You can often use variations of my favorite equation: Y = Mx + B (really!) and
Beg Balance + Add - = End Balance
Goods available is a subtotal in this equation. The following questions require math skills. Consider the ‘given' information, the ‘question' and calculate the answer. Show your work for partial credit. Label your answers. Use columns. You may wish to use Excel (you can submit your excel file or two files, one word and one excel). Do your own work. Use your own words.
Question 1:
ABC Company creates a product that requires 4 pounds of material at $6 per pound for each unit produced. The production schedule is presented below:
Month Units expected to be Sold
January 1,000
February 1,400
March 2,100
The inventory level at January 1 is 800 pounds. The company wishes to have an inventory equal to 20% of the amount required for sales for the next month.
a. How many pounds of material must be purchase in January and in February to meet the budget?
b. What will be the ending inventory of the material as of February 28?
Question 2: Operating results for Quantum Jet Inc. are presented below. Present a Contribution Margin Income Statement. The company sold 20,000 units with no beginning or ending inventories.
2015
Variable Cost %
Net sales
$955,860
Cost of goods sold
452,940
60%
Selling, general & admin expenses
218,460
50%
Net Income
Question 3: The Teledine Company opened for business on March 1. Sales are budgeted as $350.000 for March and expected to increase by 10% each month. All sales are on account. Receivables are expected to be paid as follows: 60% in the month of sale, 30% the next month, and 10% in the next. Present the Sales and Accounts Receivable Budget for the months of March, April, May and June.
Month Sales Cash Collections Accounts Receivable Balance
March $350,000
April
May
June
Question 4: Explain the philosophy of budgets and coming in over or under budget. Your answer should include Sales, Cost of Goods Sold, and Operating Expenses (SG&A). As a manager how would you feel about learning your were over or under budget for any of these items? Why would someone purposely estimate or budget the ‘wrong' value? The Sales budget for this question is created by the Sales Department. The plant manager budgets for cost of goods sold and the office manager budgets for the operating expenses.
Question 5: What is the first budget? Why is this important (how will the values of the first budget affect all other budgets?).
Question 6: Lipton Company sells Green Tea at $6 a unit. In 2015, fixed costs are expected to be $200,000 and variable costs are estimated at $4 a unit. How many units of product Green Tea must Lipton sell to generate operating income of $80,000?
Question 7: The Blue Company plans to sell their new product for $10 a unit. Variable costs are $6 a unit and fixed costs are $200,000. What must the total sales (in units and in dollars) total to break even?
Question 8: A repair shop, during has its busiest month in July. The repair shop incurred repair labor hours of 60,000 and total costs of $940,000. During December, its slowest month, the repair shop had labor hours of 20,000 and total costs or $680,000.
How much is the repair shops variable repair cost per labor hour?
How much are fixed costs?
Present the total cost formula for the repair shop based on the high low method.