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Styles Editing Dictate Sensitivity TU XX Po ...A - Aa- A X Font 21 Paragraph Styles 5 Voice Sensitivity 6 CASE Cash budget, income statement and performance report using a flexible budget. Harry Kohl owns a factory that specializes in making steel widgets on a just in time basis. Harry buys his steel only after he receives a firm order. Thus, Harry only buys materials for and produces what he sells in a particular month. To build his business and gain new customers Harry has extended generous credit terms to his customers. While Harry is confident about the fundamentals of his business, he is concerned about the possible cash flow implications. Harry informs you that he currently expects to collect 20% of sales in the month of the sale, 40% of sales in the month after the sale and 40% of sales two months later (for example 20% of February sales are collected in February, 40% in March and 40% in April). He pays for 80% of his materials purchase in the month of the purchase and 20% one month later. Costs of labor and overhead other than depreciation are paid in the same month they are incurred. His monthly fixed selling and administrative costs, other than interest, amount to $320,000, of which $30,000 is depreciation. These costs also, excepting depreciation, are paid in the month incurred. There are no variable selling or administrative costs. Harry has large tax loss carry forwards from a previous unsuccessful business venture. Therefore he does not expect to pay any income taxes this year. (In other words you may ignore income taxes). Sales revenues in February were $4.050,000 and in March were $4,150.000 (these numbers do not agree with the excel sheet). Purchases in March were $1,350,000. The budgeted selling price of widgets for April, May, and June is $25 per widget. Harry provides the following information regarding his sales in units for the next 3 months: April 180,000 units, May 200,000 units and June 210.000 units. The variable costs of producing a widget are budgeted at: $8 for materials, $5 for labor. and $7 for variable overhead. Fixed overhead is budgeted at $380,000 per month. The detailed components of fixed and variable overhead are as listed below. For variable overhead, supplies are budgeted at $1 per unit, electric power is budgeted at $4 per unit, and indirect labor is budgeted at $2 per unit. For fixed overhead depreciation is budgeted at $70,000 per month. Supervision and other salaries is O DS Focus Font Paragraph Styles Voice Sensitivity budgeted at $180,000 per month, insurance is budgeted at $12,000 per month, maintenance is budgeted at $23,000 per month, licensing fees and permits to use proprietary technology are budgeted at $64,000 per month, and other miscellaneous fixed expenses are budgeted at $31,000 per month. Assume Harry's opening cash balance on April 1 is $25,000. Harry requires a minimum cash balance of $5,000 at the end of each month. If the budgeted cash balance will fall below this level Harry plans to borrow enough cash at the beginning of the month to keep his ending balance up to the minimum level. Harry's bank charges him interest at the rate of 1% per month (12% per year) on the balance tutstanding during that month. Harry pays the interest at the beginning of the following month and plans to repay as much as he can without letting his cash balance go below $5,000. Assume no borrowings were outstanding as of April 1. Required 1) Construct Harry's cash budget for the 3 months April, May, and June and the total for the 2nd quarter. Fixed overhead expenses requiring the use of cash may be grouped together as a single line item called "fixed overhead". Variable overhead items may be grouped together as a single line item called "variable overhead". Show any necessary calculations. (7 points) Construct Harry's contribution margin format budgeted income statement for the 