Problem:
Thome Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead cost per direct labor hour are as follows.
Indirect labor $1.00
Indirect materials $0.60
Utlilities $0.40
Fixed overhead cost per month are supervision $4,000, depreciation $1,200, and property taxes $800. The company believes it will normally operate in a range of 7,000-10,000 direct labor hours per month.
Pepare a monthly manufacturing overhead flexible budget for 2014 for the expected range of activity, using increments of 1,000 direct labor hours.
Each of the items below must be considered in preparing a statement of cash flows for Alpha-Omega Co. for the year ended December 31, 2014. For each item, state how it should be shown in the statement of cash flows for 2014.
a. Issued bonds for $150,000 cash.
b. Purchased equipment for $200,000 cash.
c. Sold land costing $50,000 for $50,000 cash.
d. Declared and paid a $20,000 cash dividend.
The management of Russel Inc. is trying to decide whether it can increase its dividend. During the current year, it reported net income of $875,000. It had cash provided by operating activities of $643,000, paid cash dividends of $80,000 and had capital expenditures of $280,000. Compute the company's free cash flow, and discuss whether an increase in the dividend appears warranted. What other factors should be considered?