PROBLEM 1
The Alfa Company is preparing its master budgets for 2015.
Sales.Sales for the year are expected to total 1.200. 000units.Quartely sales are 20%, 25%, 30%, and 25% respectively. The sales price is expected to be $50 per unit for the first three quarters and $55 in the last quarter. Sales in the first quarter of 2000 are expected to be 10% higher than the budgeted sales volume of the first quarter of 2016.
Production. Management desires to maintain ending finished inventory at 25% of the next quarter’s sales and beginning inventory 25% of the current quarter’s sales.
Direct Labor. Each unit needs 2 hours to be produced and each hour costs $10.
Required: Prepare Sales, Production and the Direct Labor budgets by quarters for 2015.
PROBLEM 2
1. Ortega company has cash balance in January $46.000 and the following monthly data,
Accounts Receivable: January $80.000. February $150.000
Payments: January $40.000. February $65.000
Direct Labor: January $30. 000.February $40.000.
M/OH: January $18. 000.February $30.000 including $ 1000 depreciation.
Administrative expenses: January $20.000 February $15.000 including $ 1000 depreciation
Sales of marketable securities in January are $20.000 in cash and in February $5.000.
The company can borrow up to $15.000 and wants to maintain a minimum of $30.000 each month.
Prepare a cash budget for each month.
PROBLEM 3
As a sales manager, Steve was given the following static report for selling expenses in Clothing department for the month of October.
| Budget | Actual | Difference | |
| Sales in units | 7000 | 10000 | |
| Variable Expenses | |||
| Sales Commissions | 2100 | 2600 | |
| Advertising | 800 | 850 | |
| Travel | 2400 | 2700 | |
| Other | 1600 | 1300 | |
| Total Variable cost | |||
| Fixed expenses | |||
| Rent | 1500 | 1500 | |
| Sales Salaries | 1000 | 1000 | |
| Office Salaries | 800 | 800 | |
| Depreciation | 500 | 500 | |
| Total Fixed Cost | |||
| Total Expenses |
Firstly, prepare the flexible budget given by the table above.
Secondly, based on this Steve was dismissed. So, he came to you for advice. Please explain by preparing a new flexible budget if management decision was correct. (To justify your opinion prepare a new flexible budget that should be compared with the current one)
PROBLEM 4
| Sales | 400.000 |
| Selling Price per unit | $40 |
| Direct Materials cost per unit | $8 |
| Direct Labor cost per unit | $10 |
| M/OH per unit | $2 |
| Operating expenses | $50.000 |
| Interest expense | $5000 |
| Tax factor | 25% |
Prepare a proforma Income Statement
PROBLEM 5 (Critical thinking and bonus 10 points)
In Geraldo Company it costs $40 per unit ($20 variable and $20 fixed) to make a product that sells for $45.A customer offers to buy 4.000 units at $25 per unit. Geraldo Company has $1 per unit extra variable cost. If the company has extra operating capacity, indicate the net income (loss) the company would have. (Incremental analysis)
PROBLEM 6
| Budget | Actual | Difference | |
| Sales | $1.200.000 | 1.150.000 | |
| Variable Expenses | |||
| Cost of Goods Sold | 500.000 | 450.000 | |
| Selling and Administrative | 160.000 | 156.000 | |
| Total | ? | ? | |
| Contribution Margin | ? | ? | |
| Controllable Fixed Cost | |||
| Rent | |||
| Sales Salaries | |||
| Total Controllable Fixed Cost | |||
| Controllable Margin |
From the information of the table above prepare a Responsibility report if the fixed rent cost of $300.000 is controlled by the manager by 50% and the fixed Sales salaries are controlled by 30% ..
