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

Additional Information:

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.

……………………………………………………………………………………………....

QUESTION 2

Complete essay in Word document in APA format.

Essay Question 1

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 2

Managers use budgeting to control and evaluate their operations. Two types of budgets that were discussed: the static budget and the flexible budget. How do the two budgets differ and explain how the flexible budget is used in evaluating performance.