Accounting project

Week 8 Decision Making: Relevant Costs and Benefits PLEASE COMPLETE THE ATTACHED PDF IN FULL!!!!

Topics

• Steps in Decision Making Process
• Opportunity Costs

Special Decisions

Outcomes

• Compute the flow of costs through manufacturing cycles and the determination of product (or service) cost.
• Discuss the impact of flow of costs and product cost on decision making.
• Describe the issues and procedures for the allocation of overhead costs, including activity-based costing.
• Categorize the techniques and components of preparing a master budget.
• Use commonly used tools for performance evaluation (e.g., ROI, residual income).
• Discuss the impact of performance evaluation on decision making.

Prepare and explain the flow of cash as relating to operating, investing, and financing activities, free cash flow, and the impact that it has on decision making.

Learning Resources

• eBook: Managerial accounting: Creating value in a dynamic business environment. Chapter 14 Decision Making: Relevant Costs and Benefits

Introduction – Text

Complete these Assignments

Master Budget 8.1 Completion and Submission of the Master Budget Project

complete attached worksheet Case Analysis Assignment

Please prepare elements of the master budget for the Hancock Company using the following information. You should have a cover page and type your answers in excel or word.

ACC 5100 Accounting
Master Budget 8.1 (500 points)
Case Analysis Assignment
Please prepare elements of the master budget for the Hancock Company using the following information. You
should have a cover page and type your answers in excel or word.
Case Details
Hancock Company, a merchandising company, prepares its master budget on a quarterly basis. The following data
have been assembled to assist in preparation of the master budget for the second quarter.
a.
As of December 31 (the end of the prior quarter), the company’s balance sheet showed the following
account balances:
Cash
$ 6,700
Accounts receivable
36,900
Inventory
11,130
Buildings and equipment (net)
120,000
Accounts payable
$ 32,880
Common stock
100,000
Retained earnings
41,850
$174,730
b.
$174,730
Actual and budgeted sales are as follows:
December (actual)
$61,500
January (budgeted)
$79,500
February (budgeted)
$88,800
March (budgeted)
$89,400
April (budgeted)
$58,100
c.
Sales are 40% for cash and 60% on credit. All payments on credit sales are collected in the month
following the sale. The accounts receivable on December 31 are a result of December credit sales.
d.
The company’s gross margin percentage is 30% of sales. (In other words, cost of goods sold is 70% of
sales.)
e.
Each month’s ending inventory should equal 20% of the following month’s budgeted cost of goods sold.
f.
One-quarter of a month’s inventory purchases is paid for in the month of purchase; the other threequarters are paid for in the following month. The accounts payable on December 31 are the result of
December purchases of inventory.
UVI Online – ACC 5100 Accounting – Master Budget 8.1 –
1
g.
Monthly expenses are as follows: commissions, $12,150; rent, $2,650; other expenses (excluding
depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,550 for the
quarter and includes depreciation on new assets acquired during the quarter.
h.
Equipment will be acquired for cash: $3,830 in January and $8,100 in February.
i.
Management would like to maintain a minimum cash balance of $5,000 at the end of each month. 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, up to a total loan balance of $50,000. 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.
Submit the Following
Using the data above, Prepare an excel file using the information below and complete the following statements
and schedules for the second quarter:
1.
Schedule of Expected Cash Collections
January
2.
Cash sales
$31,800.00
Credit sales
36,900.00
Total collections
$68,700.00
February
March
Total
February
March
Total
March
Total
a. Merchandise Purchases Budget
January
Budgeted cost of goods
$55,650.00
*
Add desired ending inventory
12,432.00
†
Total needs
68,082.00
Less beginning inventory
11,130.00
Required purchases
$56,952.00
$62,160.00
*$79,500.00 sales × 70% = $55,650.00.
†$88,800.00 × 70% × 20% = $12,432.00.
b. Schedule of Expected Cash Disbursements for Merchandise Purchases
January
December purchases
$32,880.00
January purchases
14,238.00
February purchases
0.00
March purchases
0.00
Total cash disbursements for
purchases
February
*
$32,880.00
$42,714.00
56,952.00
$47,118.00
*Beginning balance of the accounts payable.
UVI Online – ACC 5100 Accounting – Master Budget 8.1 –
2
3.
Schedule of Expected Cash Disbursements for Selling and Administrative Expenses
January
Commissions
4.
March
Total
February
March
Total
$12,150.00
Rent
2,650.00
Other expenses
6,360.00
Total cash disbursements for
selling
and administrative expenses
February
$21,160.00
Cash Budget
January
Cash balance, beginning
$ 6,700.00
Add cash collections
68,700.00
Total cash available
75,400.00
Less cash disbursements:
For inventory
47,118.00
For operating expenses
21,160.00
For equipment
3,830.00
Total cash disbursements
72,108.00
Excess (deficiency) of cash
3,292.00
Financing
Etc.
5.
Prepare an income statement for the quarter ending March 31.
6.
Prepare a balance sheet as of March 31.
Grading Criteria
•
•
•
•
•
•
Schedule of Expected Cash Collection (10%)
Merchandise Purchase Budget (30%)
Schedule of Cash Disbursements (10%)
Cash Budget (40%)
Income Statement (5%)
Balance Sheet (5%)
UVI Online – ACC 5100 Accounting – Master Budget 8.1 –
3