3 months April, May, and June and the total for the 2nd quarter. Fixed overhead expenses may be grouped together as fixed overhead. Variable overhead expenses may be grouped together as variable overhead. Remember to include interest on any borrowings. Show any necessary calculations. (6 points) Explain why Harry is facing a cash flow problem in May even though his business is profitable. (2 points) 4) During April Harry actually produced and sold 175,000 widgets. Actual sales revenues were $4,342,000. Actual costs were as detailed in the table 2) 4 So words D. Focus (? Styles Editing Dictate Voice Font Calibri BI Uebx A A. - A M a.- l IT Paragraph Is Styles Sensitivity 1) Construct Harry's cash budget for the 3 months April, May, and June and the total for the 2nd quarter. Fixed overhead expenses requiring the use of cash may be grouped together as a single line item called "fixed overhead". Variable overhead items may be grouped together as a single line item called "variable overhead". Show any necessary calculations. (7 points) 2) Construct Harry's contribution margin format budgeted income statement for the 3 months April, May, and June and the total for the 2nd quarter. Fixed overhead expenses may be grouped together as fixed overhead. Variable overhead expenses may be grouped together as variable overhead. Remember to include interest on any borrowings. Show any necessary calculations. (6 points) 3) Explain why Harry is facing a cash flow problem in May even though his business is profitable. (2 points)*** During April Harry actually produced and sold 175,000 widgets. Actual sales revenues were $4,342,000. Actual costs were as detailed in the table below. Complete the table by constructing a flexible budget and performance report including variances for April based on 175,000 widgets. Your performance report should be similar to the performance report shown in exhibit 10.7 of page 559 except your report includes detailed cost production cost line items. Use the template provided below for your answer. (8 points) Write a brief report explaining the most important reasons why Harry's profits were different from the amount projected in the master budget. (2 points) 4) 5) 14 50 words B DlFocus BB X Calibri BI U vex, x' A 3 AD - Aa A K a. 21 T Font Paragraph Styles Editing Dictate Edi Styles Voice Sensitivity Actual Costs and Template for Requirement #4 Use this page to answer this requirement. Cost Item Static Master Budget for 180.000 units Sales Revenues Direct Materials Direct Labor Supplies Electric Power Indirect Labor Salaries and Supervision Maintenance Performance Report for April Actual results Flexible Flexible Sales Volume Budget Budget for Variance Variance 175,000 units $4.342.000 $1,515.625 $881.436 $166.288 $701,354 $339.272 $175.549 Insurance Permits and license fees $37,336 $12.000 $68.000 $70,000 $33.173 Factory depreciation Other Overhead expenses Total Production Expenses Total Selling & Administrative Expenses Total Expenses Operating Income $329,453 1 Focus 3:59 PN 6/28/20 . chegg.com/homework-help/questions and answers/case-cash-budget-income TURTISwer Anonymous answered this 371 answers Was this answer helpful? Answer 1) Cash Budget Particulars Cash Balance beginning Cash collection from customers Total Cash Available April 25,000 41,80,000 42,05,000 May 5,000 44,60,000 44,65,000 June 5,000 48,50,000 48,55,000 (5) Total Quarter 25,000 1,34,90,000 1,35,15,000 14,22,000 9,00,000 12,60,000 15,68,000 10,00,000 14,00,000 16,64,000 10,50,000 14,70,000 46,54,000 29,50,000 41,30,000 Less: Variable Cost Material Purchased Labour Cost Manufacturing overheads (Indirect Material + electric Ind, Labour) Flared Cost Fixed Manufacturing Overhead Supervision & Salaries Insurance Premium Maintenance Exp. Licensing fees Other Fixed Assets Selling and Administrative cost 320000 30000) 3,80,000 1,80,000 12,000 23,000 64,000 31,000 2,90,000 3,80,000 1,80,000 