question archive Problem 10-2 The results of operations for the Munchies Bug Spray Manufacturing Company for the fourth quarter of 2017 were as follows (in thousands): Sales of bug spray $540,000 Less variable cost of goods sold 302,400 Contribution margin 237,600 Less fixed bug removal costs $75,600 Less fixed selling and administrative expenses 32,400 108,000 Income before taxes 129,600 Less taxes on income 51,840 Net income $77,760 Note: Munchies uses the variable costing method
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Problem 10-2
The results of operations for the Munchies Bug Spray Manufacturing Company for the fourth quarter of 2017 were as follows (in thousands):
Sales of bug spray
$540,000
Less variable cost of goods sold
302,400
Contribution margin
237,600
Less fixed bug removal costs
$75,600
Less fixed selling and administrative expenses
32,400
108,000
Income before taxes
129,600
Less taxes on income
51,840
Net income
$77,760
Note: Munchies uses the variable costing method. Thus, only variable costs are included in the cost of goods sold. Fixed costs are charged to expense in the period incurred.
The company's balance sheet as of the end of the fourth quarter of 2017 was as follows (in thousands):
Assets:
Cash
$26,000
Accounts receivable
324,000
Total current assets
350,000
Fixtures and equipment
$130,000
Less accumulated depreciation
85,000
45,000
Total assets
$395,000
Liabilities and owners' equity:
Accounts payable
$60,480
Retained earnings
225,820
Common stock
108,700
Total liabilities and owners' equity
$395,000
Additional information:
1.Sales and variable costs of sales are expected to increase by 4 percent in the next quarter.
2.All sales are on credit with 40 percent collected in the quarter of sale and 60 percent collected in the following quarter.
3.Variable cost of sales consists of 40 percent materials, 40 percent direct labor, and 20 percent variable overhead. Materials are purchased on credit. 50 percent are paid for in the quarter of purchase, and the remaining amount is paid for in the quarter after purchase. There is no inventory. Also, direct labor and variable overhead costs are paid in the quarter the expenses are incurred.
4.Fixed bug removal costs (other than $4,920 of depreciation expense) are expected to increase by 1.50 percent. Fixed bug removal costs requiring payment are paid in the quarter they are incurred.
5.Fixed selling and administrative costs (other than $2,800 of depreciation expense) are expected to increase by 3 percent. Fixed selling and administrative costs requiring payment are paid in the quarter they are incurred.
6.The tax rate is expected to be 40 percent. All taxes are paid in the quarter they are incurred.
7.No purchases of fixtures or equipment are expected in the first quarter of 2018.
prepare a budgeted income statement for the first quarter of 2018.
Munchies Bug Spray Manufacturing Company
Budgeted Income Statement
(Below are options to select per section) (Select one of the following per section and indicate the number)
March 31, 2018
For the Year Ended March 31, 2018
For the Quarter Ended March 31, 2018
Fixed selling and administrative expenses
Income before taxes
Contribution margin
Net income/(loss)
Sales of bug spray
Variable cost of goods sold
Fixed bug removal costs
Taxes on income
$
Add
Less
:
Contribution margin
Taxes on income
Variable cost of goods sold
Income before taxes
Sales of bug spray
Net income/(loss)
Fixed bug removal costs
Fixed selling and administrative expenses
Contribution margin
Taxes on income
Fixed bug removal costs
Net income/(loss)
Income before taxes
Fixed selling and administrative expenses
Sales of bug spray
Variable cost of goods sold
Less
Add
:
Contribution margin
Taxes on income
Net income/(loss)
Sales of bug spray
Variable cost of goods sold
Fixed bug removal costs
Fixed selling and administrative expenses
Income before taxes
$
Sales of bug spray
Contribution margin
Fixed bug removal costs
Variable cost of goods sold
Fixed selling and administrative expenses
Income before taxes
Taxes on income
Net income/(loss)
Sales of bug spray
Fixed selling and administrative expenses
Net income/(loss)
Income before taxes
Variable cost of goods sold
Contribution margin
Taxes on income
Fixed bug removal costs
Less
Add
:
Net income/(loss)
Contribution margin
Sales of bug spray
Variable cost of goods sold
Fixed bug removal costs
Income before taxes
Fixed selling and administrative expenses
Taxes on income
Fixed bug removal costs
Income before taxes
Fixed selling and administrative expenses
Taxes on income
Net income/(loss)
Sales of bug spray
Variable cost of goods sold
Contribution margin
$
prepare a budgeted statement of cash budget for the first quarter of 2018.
