Task: Review Mr. Puffin's Muffins operation. Determine the Financing Section of the Cash Budget for Months...
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Task: Review Mr. Puffin's Muffins operation. Determine the Financing Section of the Cash Budget for Months 1, 2, and 3. Evaluate whether the line of credit is sufficient and why. Review the material and labor variances, evaluate causes and recommend action plans. Criteria for Deliverable: prepare a 1-2 page memo addressed to Mr. Puffin. The memo should NOT be overly technical and should use the format below and address the following: 1. Memo format: Date a. b. Salutation (addressed to Mr. Puffin) c. Body (this is where you address the questions posed) d. Closing/signature 2. Create the Financing Section of the Cash Budget for Months 1, 2 and 3. Determine if the line of credit is sufficient and why. 3. Provide explanations for the material and labor variances and recommend actions plans. Mr. Puffin is currently developing its cash budget for the first three months of operation as well as an investment in machinery in the 3rd month. Mr. Puffin needs assistance determining its financing needs. Specifically, he wants to know how much to borrow or repay, including interest, each month. The first month's beginning balance is $22,000. Each month requires a minimum balance of $20,000. The cash collections from revenues for months 1, 2, and 3 are $50,000, $90,000, and $70,000, respectively. The operating cost outflows for months 1, 2, and 3 are $60,000, $80,000, and $50,000, respectively. The third month also includes a $100,000 outflow for an investment in new machinery. Mr. Puffin has access to an $80,000 line of credit, with 10% annual interest rate. For budgeting purposes, borrowings occur on the 1st day of the month and repayments occur as soon as possible with payment on the last day of the month. Round interest calculations to nearest whole number. Mr. Puffin developed a budget at the start of the month before the following events occurred: -The company changed vendors of its source of flour to Royal Flour Supply. -The company's bakers have worked day and night without many breaks. At the end of the month, Mr. Puffin produced his variance report. Below are the following results: -Labor efficiency variance = $5,000 U -Labor rate variance = $7,500 F -Material quantity variance = $8,000 F -Material price variance = $10,000 U Task: Review Mr. Puffin's Muffins operation. Determine the Financing Section of the Cash Budget for Months 1, 2, and 3. Evaluate whether the line of credit is sufficient and why. Review the material and labor variances, evaluate causes and recommend action plans. Criteria for Deliverable: prepare a 1-2 page memo addressed to Mr. Puffin. The memo should NOT be overly technical and should use the format below and address the following: 1. Memo format: Date a. b. Salutation (addressed to Mr. Puffin) c. Body (this is where you address the questions posed) d. Closing/signature 2. Create the Financing Section of the Cash Budget for Months 1, 2 and 3. Determine if the line of credit is sufficient and why. 3. Provide explanations for the material and labor variances and recommend actions plans. Mr. Puffin is currently developing its cash budget for the first three months of operation as well as an investment in machinery in the 3rd month. Mr. Puffin needs assistance determining its financing needs. Specifically, he wants to know how much to borrow or repay, including interest, each month. The first month's beginning balance is $22,000. Each month requires a minimum balance of $20,000. The cash collections from revenues for months 1, 2, and 3 are $50,000, $90,000, and $70,000, respectively. The operating cost outflows for months 1, 2, and 3 are $60,000, $80,000, and $50,000, respectively. The third month also includes a $100,000 outflow for an investment in new machinery. Mr. Puffin has access to an $80,000 line of credit, with 10% annual interest rate. For budgeting purposes, borrowings occur on the 1st day of the month and repayments occur as soon as possible with payment on the last day of the month. Round interest calculations to nearest whole number. Mr. Puffin developed a budget at the start of the month before the following events occurred: -The company changed vendors of its source of flour to Royal Flour Supply. -The company's bakers have worked day and night without many breaks. At the end of the month, Mr. Puffin produced his variance report. Below are the following results: -Labor efficiency variance = $5,000 U -Labor rate variance = $7,500 F -Material quantity variance = $8,000 F -Material price variance = $10,000 U
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Date Insert Date Salutation Dear Mr Puffin I have reviewed your cash budget for the next three months as well as the variances in your material and la... View the full answer
Related Book For
Principles of Auditing and Other Assurance Services
ISBN: 978-0078025617
19th edition
Authors: Ray Whittington, Kurt Pany
Posted Date:
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