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Need completed no later than Saturday, 9/21st please advise asap thank you
Problems: 14-16, 14-18, 14-20, 15-18, 15-19, 15-20, 16-16, 16-17 & 16-18
PRlNTED BY: geoevie-..-e.rodriguez@verizoruJeL Printing is for personal. private use only. No part of this book may be reproduced or transmitted without publisher’s prior permission. Violators will be
prosecuted.
524
ACC201
L07
L03
C E RG ES
c.feb~S194.1lD
March: S/J3,400
L04.1
CHECXRG ES
a. Ma'(.$7I,ooo
c. Jene: $16,760
Exen:ise 14-15 PrePRring pro forma income sttdemeJrts with different flSnlmptWru
. ‘orman Jelen, the contreller of Wing Corporation, is trying to prepare a sales budget for the
corning year, The income statements for tbe last four quarters foUow.
First Second Third fouJtll
Quarter Quarter Quarter Quarter Tatll
Sales revenue S170.0Jl 5200.000 S210.tm 5260.000 S640.000
Cost of gooos sold 102.000 120.000 126.tm ~
~
Gross profit 68.tm 110,000 84,D00 104.000 336.000
Seling & admin. expense 17,llXl ~ 21,D00 26.000 ~
Net Income S 51.,000 560.000 S 63.tm S 18.000 S252.00D
Historically. cost of goods sold is about 60 percent of sales revenue. Selling and administra-
tive expenses are about 10 percent of sales revenue.
Sam Wing. the chief executive officer. told Mr. Jelen that he expected sales next year to be
10 percent for each respective quarter above last )-ear’$ level, However; Glenda Sullivan, the vice
president of sales, IOId Mr. Jelen that she believed sales grov.’tb would be only 5 percent,
1Ie~.iRd
•.. Prepar-e a pro forma income statement including quarterly budgets for the coming year using
Mr. Wing’s estimate.
b. P~ a pro forma income statement including quarterly budgets for the coming year using
M$. Sullivan’s estimate.
e, £splain \>oily two exe..-uti”” officers in the same company could have different estimates of
future growth.
PRlBLEMS
AUapplicable ProbletallFlt IIvailable with McGrawMill’s
ComIfICt AccDllllfi”,.
P 14-1& Prepgring /I sales lNuiget and 5cheda1e of ClUh receipts Relllin:d
II, Prepare a sales budget for the fltSt quarter of 20 12. rerma income statement. IUI inventory purclrtues budget and scluuhde of Cluh
paoy’s marketing director developed the follcwing cost of Bu~geted cost of goods sold
May
S70,000
Jane July
$86.noo58lJ.noo
Spratt bad a begillJling inventory balance of ,600 on April I and a beginning balance in PRINTED BY: geoevieve.rodrigueZ@Ver1zorLnel Printing is for peIWOa1, private use only. No part of this book may be reproduced or transmitted without publisher’s prior permission. Violators wilJ be Survey or Accounting. Third Edition
PIonn.ng fry pro’£. ••nd Cast Control
equal to 10 percent of tbe next period’s of 800d£ sold. Spratt makes all purchases on ac- Requinrd forma balance sb forma b sheet.
