Budgeting and Control Final Assignment (High Grade Needed)

• prepare cash budgets and predicted a pro forma income statement and a pro forma balance sheet.

• develop an understanding and working knowledge of real-world budget issues including variances in input, labour and other prices, and costs of finance;

• analyse the way in which costs can be managed.

Submission file format: Excel document with all the answers, clearly identifying all steps, results, journals and including comments besides each answer.

Calculation results HAVE TO be explained and the calculation steps explained

We are in the first week of November and Stalk & Case Inc. its CEO needs your help. After continued growth and profits the company will report losses for the first time. In a series of exercises try to understand the root causes for the current situation and provide useful insight for their CEO to help fix the issues and get back on track.

1. The Business is reporting a negative 8% Operating Profit Ratio, but the liquidity index is looking great and inventories turnover beat any benchmark in the industry. (20 pts) Here are some figures from Stalk & Case:

1. If Current Assets Past were at 4 Mio€ and they are Now at 3,2 Mio€, what can you tell about Cash? Please indicate your ‘made up’ amount for Past and Now.

a) Please explain how the Inventory turnover must have evolved from Past to Now, taking into account that CoGS have been 7Mio€ Past & Now (didn’t change). Calculate the Gross Profit Margin percentage.

b) Please explain how the AR turnover must have evolved from Past to Now.

c) Explain briefly if the company is doing business as usual, expanding (investing) or contracting (cashing out).

1. Stalk & Case Inc., wants a projection of cash receipts and cash payments for the month of November. On November 28, a note will be payable in the amount of €2.402.250,- including interest. The cash balance on November 1 is €2.080,200,- