Management Finance & Decision Making
There are two (2) questions.
Question 1: Show all workings. Could be done in word or excel format.
Question 2: Answer should be in word document format.
QUESTION 1
Bill Thomas, Bates & Hill’s controller, has received all the budgets prepared by the various operating units and is ready to compile the pro-forma financial statements for the first quarter. The company’s balance sheet as of December 31 is as follows:
Cash…………………………………………….. $ 36,000
Accounts Receivable (net) ……………………… 35,100
Finished Goods Inventory ……………………… 29,400
Raw Materials Inventory ……………………… 4,536
Property, Plant & Equipment ………………… 180,000
Accumulated Depreciation …………………… (45,000)
Total Assets …………………………………… $240,036
Accounts Payable …………………………….. $ 10,800
Income Tax Payable ………………………….. 45,156
Common Stock ……………………………….. 60,000
Retained Earnings ……………………………. 124,080
Total Liabilities & Owners Equity…………… $240,036
| Quarter | |||
| Budgeted revenue | $846,000 | ||
| Selling and administrative expense | 159,840 | ||
| Interest expense | 2,028 | ||
| Cash | 18,465 | ||
| Cost of Goods Sold | 602,022 | ||
| Accounts receivable | 81,900 | ||
| Direct materials | 3,336 | ||
| Finished goods | 35,409 | ||
| Acounts payable | 19,920 | ||
| Notes payable | 24,600 |
Additional Information:
| ● | Bates & Hill plans to declare and pay dividends totaling $29,400 in January. | |
| ● | Bates & Hill plans to purchase and pay cash for a piece of land in February at a cost of $43,200. | |
| ● | Bates & Hill plans to purchase equipment in March at a cost of $36,000. | |
| ● | Depreciation for manufacturing overhead $18,000 per month and for selling and administrative $6,000 per month. |
The company expects a 18% income tax rate, and all quarterly taxes are paid in the first month of the following quarter.
The company expects a 30% income tax rate, and all quarterly taxes are paid in the first month of the following quarter.
Required
a. Prepare Bates & Hill’s pro-forma income statement for the first quarter.
b. Prepare Bates & Hill’s pro-forma balance sheet as of March 31.
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QUESTION 2
Complete essay in Word document in APA format.
Essay Question 182
Complete the essay questions in one Word document and submit to the Dropbox:
Management by exception focuses only on those variances management considers important. List three factors that managers use in deciding whether or not to investigate a variance and give an example of each.
Essay Question 183
Managers use budgeting to control and evaluate their operations. Two types of budgets that are discussed in chapter 6 are the static budget and the flexible budget. How do the two budgets differ and explain how the flexible budget is used in evaluating performance.
