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Jackson Co must decide whether to make or buy some of its components. The variable costs of producing 88000 electrical cords for its floor lamps are...


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1.

Jackson Co must decide whether to make or buy some of its components.  The variable costs of producing 88000 electrical cords for its floor lamps are $22 per unit.  The fixed costs associated with making the cords is $496000.  Instead of making the cords, the company has the opportunity to buy the cords at $25 per unit.  However, 30% of the fixed costs will remain.  Prepare a differential analysis showing whether the company should make or buy the electrical cords.  Round all answers to the nearest whole unit and whole dollar.  Enter negative numbers with a minus sign. Enter zeros where appropriate.  

Variable Cost $ $
Fixed Cost $ $
Total Cost $

$


2.

Halifax, Inc. is trying to prepare their budget for the third quarter. As part of the budget they need to determine the total cash that will be collected from sales for each month. Halifax reports the following budgeted sales information necessary to calculate budgeted cash collections:

Sales   $652,230 $676,280 $640,180 $666,130

30% of the monthly sales listed above are cash sales and are therefore collected right away and 70% of the sales are on account. The amount sold on account each month is collected the following month.

Calculate the amount of cash collected in July, August, and September.  Round all answers to the nearest whole dollar.

Cash Sales      
Cash collected from sales on account      
Total Cash Collected    



3.

Applewood Company is a service based company. They are putting together their budgeted income statement for next year. They project their next year's budget based on prior year's results. Their prior year's income statement follows:

Sales 881,318
 
Expenses:
Sales commission expense 96,945
Rent expense 24,600
Advertising expense 89,359
Salaries expense 213,000
Payroll tax expense 23,711
Depreciation 25,000
Total Expenses 472,615
Income before taxes 408,703
Income tax expense 122,611
Net Income/(Loss) 286,092

 

Applewood's management also predicts the following information to assist in preparing the budget for the next year.

  1. Sales will increase by 8%.
  2. Sales Commissions are 11% of sales.
  3. Rent expense for next year is $2,050 per month for January - August and will increase to $2,400 on September 1st.
  4. Advertising expense is 12% of sales.
  5. Salaries are expected to increase by 3%.
  6. Payroll tax expense is expected to remain 7.65% of commissions and salaries combined.
  7. Depreciation expense is expected to remain unchanged.
  8. The income tax rate is 30%.

Prepare a budgeted income statement for the next year.  Round all calculations to the nearest whole dollar.

Sales
 
Expenses:
Sales commission expense
Rent expense
Advertising expense
Salaries expense
Payroll tax expense
Depreciation
Total Expenses
Income before taxes
Income tax expense
Net Income/(Loss)



4.

Kaiser, Inc. has the following budgeted cash collections from the cash receipts budget and cash payments (excluding loan principal repayments and interest payments) from the cash disbursements budget for the next quarter (April, May, & June). 

April  $29,868 $26,879
May $30,759 $37,712
June $31,068 $27,794

In addition, Kaiser's beginning cash balance as of April 1 is $15,180.

Kaiser, Inc. would like to maintain a minimum $15,000 cash balance at all times. In order to achieve this goal Kaiser has negotiated a line of credit with the bank. If the preliminary cash balance falls below $15,000 Kaiser will borrow the necessary funds to keep their balance above the desired amount. If the preliminary cash balance is above the $15,000 minimum balance they will use any excess to pay down any outstanding loan balance at the time. The interest rate on any outstanding line of credit balance is 6% per year. The interest is paid at the end of each month and is computed on the beginning loan balance for the month. They have a zero balance on their line of credit on April 1st.

Prepare the cash budget for the quarter.  
Enter cash disbursements and loan repayments as a negative number. Round all calculations to the nearest whole dollar.

Beginning Cash Balance $ $ $
Cash collected $ $ $
Cash Disbursements
  Cash payments (given) $ $ $
  Interest on bank loan (6%) $ $ $
Preliminary cash balance $ $ $
Additional loan/ or (repayment) $ $ $
Ending cash balance $ $ $
Loan balance at beg. of month $ $ $
Additional money borrowed $ $ $
principal amount repaid $ $ $
Loan balance at end of month $ $

$


Answer

 

1

 

Jackson Company

 

Variable cost

 

Fixed Cost

 

Total Cost

 

Differential cost of buying $

 

$

 

$ Make

 

1,936,000 $

 

496,000 $

 

2,432,000 $ Buy

 

2,200,000

 

148,800

 

2,348,800

 

-83200 Company should by...

 


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