12,000 23,000 64,000 31.000 2,90,000 3,80,000 1,80,000 12,000 23.000 64,000 31,000 2,90,000 11.40,000 5,40,000 36,000 69,000 1,92,000 93,000 8,70,000 Total Cash Expenses -45,62,000 -49,48,000 -51,64,000 - 1,46,74,000 Financing Borrowing As needed to maintain 5,000 cash balance) Less: Interest paid 1% p.m. in next month Total Financing 3,62,000 4,91,620 -3,620 4,88,000 3,22,536 -8,536 3,14,000 11,76, 156 -12,156 11,64,000 3,62.000 Ending cash Balance 5,000 5,000 5,000 5.000 Working Cash collection from customers Particulars Gross Sale on Credit Sale Unit $25 per widet) Receipts 20 in same month Receipts 4 in next month Receipts 40 % in after second month Total Cash receipt from customers Feb. 40,50.000 8.10,000 March 41,50,000 8,30,000 16,20,000 April 45,00,000 9,00.000 16,60,000 May 5000000 10,00,000 18,00,000 10 20 41 TUTORS CHAT Type here to search E 70 Selling and AMISI COSI 20000 30000 2,30,000 2,30,000 3,70,000 Total Cash Expenses -45,62,000 -49,48,000 -51,64,000 -1,46,74,000 3,62,000 Financing Borrowing (As needed to maintain 5,000 cash balance) Less: Interest paid 1% p.m. in next month Total Financing 4,91,620 -3,620 4,88,000 3,22,536 -8,536 3,14,000 11,76,156 -12, 156 11,64,000 3,62,000 Ending cash Balance 5,000 5,000 5,000 5,000 Feb. 40,50,000 8,10,000 Working Cash collection from customers Particulars Gross Sale on Credit Sale Unit" $25 per widet). Receipts 20 % in same month Receipts 40 % in next month Receipts 40 % in after second month Total Cash receipt from customers April Sale (180000*25) 45,00,000 May Sale (200000*25)-50,00,000 June Sale (210000*25) = 52,50000 March 41,50,000 8,30,000 16,20,000 April 45,00,000 9,00,000 16,60,000 16,20,000 41,80,000 May 5000000 10,00,000 18,00,000 16,60,000 44,60,000 March 13,50.000 10,80,000 Cash Payment to Suppliers for Material Particulars Purchase cost Paid 80 % in same month Paid 20 in next month Total Pald for Material **April 180000"8)= 14,40,000 May (200000"8)=16,00,000 June (210000*8) 16,80,000 April 14,40,000 11,52,000 2.70,000 14,22,000 May 1600000 12,80,000 2.88,000 15,68,000 June 1680000 13,44,000 3,20,000 16,64,000 Cash Payment for Labour in same month April 180000*5)= 9,00,000 May 200000 5) 10,00,000 June (210000"5)= 10,50,000 Cash Payment for Variable overhead in same month April 180000"7) 12,60,000 May (200000"7)=14,00,000 June (210000*7) 14,70,000 TUTORS CHAT Type here to search O TT E 70 ay (200000"5)10,00,000 ne (210000"5)= 10,50,000 ash Payment for Variable overhead in same month prill 180000*7) 12,60,000 May (2000007)-14,00,000 une (210000*7) 14,70,000 2) Income Statement (Budgeted) Particulars April 45,00,000 May 50,00,000 June 52,50,000 (5) Total Quarter 1,47,50,000 Sales Total Revenue 45,00,000 50,00,000 52,50,000 1,47,50,000 14,40,000 9,00,000 12,60,000 16,00,000 10,00,000 14,00,000 16,80,000 10,50,000 14,70,000 47,20,000 29,50,000 41,30,000 Less: Variable Cost Material Purchased Labour Cost Manufacturing overheads (Indirect Material electric+ind. Labour) Fixed Cost Fixed Manufacturing Overhead Supervision & Salaries Insurance Premium Maintenance Exp. Licensing fees Other Fixed Assets Selling and Administrative cost (including Depreciation) Depreciation (Overhead) Financing Cost Total Cost 3,80,000 1,80,000 12,000 23.000 64,000 31,000 3,20.000 70,000 3,80,000 1,80,000 12,000 23,000 64,000 31,000 3,20,000 70,000 3,620 50,83,620 3,80,000 1,80,000 12,000 23,000 64,000 31,000 3,20,000 70,000 8,536 52,88,536 11,40,000 5,40,000 36,000 69,000 1,92,000 93,000 9,60,000 2,10,000 12,156 1,50,52,156 46,80,000 Net Profit (Revenue - Cost) -1,80,000 -83,620 -38,536 -3,02,156 3) There is less cash collection of sale as earlier month sale was low and higher purchase of material. That's why cash crunch and taken exter external finance 4) Under flexi budget, budgeted variable expenses shall be revised as per the actual output and then comparison ! (This part is partly solved) TUTORS CHAT Type here to search o