthly data.

Description April May June Quarter
Units to be produced
Direct labor hours/unit
Total direct labor hours
Direct labor cost/hour
Total direct labor cost

C. JetGreen Cleaners makes 80% of its sales on credit. Experience shows that 25% of the credit customers pay in the month of sale, 55% within the following month, the rest during the next month. Total sales for May, June, July, and August are estimated at $180,000; $220,000; $280,000; and $200,000, respectively.

Instructions: Determine budgeted cash receipts for July and August.

Description July August
Collections from May
Collections from June

Collections from July

Collections from August
Cash sales, July
Cash sales, August

D. Southside Sports is preparing its annual cash budget, showing quarterly data, for 2014. A $14,000 cash balance is desired at the end of each quarter. Borrowings and repayments are in $1,000 increments at 6% annual interest. The company borrows at the beginning of a quarter based on the estimated deficiency. Interest is paid only when principal is repaid at the end of a quarter with excess cash. The maximum amount of principal was repaid in the second and fourth quarters. The cash balance on December 31, 2013 is $17,000. Total receipts and disbursements, other than borrowings and principal or interest payments, are estimated at:

Quarter 1 Quarter 2 Quarter 3 Quarter 4
Disbursements: $110,000 $135,000 $124,000 $140,000
Receipts: 102,000 142,000 120,000 155,000

Instructions: Prepare a schedule of estimated borrowings and repayments of principal and interest for the four quarters of 2014.

Description Quarter 1 Quarter 2 Quarter 3 Quarter 4
Beginning cash balance
Add: Receipts
Total available cash
Less: Disbursements
Excess (deficiency).
Financing
Borrowings
Repayments
Ending cash balance

PART III - VARIANCE ANALYSIS (5 points each)

Gulf Production manufactures recycle bins using recycled plastic that it sells to municipal governments. It has developed the following per unit standard costs for 2014 for each bine:
Direct Materials Direct Labor Manufacturing Overhead
Standard quantity 3 pounds ½ hour ½ hour
Standard price $0.80 $12.00 $4.50
Unit standard cost $2.40 $6.00 $2.25

In 2014, the company planned to produce 40,000 bins at a level of 20,000 hours of direct labor. Actual results for 2014 are presented below:

1. Direct materials purchased and used were 116,000 pounds of plastic that cost $98,600.
2. Direct labor costs were $258,300 for 21,000 direct labor hours actually worked.
3. Total manufacturing overhead was $88,000.
4. Actual production was 40,200 bins.

Instructions
Compute the following variances: (Be sure to indicate if it is favorable or unfavorable)

1. Direct materials price

2. Direct materials quantity

3. Direct labor price

4. Direct labor quantity

PART IV - COMPUTATION OF RETURN ON INVESTMENT (ROI) (5 points eacg)
For the year ended December 31, 2014, SanaDune Tools reports the following:

Sales $4,000,000
Variable costs 2,700,000
Controllable fixed costs 600,000
Average operating assets 3,400,000

Instructions: Compute ROI for each of the following situations..

1. The year ended December 31, 2014.

_________________ ÷ _________________ = ________%

2. For 2015 assuming the following independent courses of action:

(a) Sales will increase 15% with no change in the contribution margin ratio.

_________________ ÷ _________________ = ________%

(b) Variable costs and controllable fixed costs will both be reduced 8%.

_________________ ÷ _________________ = ________%

(c) Average operating assets will be reduced 25%.

_________________ ÷ _________________ = ________%

ONE MORE PROBLEM ON THE NEXT PAGE

PART V- CAPITAL BUDGETING (5 points each)

Shangria Company is considering a capital investment of $140,000 in new equipment, which is expected to have a useful life of 4 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $10,000 and $45,000, respectively. Shangria requires either a 10% rate of return, or a payback period of 3 ½ years.

Instructions: Compute the (a) annual rate of return, (b) cash payback period, (c) net present value, (d) profitability index, and (e) internal rate of return. Show all computations. State whether the project should be accepted or rejected for each of the five capital budgeting techniques. (Be sure to indicate if the result is acceptable or unacceptable)

Present Value of a Series of Future Payments
Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14%
1 0.990 0.98 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877
2 1.970 1.942 1.914 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647
3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322
4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.975 2.914
5 4.853 4.714 4.580 4.452 4.330 4.212 4.100 3.993 3.89 3.791 3.696 3.605 3.517 3.433

(a) Annual Rate of Return = _____________________.

(b) Cash Payback Period = _____________________.

(c) Net Present Value = _____________________.

(d) Profitability Index = _____________________.

(e) Internal Rate of Return = _______________________.