Bloom Corp. produces one product that sells at $20 per unit and sells best on Valentine's...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Bloom Corp. produces one product that sells at $20 per unit and sells best on Valentine's Day and Mother's Day. As a result peak sales occur in February and May of each year. Budgeted sales in units for the first six months of the coming year are: Month Units January 12,000 February 32,000 March 18,000 34,000 30,000 15,000 April May June 25% of all sales are cash sales and the rest are on account. Past experience shows that the company collects 25% of a month's credit sales in the month of sale. Another 65% of credit sales is collected in the month following sale, and the remaining 10% of credit sales is collected in the second month following sale. Bad debts are negligible and can be ignored. To ensure that sales volumes can be met, the company requires that ending inventory for a particular month reflect 15% of next month's sales. Assume June 30 closing inventory will be 1,500 units. Required: a) Prepare a sales budget in dollars and a schedule of cash collections from sales, by month and in total, for the second quarter (10 marks). b) If the company prepares a budgeted balance sheet as of June 30, compute the accounts receivable as of that date (5 marks). Prepare a production budget by month and in total for the first quarter (5 marks). CBH Associates is reeling from a decline in profits because of competition. For its most recent year end, its controller has prepared following variance analysis and concluded that the company has done very well controlling its costs: Budgeted Actual Variance Variable Costs: Professional labour $ 1,000,000 $ 50,000 940,000 $ 40,000.00 60,000 $10,000 F $10,000 Travel Supplies 100,000 90,000.00 Fixed Costs: Professional labour 400,000 405,000 -$5,000 U -$15,000 U $2,000 F Facilities Csots 250,000 265,000 Insurance 80,000 78,000 Total Costs $ 1,880,000 $ 1,818,000 $ 62,000 For the year CBH Associates projected that it would generate $2,000,000 of revenues; it actually generated $1,800,000. The company has consulted with you for help in understanding what is happening. You decide to address the following items. 1 Comment on the usefulness of the report above in performing cost control evaluation. (3 marks) 2 Prepare an alternative performance report to enable more meaningful cost control evaluation (use flexible budgeting and identify volume and price variances). (7 marks) The CFO of Carrie Electric Auto, Mary Scofield is debating an investment. The investment is projected to earn $100,000 annually and will require the company to acquire $600,000 in assets. The following chart summarizes Mary's decision: Before After Investment Investment Sales $ 3,500,000 $ 4,100,000 Operating Income Average Operating Assets 600,000 $ 700,000 3,000,000 3,600,000 Required: a.) Assume Mary is evaluated based on growth in the company's ROI. Compute the Return on Investment including the margin and turnover components for the company before and after the investment. Would you recommend Mary make the investment? Why (refer to margin and turnover in your answer)? (5 marks) b.) Assume Mary is evaluated based on growth in the company's residual income. The company's required rate of return is 15%. Compute the company's residual income before and after the investment. Would you recommend Mary make the investment? (3 marks) c.) Give at least one advantage and one disadvantage of using measures like ROI and residual income to evaluate company performance. (2 marks) Bloom Corp. produces one product that sells at $20 per unit and sells best on Valentine's Day and Mother's Day. As a result peak sales occur in February and May of each year. Budgeted sales in units for the first six months of the coming year are: Month Units January 12,000 February 32,000 March 18,000 34,000 30,000 15,000 April May June 25% of all sales are cash sales and the rest are on account. Past experience shows that the company collects 25% of a month's credit sales in the month of sale. Another 65% of credit sales is collected in the month following sale, and the remaining 10% of credit sales is collected in the second month following sale. Bad debts are negligible and can be ignored. To ensure that sales volumes can be met, the company requires that ending inventory for a particular month reflect 15% of next month's sales. Assume June 30 closing inventory will be 1,500 units. Required: a) Prepare a sales budget in dollars and a schedule of cash collections from sales, by month and in total, for the second quarter (10 marks). b) If the company prepares a budgeted balance sheet as of June 30, compute the accounts receivable as of that date (5 marks). Prepare a production budget by month and in total for the first quarter (5 marks). CBH Associates is reeling from a decline in profits because of competition. For its most recent year end, its controller has prepared following variance analysis and concluded that the company has done very well controlling its costs: Budgeted Actual Variance Variable Costs: Professional labour $ 1,000,000 $ 50,000 940,000 $ 40,000.00 60,000 $10,000 F $10,000 Travel Supplies 100,000 90,000.00 Fixed Costs: Professional labour 400,000 405,000 -$5,000 U -$15,000 U $2,000 F Facilities Csots 250,000 265,000 Insurance 80,000 78,000 Total Costs $ 1,880,000 $ 1,818,000 $ 62,000 For the year CBH Associates projected that it would generate $2,000,000 of revenues; it actually generated $1,800,000. The company has consulted with you for help in understanding what is happening. You decide to address the following items. 