Munchies Bug Spray Manufacturing Company
Cash Budget
For the First Quarter, 2018
In quarter 4, 2017
Payment of income taxes
Payment for variable overhead
Beginning cash balance
In quarter 1, 2018
Cash collected from sales
Excess/(deficiency) of receipts over disbursements
Payment for labor
Depreciation of equipment
Payment for fixed bug removal costs
Ending cash balance
Cash payments
Payment for fixed selling and administrative expense
Payment of material
:
Payment for labor
Ending cash balance
Payment of income taxes
Excess/(deficiency) of receipts over disbursements
Payment for variable overhead
Beginning cash balance
Payment for fixed selling and administrative expense
Depreciation of equipment
Cash collected from sales
Cash payments
In quarter 4, 2017
Payment for fixed bug removal costs
In quarter 1, 2018
Payment of material
$
Beginning cash balance
Payment for variable overhead
Ending cash balance
Payment for fixed bug removal costs
In quarter 1, 2018
Payment of material
Payment for labor
Cash collected from sales
Payment for fixed selling and administrative expense
Payment of income taxes
Cash payments
Excess/(deficiency) of receipts over disbursements
Depreciation of equipment
In quarter 4, 2017
$
Payment for fixed selling and administrative expense
Payment for variable overhead
Beginning cash balance
In quarter 4, 2017
Payment for labor
Ending cash balance
Payment of income taxes
Depreciation of equipment
Payment of material
Excess/(deficiency) of receipts over disbursements
Payment for fixed bug removal costs
Cash collected from sales
In quarter 1, 2018
Cash payments
:
Cash payments
Payment for fixed bug removal costs
Excess/(deficiency) of receipts over disbursements
Payment of material
Depreciation of equipment
Payment for fixed selling and administrative expense
Payment of income taxes
Beginning cash balance
In quarter 4, 2017
Ending cash balance
Cash collected from sales
In quarter 1, 2018
Payment for labor
Payment for variable overhead
Excess/(deficiency) of receipts over disbursements
Cash payments
Payment for variable overhead
In quarter 4, 2017
Payment of income taxes
In quarter 1, 2018
Cash collected from sales
Payment for fixed selling and administrative expense
Beginning cash balance
Payment for labor
Payment for fixed bug removal costs
Ending cash balance
Depreciation of equipment
Payment of material
Ending cash balance
In quarter 1, 2018
Excess/(deficiency) of receipts over disbursements
Depreciation of equipment
Beginning cash balance
Cash collected from sales
Cash payments
Payment for labor
Payment of material
In quarter 4, 2017
Payment of income taxes
Payment for variable overhead
Payment for fixed bug removal costs
Payment for fixed selling and administrative expense
Payment of income taxes
Excess/(deficiency) of receipts over disbursements
Beginning cash balance
Payment for fixed selling and administrative expense
Payment of material
Ending cash balance
Payment for fixed bug removal costs
Depreciation of equipment
Cash collected from sales
In quarter 4, 2017
Cash payments
In quarter 1, 2018
Payment for labor
Payment for variable overhead
Payment for fixed bug removal costs
Payment for variable overhead
Beginning cash balance
Ending cash balance
Depreciation of equipment
Payment for fixed selling and administrative expense
Cash collected from sales
In quarter 4, 2017
Payment of income taxes
Cash payments
Payment for labor
Excess/(deficiency) of receipts over disbursements
Payment of material
In quarter 1, 2018
Payment for fixed selling and administrative expense
Ending cash balance
Payment for fixed bug removal costs
Payment for labor
Depreciation of equipment
Payment of income taxes
Payment of material
In quarter 1, 2018
Payment for variable overhead
Excess/(deficiency) of receipts over disbursements
In quarter 4, 2017
Cash collected from sales
Beginning cash balance
Cash payments
Payment for variable overhead
Payment for fixed selling and administrative expense
Excess/(deficiency) of receipts over disbursements
Beginning cash balance
Payment of income taxes
Ending cash balance
In quarter 4, 2017
Depreciation of equipment
Cash collected from sales
Cash payments
Payment of material
In quarter 1, 2018
Payment for labor
Payment for fixed bug removal costs
Payment for variable overhead
Depreciation of equipment
Payment for labor
In quarter 4, 2017
Ending cash balance
Payment of material
Cash collected from sales
Beginning cash balance
Cash payments
In quarter 1, 2018
Payment for fixed bug removal costs
Payment for fixed selling and administrative expense
Payment of income taxes
Excess/(deficiency) of receipts over disbursements
Payment of income taxes
Payment of material
Payment for fixed selling and administrative expense
Ending cash balance
Depreciation of equipment
Excess/(deficiency) of receipts over disbursements
Beginning cash balance
Cash payments
Payment for fixed bug removal costs
In quarter 4, 2017
Payment for variable overhead
Cash collected from sales
In quarter 1, 2018
Payment for labor
Add
Less
:
Ending cash balance
Payment for labor
Payment of material
Cash payments
Payment for variable overhead
In quarter 1, 2018
Payment for fixed selling and administrative expense
Payment for fixed bug removal costs
Payment of income taxes
Excess/(deficiency) of receipts over disbursements
Beginning cash balance
Depreciation of equipment
Cash collected from sales
In quarter 4, 2017
Payment for fixed selling and administrative expense
Payment of material
In quarter 4, 2017
Cash collected from sales
Payment of income taxes
Excess/(deficiency) of receipts over disbursements
Payment for variable overhead
In quarter 1, 2018
Depreciation of equipment
Beginning cash balance
Payment for labor
Cash payments
Payment for fixed bug removal costs
Ending cash balance
$
prepare a budgeted balance sheet as of the end of the first quarter of 2018. (List assets in order of liquidity.)
Munchies Bug Spray Manufacturing Company
Budgeted Balance Sheet
March 31, 2018
For the Year Ended March 31, 2018
For the Quarter Ended March 31, 2018
Assets
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
$
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
Add
Less
:
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
$
Liabilities and Stockholders' Equity
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
$
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
Current Assets
Intangible Assets
Liabilities
Long-term Investments
Long-term Liabilities
Net Income / (Loss)
Property, Plant and Equipment
Stockholders' Equity
Total Assets
Total Current Assets
Total Intangible Assets
Total Liabilities
Total Liabilities and Stockholders' Equity
Total Long-term Investments
Total Long-term Liabilities
Total Property, Plant and Equipment
Total Stockholders' Equity
$
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