Styles Editing Dictate Sensitivity TU XX Po ...A - Aa- A X Font 21 Paragraph Styles 5 Voice Sensitivity 6 CASE Cash budget, income statement and performance report using a flexible budget. Harry Kohl owns a factory that specializes in making steel widgets on a just in time basis. Harry buys his steel only after he receives a firm order. Thus, Harry only buys materials for and produces what he sells in a particular month. To build his business and gain new customers Harry has extended generous credit terms to his customers. While Harry is confident about the fundamentals of his business, he is concerned about the possible cash flow implications. Harry informs you that he currently expects to collect 20% of sales in the month of the sale, 40% of sales in the month after the sale and 40% of sales two months later (for example 20% of February sales are collected in February, 40% in March and 40% in April). He pays for 80% of his materials purchase in the month of the purchase and 20% one month later. Costs of labor and overhead other than depreciation are paid in the same month they are incurred. His monthly fixed selling and administrative costs, other than interest, amount to $320,000, of which $30,000 is depreciation. These costs also, excepting depreciation, are paid in the month incurred. There are no variable selling or administrative costs. Harry has large tax loss carry forwards from a previous unsuccessful business venture. Therefore he does not expect to pay any income taxes this year. (In other words you may ignore income taxes). Sales revenues in February were $4.050,000 and in March were $4,150.000 (these numbers do not agree with the excel sheet). Purchases in March were $1,350,000. The budgeted selling price of widgets for April, May, and June is $25 per widget. Harry provides the following information regarding his sales in units for the next 3 months: April 180,000 units, May 200,000 units and June 210.000 units. The variable costs of producing a widget are budgeted at: $8 for materials, $5 for labor. and $7 for variable overhead. Fixed overhead is budgeted at $380,000 per month. The detailed components of fixed and variable overhead are as listed below. For variable overhead, supplies are budgeted at $1 per unit, electric power is budgeted at $4 per unit, and indirect labor is budgeted at $2 per unit. For fixed overhead depreciation is budgeted at $70,000 per month. Supervision and other salaries is O DS Focus Font Paragraph Styles Voice Sensitivity budgeted at $180,000 per month, insurance is budgeted at $12,000 per month, maintenance is budgeted at $23,000 per month, licensing fees and permits to use proprietary technology are budgeted at $64,000 per month, and other miscellaneous fixed expenses are budgeted at $31,000 per month. Assume Harry's opening cash balance on April 1 is $25,000. Harry requires a minimum cash balance of $5,000 at the end of each month. If the budgeted cash balance will fall below this level Harry plans to borrow enough cash at the beginning of the month to keep his ending balance up to the minimum level. Harry's bank charges him interest at the rate of 1% per month (12% per year) on the balance tutstanding during that month. Harry pays the interest at the beginning of the following month and plans to repay as much as he can without letting his cash balance go below $5,000. Assume no borrowings were outstanding as of April 1. Required 1) Construct Harry's cash budget for the 3 months April, May, and June and the total for the 2nd quarter. Fixed overhead expenses requiring the use of cash may be grouped together as a single line item called "fixed overhead". Variable overhead items may be grouped together as a single line item called "variable overhead". Show any necessary calculations. (7 points) Construct Harry's contribution margin format budgeted income statement for the 3 months April, May, and June and the total for the 2nd quarter. Fixed overhead expenses may be grouped together as fixed overhead. Variable overhead expenses may be grouped together as variable overhead. Remember to include interest on any borrowings. Show any necessary calculations. (6 points) Explain why Harry is facing a cash flow problem in May even though his business is profitable. (2 points) 4) During April Harry actually produced and sold 175,000 widgets. Actual sales revenues were $4,342,000. Actual costs were as detailed in the table 2) 4 So words D. Focus (? Styles Editing Dictate Voice Font Calibri BI Uebx A A. - A M a.