Financal problems

Question # 00004743 Posted By: neil2103 Updated on: 12/05/2013 10:51 PM Due on: 12/31/2013
Subject Finance Topic Finance Tutorials:
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Norman Concrete Company pours concrete slabs for single-family dwellings. Wayne Construc- tion Company, which operates outside Norman’s normal sales territory, asks Norman to pour 40 slabs for Wayne’s new development of homes. Norman has the capacity to build 300 slabs and is presently working on 250 of them. Wayne is willing to pay only $2,500 per slab. Norman esti- mates the cost of a typical job to include unit-level materials, $1,000; unit-level labor, $600; and an allocated portion of facility-level overhead, $700.


Should Norman accept or reject the special order to pour 40 slabs for $2,500 each? Support your answer with appropriate computations.

Problem 14-22

Patel Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2006. The company president formed a planning committee to prepare a master budget for the first three months of operation. He assigned you, the budget coordinator, the following tasks.

a. October sales are estimated to be $120,000 of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 25 percent per month. Prepare a sales budget.
b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.
c. The cost of goods sold is 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of the next month’s cost of goods sold. Ending inventory at December 31 is expected to be $12,000. Assume that all purchases are made on account. Prepare an inventory purchases budget.
d. The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases.
e. Budgeted selling and administrative expenses per month follow.

Salary expense (fixed) $18,000
Sales commissions 5 percent of Sales
Supplies expense 2 percent of Sales
Utilities (fixed) $1,400
Depreciation on store equipment (fixed)* $4,000
Rent (fixed) $4,800
Miscellaneous (fixed) $1,200

*The capital expenditures budget indicates that Unici will spend
$164,000 on October 1 for store fixtures, which are expected to have a
$20,000 salvage value and a three-year (36-month) useful life.

f.Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.

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  1. Tutorial # 00004538 Posted By: neil2103 Posted on: 12/05/2013 10:53 PM
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