1 Comment on the usefulness of the report above in performing cost control evaluation. (3 marks) 2 Prepare an alternative performance report to enable more meaningful cost control evaluation (use flexible budgeting and identify volume and price variances). (7 marks) The CFO of Carrie Electric Auto, Mary Scofield is debating an investment. The investment is projected to earn $100,000 annually and will require the company to acquire $600,000 in assets. The following chart summarizes Mary's decision: Before After Investment Investment Sales $ 3,500,000 $ 4,100,000 Operating Income Average Operating Assets 600,000 $ 700,000 3,000,000 3,600,000 Required: a.) Assume Mary is evaluated based on growth in the company's ROI. Compute the Return on Investment including the margin and turnover components for the company before and after the investment. Would you recommend Mary make the investment? Why (refer to margin and turnover in your answer)? (5 marks) b.) Assume Mary is evaluated based on growth in the company's residual income. The company's required rate of return is 15%. Compute the company's residual income before and after the investment. Would you recommend Mary make the investment? (3 marks) c.) Give at least one advantage and one disadvantage of using measures like ROI and residual income to evaluate company performance. (2 marks)
Expert Answer:
Answer rating: 100% (QA)
Step 1 In the above question we have asked to prepare sales budget cash collection from sales produc... View the full answer
Posted Date:
Students also viewed these accounting questions
-
Budgeted sales of The Music Shop for the first six months of 2010 are as follows: Beginning inventory for 2010 is 40,000 units. The budgeted inventory at the end of a month is 40 percent of units to...
-
3. Suppose that o: G G' is a group homomorphism and a Ker(o). Show that for any gG, gag Ker(p).
-
Herbert was employed for the first six months of 2014 and earned $90,000 in salary. During the next six months, he collected $8,800 of unemployment compensation, borrowed $12,000 (using his personal...
-
Differentiate between formal and behavioral roles, and describe how behavioral roles emerge during group interaction.
-
What alternative investment and financing instruments can firms use to alter their marginal tax rate? Why might the firm prefer to repackage its capital structure (the mix of financial instruments it...
-
Many small retailers advertise in their neighborhoods by sending out flyers. People deliver these to homes and are paid according to the number of flyers delivered. Each deliverer is given several...
-
What is protected visibility? Give an example.
-
The Teknomill Corporation must appoint a president, chief executive officer (CEO), chief operating officer (COO), and chief financial officer (CFO). It must also appoint a Planning Committee with...
-
3. (2 points) A binary tree data structure can be implemented as: template class Node { T key; Node *left; Node "right; }; template class Tree ( Node "root; }; 8 3 (10) 1 6 (14) 7 (13) Write a...
-
Sixty-nine percent of U.S. college graduates expect to stay at their first employer for three or more years. You randomly select 18 U.S. college graduates and ask them whether they expect to stay at...
-
Unfolding Case Study: Activity 2Instructions Read Unfolding Case Study: Activity 2. Then, answer the reflective questions. Case Study Jean had been living alone at home for two months after her...
-
If you were Noah and you could preserve half of the species on the planet, how would you decide which species to provide with boarding passes? Be specific. your method does not need to be one of...
-
Calculate the future value of $4000 in a. 3 years at an interest rate of 6% per year. b. 6 years at an interest rate of 6% per year. c. 5 years at an interest rate of 10% per year. d. Why is the...
-
At -30C, the saturation pressure of ethane is 10.6 bar. Calculate the densities of the liquid and vapor phases using the PengRobinson equation. Compare to the reported values for the liquid and vapor...
-
Suppose you invest $800 in an account paying 2% interest per year. a. What is the balance in the account after 3 years? How much of this balance corresponds to interest on interest? b. What is the...
-
Do you agree with Klaus Toepfer that wars over water are inevitable? What do you see as the most realistic policy approach to minimizing future conflicts over water? Would you be in favor of water...
-
Pre-Scripted Mission Assignments (PSMAs): A. Are automatically issued in certain types of disasters. B. Cannot be modified by the primary agency of an Emergency Support Function. C. Assign tasks to...
-
In Exercises 105108, evaluate each expression without using a calculator. log(ln e)
-
Describe the role of a paralegal in a family law practice.
-
Define family law and identify the kinds of issues that are addressed in a family law practice.
-
Describe the characteristics of effective fee agreements, and identify the various types of fee agreements that may be used in divorce cases.
Study smarter with the SolutionInn App