Problem 14-18 PreparifIJ: pro fomtll incom« statements with diffirenllUsumptWm La7
CHECK FICU Current Ye.r
SSIK re’lenue $2,000.000 6OO,!Dl ~ Cost of goods sold is usually 70 percent of sales revenue, and selling and administrative a- Requinr411 II- What percentage i1lC1’e Co The company decides to eiaIate its ad\~ campaign to boost consumer ~ Prob1m14-19 Preparilrg4u:JaedMkof J1IIFmatsf(Juel1i.KtDIIi~ La 5, 8 Prestia is ‘a rew.il company specializing in men’s haIi Its ~ CirectDr prepartd the list or a- a. Sept: S2II.510 Salary &xpense Jlly
518.000 36Il ~ 525
523 PRINTED BY: genevieve.rodriguez@veri.zon.net. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher’s prior permission. Violators will be 526 ACC201
LOS
C ECK G L03. 4. 5
JC c. IstarR purctases for LO3. 4. 5. 6. 7
Required
a, Prepare a schedule of cas nts for selling and administrative expenses. Problem 14-20 Preparing tI ctlSh budget January February March
CaSh receipts $100.000 S106.llOO Sl26,OO11 For inventory purchases !IO,ooo 72.llOO 85,001I Kinnlon ~edical had a eash balance of SS,OOO on January I. The company desires to main- Req_iRd Proble 14-21 Pre ‘g budgds ••,ith tmdtipJe products Rm QUlrWr Third Oaarter Fourth QarWr Tata’ Based on the company’s past experience. st of goods sold is usually 60 percent of sales the cost of goods sold for the first quarter to Required pan)”s Wdgeted annual inco= statement. oranges, Prepare tne company’s in>-entol)’ purchases bud for peacbes and S56)lOO fOf Problem 14-22 PreJHUing tI master budget fOl’ tI rettW co’MpfUlJV”‘lrIJ lID ~g Paid Company is 3 rerail company that specializes in selling outdoor PRINTED BY: genevieve.rodrigueZ@verizon..net Printing is for personal, private use only. No part of this book may be reproduced or- trmsmi:tted v..itbout publisher’s prior permission Violators will be s..vey or Acco.;nting. Third Edition
LOS.7 ROI is l~ percent. The Wade Division opportunity to ~t 55.000,000 at 18 percent but is IIlOU>’3le the Wade Division to make the investment by using the
PROBLEMS
.• connectAll appljcable Problem. are available with McGraw-Hill’s Problem 15-18 Determining SI1.1es and ~'{U’iIlblecost volume variances SllIndard prtce and variable costs: Planr.ed ed eons: L04
CHECX AGU ES S36.oo $135.000 Todbunter planned to make and sell 30,000 copies of the book.
RequiJed units. Problem 15-19 Determining and interpreting flexibte budJ, Act\l1Il price and variable COilS: Actual fixed eo~ LOS S35.oo CHEC FIGURE 5120.000 PRINTED BY: genevieve.rodnguez@verizon.net Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher’s prior permission. Violators will be ACC201 558 a,.,~””” 15 b. Indicate whether each variance is favorable (F) or unfavorable (L”. caused the variance.
L05
X Luke Chou, the president of Digitecb Computer Services, needs your help. He wonders about a. NI ~ SlSO.IJIJO Standard (ate and vanable casts: Expected fixed costs; $80.00 $5Z5,1JIJO.00 Req.ired expects to provide 30,000 hours of services in 2012. service hours that the firm can achieve. According to the consultant’s analysis, if Digitech e. The same consultant also suggests that if the firm raises its rate to SB5 per hour, the number of d. Evaluate the three po ible outcomes ),OU determined in Requirements a, b, and C” and rec- LOS,7 Differ-em types of ruporuibiiity cesters
is a large municipal bank with several branch offices, The bank’s com- ise in systems dev-elopment and excess machine time to several computer department as a cost center, The manager of the actual and budgeted expenses. Revenues from the depart- The COSI.S of servicing these clients are included in
Liberty >lational The bank currently The manager of the computer department iklluired center from each other. PRlNTED BY: geoevieve.rodriguez@verizon.net Printing is for personal, private use only. No part oftbis book may be reproduced or transmitted without publisher’s prior permission. Violators will be Survey of Ac.cowlting. Third Edition 591
LOa Required a. Determine the uBadjusltd rate of vestment opportunities’!
a!le’lli spr;!) paint machine that costs manW3CtU1″eI”‘,estir:late.
