Lolly's Lollies makes 2 sizes of lollipops: Large and Giant. For the upcoming period they are forecast to sell 3,100 and 1,800 units respectively, for $6 and $8 per unit. They make 20% of sales in cash, the outstanding is collected 50% by the end of the period and 49% next period with 1% not collected. Their opening AR balance (net) is $4,700, which will be collected this period. In addition to producing enough for this period, they would like to make enough to cover 30% of next period's sales forecasted to be 10% greater than this period. Their opening inventory in finished goods is 900 Large and 540 Giant lollies.

To make a Large pop it takes a quarter pounds of sugar and a stick (same size stick for both), where as a Giant takes twice as much sugar. The firm would like to have enough raw materials what is needed this period as well as covering 20% of production needs for the next period. Their beginning raw materials include 300 pounds of sugar and 600 sticks at a unit cost of 50 cents per pound of sugar and 30 cents a stick. Any needed purchases are paid 75% in the current period (along with the opening AP balance of $700) and 25% next period. The direct labor needed for each type of pop is 6 minutes for Large and 9 minutes for Giant and the average labor rate is $15 per hour. Variable manufacturing overhead is $1.70 per direct labor hour; fixed manufacturing overhead is $8,000 allocated evenly between the 2 products, of which 42% is depreciation.

Variable selling and administrative expenses are 63 cents and 80 cents for Large and Giant respectively. Fixed selling and admin costs are: $1,000 for advertising the brand, $600 in insurance, $1,600 in property taxes, and $2,000 in depreciation. The opening cash balance is $600 and the firm has a revolving line of credit (at 6% APR), which can be accessed in increments of $500. The firm has a policy of maintaining at least $500 in cash (end of period). There were no dividends paid, or new equipment purchased in the period (historical cost of equipment is $40,000, with an opening accumulated depreciation of $15,000). No land was purchased or sold, its historical cost is $4,000 with no accumulated depreciation. Contributed capital is $20,000 with no new shares issued or repurchased. The opening balance of retained earnings is $19,966.

1. In this period, what is the cash paid for MOH?

2. In this period, what is the cash paid for direct labor?

3. In this period, what is net income?

4. In this period, what is gross margin for Giant?

5. In this period, what is the cash paid for sugar purchased in the period?

6. In this period, what is the total cash collected from product sales?

7. In this period, what is the AP balance at close?

Answer rating: 100% (QA)

1 In this period the cash paid for MOH is 3876 This is calculated by taking the total MOH of 8000 and multiplying it by the 42 allocated to depreciati... View the full answer