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

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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