Present your analysis of the assigned problems in Excel format. Enter non-numerical responses in the same worksheet using textboxes.
Why managers use budgets understanding the components of the master budget and preparing performance reports for responsibility centers.
Doggy World operates a chain of pet stores in the Midwest. The manager of each store reports to the regional manager who in turn reports to the headquarters in Milwaukee., Wisconsin. The actual income statement for the Dayton store, the Ohio region (including the Dayton store), and the company as a whole (including the Ohio region) for July 2011 are as follows.
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DOGGY WORLD
INCOME STAEMENT
FOR THE MONTH ENDED JULY 31, 2011
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Dayton
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Ohio
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Company wide
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Revenue
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$ 158,400
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$ 1,760,000
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$ 4,400,000
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Expense
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|
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Regional manager headquarters office
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$ -
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$ 58,000
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$ 122,000
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Cost of materials
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5,536
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880,000
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1,760,000
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Salary expense
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41,184
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440,000
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1,100,000
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Depreciation expense
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7,800
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91,000
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439,000
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Utilities expense
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4,000
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46,600
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264,000
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Rent expense
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2,500
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34,500
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178,000
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Total expenses
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141,020
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1,550,100
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3,863,000
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Operating income
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$ 17,380
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$ 209,900
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$ 537,000
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Budgeted amounts for July were as follows
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DOGGY WORLD
BUDGETED INCOME STAEMENT
FOR THE MONTH ENDED JULY 31,2011
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Dayton
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Ohio
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Company wide
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Revenue
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$ 173,400
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$ 1,883,000
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$ 4,650,000
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Expenses
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|
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Regional manager headquarters office
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$ -
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$ 64,600
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$ 124,000
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Cost of materials
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91,902
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1,035,650
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2,092,500
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Salary expense
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41,616
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470,750
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1,162,500
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Depreciation expense
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7,800
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87,500
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446,000
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Utilities expense
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4,900
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54,600
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169,000
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Rent expense
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3,400
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32,700
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169,000
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Total expenses
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149,618
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1,745,800
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4,268,000
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Operating income
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$ 23,782
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$ 137,200
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$ 382,000
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Requirements
- Prepare a report for July 2011 that shows the performance of the Dayton store, the Ohio region, and the company as a whole. Follow the format of exhibit 21-20.
- As the Ohio regional manager, would you investigate the Dayton store on the basis of this report? Why or Why not?
- Should Doggy World prepare the master budget? Briefly discus the benefits of budgeting. Base your discussion on Doggy World's performance report.
The budget committee of Clipboard Office Supply has assembled the following data. As the business manager, you must prepare the budgeted income statement for May and June 2011
Requirement
- Sales in April were $ 50,000. You forecast the monthly sales will increase 2.0% in May and 2.4% in June.
- Clipboard maintains inventory of $ 9,000 plus 2.5% of sales revenue budgeted for the following month. Monthly purchases average 50% of sales revenue in that same month. Actual inventory on April 30 is $ 13,000. Sales budgeted for July are $ 65,000
- Monthly salaries amount to $ 3,000. Sales commissions equal 4% of sales for that month. Combine salaries and commissions into a single figure.
- Other monthly expenses are as follows:
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Rent expense $2,00, paid as incurred
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Depreciation expense $300
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Insurance expense $200, expiration of prepared amount
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Income tax 20% of operating income
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- Prepare Clipboard Office Supply's budgeted income statements for May and June. Show cost of goods sold computations. Round all amounts to the nearest 4100. (round amounts ending in $50 or more upward, and amounts ending in less than $50 downward). For example, budgeted May sales are $51,000 ($50,000 x 1.02), and June sales are $52,200 ($51,000 x 1.04).
Note: Problem 21-21A must be completed before attempting problem 21-22A.
Preparing a financial budget
Refer to P21-22A. Clipboard Office Supply's sales are 75% cash and 25% credit. Use the rounded sales value. Credit sales are collected in the month after sales. Inventory purchases are paid 25% in the month of purchase and 75% the following month. Salaries are sales commissions are also paid half in the month earned and half the next month. Income tax is paid at the end of the year.
The April 30, 2011. Balance sheet showed the following balances:
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Cash $25,000
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Accounts receivable 3,000
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Salaries and commissions payable 2,500
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Requirements
- Prepare schedules of (a) budgeted cash collections, (b) budgeted cash payments for purchases, and (c) budgeted cash payments for operating expenses. Show amounts for each month and totals for May and June. Round your computations to the nearest dollars.
- Prepare a cash budget similar to Exhibit 21-14. If no financing activity took place, what is the budgeted cash balance on June 30, 2011?