- l IT Paragraph Is Styles Sensitivity 1) Construct Harry's cash budget for the 3 months April, May, and June and the total for the 2nd quarter. Fixed overhead expenses requiring the use of cash may be grouped together as a single line item called "fixed overhead". Variable overhead items may be grouped together as a single line item called "variable overhead". Show any necessary calculations. (7 points) 2) Construct Harry's contribution margin format budgeted income statement for the 3 months April, May, and June and the total for the 2nd quarter. Fixed overhead expenses may be grouped together as fixed overhead. Variable overhead expenses may be grouped together as variable overhead. Remember to include interest on any borrowings. Show any necessary calculations. (6 points) 3) Explain why Harry is facing a cash flow problem in May even though his business is profitable. (2 points)*** During April Harry actually produced and sold 175,000 widgets. Actual sales revenues were $4,342,000. Actual costs were as detailed in the table below. Complete the table by constructing a flexible budget and performance report including variances for April based on 175,000 widgets. Your performance report should be similar to the performance report shown in exhibit 10.7 of page 559 except your report includes detailed cost production cost line items. Use the template provided below for your answer. (8 points) Write a brief report explaining the most important reasons why Harry's profits were different from the amount projected in the master budget. (2 points) 4) 5) 14 50 words B DlFocus BB X Calibri BI U vex, x' A 3 AD - Aa A K a. 21 T Font Paragraph Styles Editing Dictate Edi Styles Voice Sensitivity Actual Costs and Template for Requirement #4 Use this page to answer this requirement. Cost Item Static Master Budget for 180.000 units Sales Revenues Direct Materials Direct Labor Supplies Electric Power Indirect Labor Salaries and Supervision Maintenance Performance Report for April Actual results Flexible Flexible Sales Volume Budget Budget for Variance Variance 175,000 units $4.342.000 $1,515.625 $881.436 $166.288 $701,354 $339.272 $175.549 Insurance Permits and license fees $37,336 $12.000 $68.000 $70,000 $33.173 Factory depreciation Other Overhead expenses Total Production Expenses Total Selling & Administrative Expenses Total Expenses Operating Income $329,453 1 Focus 3:59 PN 6/28/20 . chegg.com/homework-help/questions and answers/case-cash-budget-income TURTISwer Anonymous answered this 371 answers Was this answer helpful? Answer 1) Cash Budget Particulars Cash Balance beginning Cash collection from customers Total Cash Available April 25,000 41,80,000 42,05,000 May 5,000 44,60,000 44,65,000 June 5,000 48,50,000 48,55,000 (5) Total Quarter 25,000 1,34,90,000 1,35,15,000 14,22,000 9,00,000 12,60,000 15,68,000 10,00,000 14,00,000 16,64,000 10,50,000 14,70,000 46,54,000 29,50,000 41,30,000 Less: Variable Cost Material Purchased Labour Cost Manufacturing overheads (Indirect Material + electric Ind, Labour) Flared Cost Fixed Manufacturing Overhead Supervision & Salaries Insurance Premium Maintenance Exp. Licensing fees Other Fixed Assets Selling and Administrative cost 320000 30000) 3,80,000 1,80,000 12,000 23,000 64,000 31,000 2,90,000 3,80,000 1,80,000 12,000 23,000 64,000 31.000 2,90,000 3,80,000 1,80,000 