ACCT 2332 MANAGERIALACCOUNTING REQUIRED: This project is worth 24 points. It is

Question

ACCT 2332 MANAGERIALACCOUNTING REQUIRED: This project is worth 24 points. It is an opportunity to put together some of the things you have learned in different parts of this course. You can work in groups of three (maximum), two or individually. Read the case and answer the requirements below. The names, usernames and Peoplesoft numbers of the group members must be written clearly below. To receive credit you must write full answers, using the templates provided for each requirement. We must ask you to handwrite your answers and show any calculations you feel are needed Hand your project in to the accounting lab 133MH during lab hours on or before Wednesday Nov 15 1) GROUP MEMBERS: NAME Blackboard Username Peoplesoft Number YOUR RECEIPT NUMBER(lab assistants will give you this) Manny Fold owns a factory that specializes in making titanium valves for high performance engines on a just in time basis. Thus, Manny produces what he sells in a particular month. There are no inventories of finished goods or work in process. However, Manny does require that an inventory of direct raw materials equal to 20% of next month's production requirement be available at the end of each month. To build his business and gain new customers Manny has extended generous credit terms to his customers. While Manny is confident about the fundamentals of his business, he is concerned about the possible income and cash flow implications The variable costs of producing a valve are budgeted at $7.20 per valve for direct materials (3/4 pound of titanium alloy costing $9.60 per pound), $2.80 per valve for direct labor, and $5.50 per valve for variable manufacturing overhead. Fixed manufacturing overhead is budgeted at $74,700 per month during the 2nd quarter. The detailed components of variable and fixed overhead are as listed below.

Explanation / Answer

REQUIREMENT 1

REQUIREMENT 2: BUDGETED PURCHASES OF TITANIUM ALLOY(Direct Material)

0.75

Note : Here it is assumed that the total qty during 2 nd quarter will be same as total of first quarter.

Hence while calculating results for 2 nd quarter it is assumed that total qty to be produced i.e.55,500 will be same in 3 rd quarter as well & hence desired ending qty is calculated on 41,625 @ 20%.

REQUIREMENT 3:

COMPUTATION OF CASH COLLECTIONS

As it is assumed that total sales in 2nd quarter is same as in first quarter therefor overall total cash collection of 2nd quarter is taken as total for april, may & june.

REQUIREMENT 3 COMPUTATION OF CASH PAYMENTS

Here it is assumed that property tax and insurance are paid for each quarter in advance.Hence same amount taken for calculation of quarter 2, as in 2ND quarter's last month same amount will be paid for q3. Also it is assumed that capital expenditure is one time and will not occur in quarter 2.

Combined Cash Budget

As there is no enough cash balance it is assumed that there was no repayment of borrowing taken in the month of June in next quarter. Also interest on borrowings in 2nd quarter is igonred for want of information.

REQUIREMENT 4 BUDGETED BALANCE SHEET FOR JUNE 30

Assets:

Current Assets

PARTICULARS APRIL MAY JUNE 2nd QUARTER SALES REVENUE $3,91,000 $4,25,500 $4,60,000 $12,76,500 DIRECT MATERIALS USED ($1,22,400) (1,33,200) ($1,44,000) ($3,99,600) DIRECT LABOUR ($47,600) ($51,800) ($56,000) ($1,55,400) VARIABLE OVERHEAD ($93,500) ($1,01,750) ($1,10,000) ($3,05,250) CONTRIBUTION MARGIN $1,27,500 $1,38,750 $1,50,000 $4,16,250 FIXED OVERHEAD ($74,700) ($74,700) ($74,700) ($2,24,100) FIXED OPERATING EXPENSES ($43,600) ($43,600) ($43,600) ($1,30,800) OPERATING INCOME $9,200 $20,450 $31,700 $61,350 INTEREST EXPENSES $0 $0 $0 $1,420 NET INCOME $9,200 $20,450 $31,700 $59,930

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