based on the average cost of the investmenr. Exercin 16-15 Co IiRg tlu pqbtzck period tIIId ll1JIlJijJutedraIL of ..man for urebase a van thai CO~15560,000; it bas an expected U L07, a
Fa)’ Rentals Requi
termiee the payback period. PROBLEMS All applicable ProblellJs ani available with MeGnIW-Hilrs opportunities
Fast Delivery is a small company thaI transports business packages bet-= . ‘n.’ Yorlc and Clarence Roy, the company’s operations manager. believes that the money shouJd be used to In contrasr, Patricia Lipa, the company’s chief accountant, believes that !be funds should be comect
L03, 5, S
it. 01 tI’.e var.s irnIesonent: b. m:Iex01the trucks Yea.’ Y_2
S32G,cm
Vea ••
$16l1.000 $400,000 S440.1lOO
The large trucks are expected to cost $800.000 and to have a four-year useful life and a Requi,.~
a. Determine the net present value of the two investment altemarives, 5BS , 592 ACC201
590 et…p:.eI’16
LO •• 7. 8
CHECKAG ES im;estmeot l.n vears L03. 4. 8
CHECK AGURES L03. 6. 7
C ECX A than 2 years
Problem 16-17 U~ing tire payback period aNllUUJdjustedmt~ of return to ffllhuue Louis Gallo owns a small retail ice cream parlor. He is considering expanding the business and Alternatively, Mr. Gallo could purchase for S10,080 the equipment necessary to serve cap- Income before taxes earned by the ice cream parlor is taxed at an effective rate of 20 percent.
Required each alternative, Probl8m 16-18 Uiling net pr”ileRt p Veronica Tanner, the president of Tanner Enterprises, is considering two investment opportuni- Req.il1ld the net present value approach? opted based on the internal rate of return approach? method is better in the gi. en circumstances? ‘Vhy?
Pro lem U~iJJgnet preleRt plllue and paybaclc period to epaJlIIlte investmeRt B~ Graham S250,OOOduring the 25 years that be worked for a major corporation. ‘ow be Opportunity il Vear2 Vear3 Veat4
S78.750 S101.250 Mr. Gmbam decides to use his past average re Reqaired on the net present value approach? I”Ouldenable tbe company to reach its goal? Support your b. The ma.ut may become stagnant next year, and the company does not expect an inaease in PRINTED BY: genevieve.rodriguez@veri.zon.net. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher’s prior permission. Violators will be PRlNTED BY: geoevieve.rodriguez@verizon.net Printing is for personal, private use only. No part oftbis book may be reproduced or transmitted without publisher’s prior permission. Violators will be
~yl’t!inla’S lee, txpec!510 begin operatioos onJaooary 1.2012; it willoperate as a specialty
sal
b. Determine the amount of sales menue )I1cCatty will repon on the first 2012 quarterly pro
c. Prepare a easb receipu schedule for the first quarte •. of 2012.
d. o.:termine the amount of accounts receh’3ble as of Macdt 31. 2012.
and JuI)·.
accoums payable of SI4,800. The company de .
o maintain an ending inventory balance
prosecuted,
count. The company pays 60 percent aecounts pa)’3bk in !be month of purchase and tbe re-
maining 40 percern in the month fo ing purcllase.
II- Prepare an inventory p ses booStt for April, :\iay. and June.
b. Determine the amoun of ending inventory Sprat! will report on the end-of-quarter pro
c. Prepare a scbed of cash payments for inventory for April, May, and June.
d. Determine balance in accounts payable Spratt will report on the end-of-quarter pro
Top executive office.r5 of Zortoli Company, a merehandieicg firm, are preparing the nett year’s
budget. The controller has provided e~ne with the current )’ear’s projected income statemenL
a.I2.75%
CaS1 of goods sold
GlllSs profc
Selling & admil. expensK
Net income
1,400.llOO
26ll,!Dl
penses are usuaUy 10 percent of sales plus a fixed cost of S6O,000.The president has announced
that tbe company’s goal is to increase net income by IS percent,
The following items are independent of each other,
sales revenue, The productioo III3DaF be\it.’tS that an impro>’Cdproduction procedure can
cut cost of goods sold by 2 peretnL \\-‘hat else can !be compall} do to reach its goal? Ptepare
a pro forma inCOID
which will increase selling and adtniJmtrative e.tpeme5 to 5340.000. Wllh the iDcn:aleci ad-
vertising, the company expects sa1cs rn’Cl1llt to increase by IS peroml. Assuoe that cost or
goods sold remains a constant proporllOfJ of Can the COIDJWI)’ reach its goal?
~r~ltHs
peered operating expenses that follows. All items are p;tid .-be:n the e:xpeose$_ incurred aapl
sales eommissionsand utilities. which are paid in the Cl th after they are incurred. July is the
fust month of operations, so there are no beginning account balances.
Sales commissions i4 percent 01sales)
Suppfles expense
Utiities
Depreciation on store e~ujpment
Rent
Miscell8f1eous
Total S&A expenses before Interest
1.700
1.100
3.000
6,SOO
~
prosecuted
Feb. cash ‘L’fplus bernre
financing actJvine~S1.o10
E RG
peaches: $141,120
2nd OTR purchases tor
orar.ges: 5312.840
b, Oett.rmine tbe amou futilities payable as of September 30.
e. Determine tbe a t of saJes commissions payable as of September 30.
Kinman Medical Clinic bas budgeted the following cash flows.
Cash pavmelllS
For S&A expenses 31.000 32.000 27,001I
lain a cash cushion of SS,OOO. Funds an assumed to be borrowed, in increments of 81,000, and
repaid on the last day of each month; the interest rate is 1 percent per month. Kinnion pays its
vendor on the liI5t day of the month also, The company had a montWy S40,OOObeginning bal-
ance in lts line of eredit liability account from this years quarterly results.
Prepare a cash budget. (Round all computations to the nearest whole dollar.)
Fresh Fruits Corporation ‘” lesales peaches and oranges. Lasbaoda King is working with the
company’, a:ountant to are next year’s budget, Ms. King estimates that sales will in-
crease S percent (or peaches an I 0 percent for oranges. The current year’s saJes revenue data
follow,
Peaehf!S mn,lXl(l 8300,000 SL40JlOO SUOl,lIOO
Oranges 4OO,lXl(l 570.000 JIIl,ooO UOl.ooo
Total S62D.ooo 5870.000 S62D,0Il0 52.10),000
revenue, Company policy is to keep 20 percent
as th~ CUtrell! period:’ ending inventory. (11int:
determine the beginning inventory for the first
the next period’s estimated cost of goods sold
.)
a, Prepare the companys sales budget for the aca )’e3r
b. If the SC’Jlingand administrative expenses are
c. Ms. King estimates next year’s ending inventory will be S
tedy figures by produce
the =year sbooo\-ingquar-
tlCf’OlUlt bttlttncf<3
company is consjdeting opening a new store on October L 2012. The company
prosecuted.
curreat ROJ of 20 petcenL The COClpany target
reluctant to do so because its ROI . an to 19.2 percent, The present im=1 base for 1M
division is 57,500,000.
Connect ACCDunting.
Todhunter Publications established the following standard price and costs [or a hardcover pic-
rure book that the company produces.
Sales prtc:e
Materials
Labor
Overhead
General, seUing. and admilllstrative
Maou’aclUrir.g
General. seUing. and administrntive
a.NI = 581.000
b. I at2ll.1lIll units: $12.lXXl
9.00
4.50
6.30
7.2D
54.000
a. Prepare the pro forma income statement that would appear in the master budget.
b. Prepare flexible budget income Stalemttlts, assuming volumes of 29.000 and 31,000 units.
c. Determine the sales and variable cost volume variances, assuming volume is actually 31,000
d. Indicate whether the variances are favorable (F) or unfavorable (ll).
c. Comment on how Todhunter could uu the ,ariance:s to evaluate performance,
S.ales price
Materials
Labor
Overhead
General, seUing, and administr.ltlve
ManutaClUling
Gensral, sellin~. and administrative
91.0
4.40
6.35
7.00
Aexible bodgetvartance of NI:
S2D,450 U
60.000
prosecuted.
Required
a. Determine the flexible budget variances.
e. Identify the management position responsible for each variance, Explain what could run’.
Pro 11m 15-20 FluibJe bwlgetp/annUrg
the potential clfe;:ts on the firm’s net income if he changes the service rate that the firm charges
its customers. The following basic data pertain to fiscal year 2012.CHfCKAG ES
c. NI ~ Sl62,5IlD
Sef\Oice rate psr hour
labor
Overhad
Genefal. 5elfing, and administrative
FaciJ’lV repair
General. seiling, and administrative
40.00
UO
4.30
150,000.00
•. Prepare the pro forma income statement that would appear in the master budget if the firm
b, A marketing consultant SU88CS1S to Mr. Chou that the service rate may affect the number of
charges customers 575 per hour, the firm can achieve 38,000 hours of services, Prepare a !lex-
ibk budget using the consultant’s assumption.