12,000 23.000 64,000 31,000 2,90,000 11.40,000 5,40,000 36,000 69,000 1,92,000 93,000 8,70,000 Total Cash Expenses -45,62,000 -49,48,000 -51,64,000 - 1,46,74,000 Financing Borrowing As needed to maintain 5,000 cash balance) Less: Interest paid 1% p.m. in next month Total Financing 3,62,000 4,91,620 -3,620 4,88,000 3,22,536 -8,536 3,14,000 11,76, 156 -12,156 11,64,000 3,62.000 Ending cash Balance 5,000 5,000 5,000 5.000 Working Cash collection from customers Particulars Gross Sale on Credit Sale Unit $25 per widet) Receipts 20 in same month Receipts 4 in next month Receipts 40 % in after second month Total Cash receipt from customers Feb. 40,50.000 8.10,000 March 41,50,000 8,30,000 16,20,000 April 45,00,000 9,00.000 16,60,000 May 5000000 10,00,000 18,00,000 10 20 41 TUTORS CHAT Type here to search E 70 Selling and AMISI COSI 20000 30000 2,30,000 2,30,000 3,70,000 Total Cash Expenses -45,62,000 -49,48,000 -51,64,000 -1,46,74,000 3,62,000 Financing Borrowing (As needed to maintain 5,000 cash balance) Less: Interest paid 1% p.m. in next month Total Financing 4,91,620 -3,620 4,88,000 3,22,536 -8,536 3,14,000 11,76,156 -12, 156 11,64,000 3,62,000 Ending cash Balance 5,000 5,000 5,000 5,000 Feb. 40,50,000 8,10,000 Working Cash collection from customers Particulars Gross Sale on Credit Sale Unit" $25 per widet). Receipts 20 % in same month Receipts 40 % in next month Receipts 40 % in after second month Total Cash receipt from customers April Sale (180000*25) 45,00,000 May Sale (200000*25)-50,00,000 June Sale (210000*25) = 52,50000 March 41,50,000 8,30,000 16,20,000 April 45,00,000 9,00,000 16,60,000 16,20,000 41,80,000 May 5000000 10,00,000 18,00,000 16,60,000 44,60,000 March 13,50.000 10,80,000 Cash Payment to Suppliers for Material Particulars Purchase cost Paid 80 % in same month Paid 20 in next month Total Pald for Material **April 180000"8)= 14,40,000 May (200000"8)=16,00,000 June (210000*8) 16,80,000 April 14,40,000 11,52,000 2.70,000 14,22,000 May 1600000 12,80,000 2.88,000 15,68,000 June 1680000 13,44,000 3,20,000 16,64,000 Cash Payment for Labour in same month April 180000*5)= 9,00,000 May 200000 5) 10,00,000 June (210000"5)= 10,50,000 Cash Payment for Variable overhead in same month April 180000"7) 12,60,000 May (200000"7)=14,00,000 June (210000*7) 14,70,000 TUTORS CHAT Type here to search O TT E 70 ay (200000"5)10,00,000 ne (210000"5)= 10,50,000 ash Payment for Variable overhead in same month prill 180000*7) 12,60,000 May (2000007)-14,00,000 une (210000*7) 14,70,000 2) Income Statement (Budgeted) Particulars April 45,00,000 May 50,00,000 June 52,50,000 (5) Total Quarter 1,47,50,000 Sales Total Revenue 45,00,000 50,00,000 52,50,000 1,47,50,000 14,40,000 9,00,000 12,60,000 16,00,000 10,00,000 14,00,000 16,80,000 10,50,000 14,70,000 47,20,000 29,50,000 41,30,000 Less: Variable Cost Material Purchased Labour Cost Manufacturing overheads (Indirect Material electric+ind. Labour) Fixed Cost Fixed Manufacturing Overhead Supervision & Salaries Insurance Premium Maintenance Exp. Licensing fees Other Fixed Assets Selling and Administrative cost (including Depreciation) Depreciation (Overhead) Financing Cost Total Cost 3,80,000 1,80,000 12,000 23.000 64,000 31,000 3,20.000 70,000 3,80,000 1,80,000 12,000 23,000 64,000 31,000 3,20,000 70,000 3,620 50,83,620 3,80,000 1,80,000 12,000 23,000 64,000 31,000 3,20,000 70,000 8,536 52,88,536 11,40,000 5,40,000 36,000 69,000 1,92,000 93,000 9,60,000 2,10,000 12,156 1,50,52,156 46,80,000 Net Profit (Revenue - Cost) -1,80,000 -83,620 -38,536 -3,02,156 3) There is less cash collection of sale as earlier month sale was low and higher purchase of material. That's why cash crunch and taken exter external finance 4) Under flexi budget, budgeted variable expenses shall be revised as per the actual output and then comparison ! (This part is partly solved) TUTORS CHAT Type here to search o

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