service hours will decline to 25,000. Prepare a flexible budget using (be new assumption,
ommend a pricing strategy.
all data processing for bank operations. In addition, the bank sells the
them as a service bureau..
cost budget annually for senior bank officials to approve.
as other income by the bank and are not reflected on
puter department
computer deportment ‘5
small busines! firms, servi
computer department prepar
Monthly operating reports com
menl’s service bureau activitio=oare
the computer department’s operating
the computer department reports, ~..”..
computer department to a profit or investment
a. Describe the characteristics that differentiate a cost
prosecuted
Lilly Painting Company is ronsidering ••.beth:r to
$4,000. The machine is expected to sz>-elabor, in
tive life of the machine is 15 years aceording
b. What is the predominant ,
. ! net inlXllnt by S600 per year, The effec-
ing of \l5ing the unadjusted rate of return to evaluate in-
imeslmeflf opportunity
no salvage
Determine the unadjusted rate of return based on the il’trage cost of tl:e im-estr:!enL
ConllflCt ACCDllnling.
frob 16-16 UJing present Wlbu!tuluUqus to ntlbuzte tJr~ __
Chicago, Ir operates a fleet of small vans that 1DO\-“eS packages to and froc a c:mtraI depot within
each 01 y and uses a common carrier to delli-er the packages ret..U>\ the depou in the noo cities.
Fast receatly acquired approximatdy £6 million or cash capital from its ~ and its prcs;iOenL
Don Keenon, is trying to identify the most profitabk way to imesI these funds.
expand the fleetof city vans at a COSt of 5720,000. He argues that more vans “‘
used to purchase large trucks to deliver the packages between the depots in the t•••” cities. The
conversion process would produce continuing improvement in operating savings with reductions
in cash outflows as the following,
St 1II.B11.C2
uwestnett 1.12&
580,000 salvage value. In addition to the purchase price of the trucks, up-front training costs are
expected to amount 10 S 16,000. Fast Deln-ery’s management bas established a 16 percent desired
rate of return.
b. Calculate the present value index for each alternative.
e, Indicate which invcstment alternative )011 would recommend. Explain your choice.
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prosecuted.
a. Payback period of the yogUll
Unadjusted rate of
return olllle cappuccino
investment 52.B6%
a. NPV of A: S4,2ll8.!14
b. Rate 01 return ot B: 12%
a. NPV of 11: 551.309.36
b. Payback period of 12: less
u.It~r1Ulli.~inrestltJUlt oPPOr1JUfitus
has identified two attractive alternatives. One involves purchasing a machine that would enable
Mr. Gallo to offer frozen yogurt to customers. The machine would cost 58,100 and has an ex-
pected useful life of three years with no salvage value, Additional annual cash revenues and cash
operating expenses associated with selling yogurt are expected to be 55,940 and 5900, respectively.
puccino. That equipment has an expected useful life of four years and no salvage , .• lue, Addi-
tional annual cash revenues and cash operating expenses associated with selling cappuccino are
expected to be 58,280 and S2,430, respectively.
3. Determine the payback period and unadjusted rate of return (use average investment) for
b. Indicate which investment akernarive you would recommend. Explain your choice.
ties. Because of limited resources, she will be able to invest in ooly one of them. Project A is to
purchase a machine that ••••~IIenable factory automation; the macbine is expected to have a useful
life of four years and no salvage value. Project B supports a tralning program that will improve
the skills of employees operating the current equipment. Initial cash expenditures for Project A
are SIOO,OOOand for Project B are £40.000. The annual expected cash inflows are S31,487 for
Project A and S 13, 169 for Project B. Both investments are expected to provide cash !low benefits
for the next four years. Tanner Enterprise’s COStof capital is 8 percent.
a. Compute the cet present value of each project. Which project should be adopted based on
b. Compute the approximate intemal rate of return of eacb project. Which one should be ad-
c. Compare the net present value approach with the internal rate of return approach. Which
opportwritiu
bas retired at the age SOand bas begun to draw a comfortable pension check every mouth. He
wants to ensure the f1 . security of his retirement by investing his savings wisely and is cur-
rently considering tWO in t opportunities. Both investments requite an initial payment of
SI87,SOO_TbefoUowingtabk ts the estimated cash inflows for the two ahemaoves,
Opportunity i2
17.500
15,000
count rate; it is S percent.
a, Compute the net present value of each opportunity. Vt’bich uld Mr. Graham adopt based
answer “ith a pro forma incoCIe Sl&tamttl.
sales revenue, The productioo III3DaF be\it.’tS that an impro>’Cdproduction procedure can
cut cost of goods sold by 2 peretnL \\-‘hat else can !be compall} do to reach its goal? Ptepare
a pro forma inCOID
Co The company decides to eiaIate its ad\~ campaign to boost consumer ~
which will increase selling and adtniJmtrative e.tpeme5 to 5340.000. Wllh the iDcn:aleci ad-
vertising, the company expects sa1cs rn’Cl1llt to increase by IS peroml. Assuoe that cost or
goods sold remains a constant proporllOfJ of Can the COIDJWI)’ reach its goal?
Prob1m14-19 Preparilrg4u:JaedMkof J1IIFmatsf(Juel1i.KtDIIi~ La 5, 8
~r~ltHs
Prestia is ‘a rew.il company specializing in men’s haIi Its ~ CirectDr prepartd the list or a- a. Sept: S2II.510
peered operating expenses that follows. All items are p;tid .-be:n the e:xpeose$_ incurred aapl
sales eommissionsand utilities. which are paid in the Cl th after they are incurred. July is the
fust month of operations, so there are no beginning account balances.
Salary &xpense
Sales commissions i4 percent 01sales)
Suppfles expense
Utiities
Depreciation on store e~ujpment
Rent
Miscell8f1eous
Total S&A expenses before Interest
Jlly
518.000
1.700
36Il
1.100
3.000
6,SOO
~
~
525
523
prosecuted
526 ACC201
LOS
C ECK G
Feb. cash ‘L’fplus bernre
financing actJvine~S1.o10
L03. 4. 5
JC
E RG
c. IstarR purctases for
peaches: $141,120
2nd OTR purchases tor
orar.ges: 5312.840
LO3. 4. 5. 6. 7
Required
a, Prepare a schedule of cas nts for selling and administrative expenses.
b, Oett.rmine tbe amou futilities payable as of September 30.
e. Determine tbe a t of saJes commissions payable as of September 30.
Problem 14-20 Preparing tI ctlSh budget
Kinman Medical Clinic bas budgeted the following cash flows.
January February March
CaSh receipts $100.000 S106.llOO Sl26,OO11
Cash pavmelllS
For inventory purchases !IO,ooo 72.llOO 85,001I
For S&A expenses 31.000 32.000 27,001I
Kinnlon ~edical had a eash balance of SS,OOO on January I. The company desires to main-
lain a cash cushion of SS,OOO. Funds an assumed to be borrowed, in increments of 81,000, and
repaid on the last day of each month; the interest rate is 1 percent per month. Kinnion pays its
vendor on the liI5t day of the month also, The company had a montWy S40,OOObeginning bal-
ance in lts line of eredit liability account from this years quarterly results.
Req_iRd
Prepare a cash budget. (Round all computations to the nearest whole dollar.)
Proble 14-21 Pre ‘g budgds ••,ith tmdtipJe products
Fresh Fruits Corporation ‘” lesales peaches and oranges. Lasbaoda King is working with the
company’, a:ountant to are next year’s budget, Ms. King estimates that sales will in-
crease S percent (or peaches an I 0 percent for oranges. The current year’s saJes revenue data
follow,
Rm QUlrWr Third Oaarter Fourth QarWr Tata’
Peaehf!S mn,lXl(l 8300,000 SL40JlOO SUOl,lIOO
Oranges 4OO,lXl(l 570.000 JIIl,ooO UOl.ooo
Total S62D.ooo 5870.000 S62D,0Il0 52.10),000
Based on the company’s past experience.
revenue, Company policy is to keep 20 percent
as th~ CUtrell! period:’ ending inventory. (11int:
determine the beginning inventory for the first
st of goods sold is usually 60 percent of sales
the next period’s estimated cost of goods sold
the cost of goods sold for the first quarter to
.)
Required
a, Prepare the companys sales budget for the aca )’e3r
b. If the SC’Jlingand administrative expenses are
pan)”s Wdgeted annual inco= statement.
c. Ms. King estimates next year’s ending inventory will be S
oranges, Prepare tne company’s in>-entol)’ purchases bud
tedy figures by produce
for peacbes and S56)lOO fOf
the =year sbooo\-ingquar-
Problem 14-22 PreJHUing tI master budget fOl’ tI rettW co’MpfUlJV”‘lrIJ lID ~g
tlCf’OlUlt bttlttncf<3
Paid Company is 3 rerail company that specializes in selling outdoor
company is consjdeting opening a new store on October L 2012. The company
PRINTED BY: genevieve.rodrigueZ@verizon..net Printing is for personal, private use only. No part of this book may be reproduced or- trmsmi:tted v..itbout publisher's prior permission Violators will be
prosecuted.
s..vey or Acco.;nting. Third Edition
LOS.7
curreat ROJ of 20 petcenL The COClpany target
ROI is l~ percent. The Wade Division opportunity to ~t 55.000,000 at 18 percent but is
reluctant to do so because its ROI . an to 19.2 percent, The present im=1 base for 1M
division is 57,500,000.
IIlOU>‘3le the Wade Division to make the investment by using the
PROBLEMS
.• connectAll appljcable Problem. are available with McGraw-Hill’s
Connect ACCDunting.
Problem 15-18 Determining SI1.1es and ~'{U’iIlblecost volume variances
Todhunter Publications established the following standard price and costs [or a hardcover pic-
rure book that the company produces.
SllIndard prtce and variable costs:
Sales prtc:e
Materials
Labor
Overhead
General, seUing. and admilllstrative
Planr.ed ed eons:
Maou’aclUrir.g
General. seUing. and administrntive
L04
CHECX AGU ES
a.NI = 581.000
b. I at2ll.1lIll units: $12.lXXl
S36.oo
9.00
4.50
6.30
7.2D
$135.000
54.000
Todbunter planned to make and sell 30,000 copies of the book.
RequiJed
a. Prepare the pro forma income statement that would appear in the master budget.
b. Prepare flexible budget income Stalemttlts, assuming volumes of 29.000 and 31,000 units.
c. Determine the sales and variable cost volume variances, assuming volume is actually 31,000
units.
d. Indicate whether the variances are favorable (F) or unfavorable (ll).
c. Comment on how Todhunter could uu the ,ariance:s to evaluate performance,
Problem 15-19 Determining and interpreting flexibte budJ,
puter department
computer deportment ‘5
small busines! firms, servi
The bank currently
computer department prepar
Monthly operating reports com
menl’s service bureau activitio=oare
the computer department’s operating
the computer department reports, ~..”..
The manager of the computer department
computer department to a profit or investment
iklluired
a. Describe the characteristics that differentiate a cost
center from each other.
prosecuted
Survey of Ac.cowlting. Third Edition 591
LOa
Lilly Painting Company is ronsidering ••.beth:r to
$4,000. The machine is expected to sz>-elabor, in
tive life of the machine is 15 years aceording
Required
a. Determine the uBadjusltd rate of
b. What is the predominant ,
vestment opportunities’!
a!le’lli spr;!) paint machine that costs
. ! net inlXllnt by S600 per year, The effec-
manW3CtU1″eI”‘,estir:late.
based on the average cost of the investmenr.
ing of \l5ing the unadjusted rate of return to evaluate in-
Exercin 16-15 Co IiRg tlu pqbtzck period tIIId ll1JIlJijJutedraIL of ..man for
imeslmeflf opportunity
urebase a van thai CO~15560,000; it bas an expected U
Fast receatly acquired approximatdy £6 million or cash capital from its ~ and its prcs;iOenL
Don Keenon, is trying to identify the most profitabk way to imesI these funds.
Clarence Roy, the company’s operations manager. believes that the money shouJd be used to
expand the fleetof city vans at a COSt of 5720,000. He argues that more vans “‘
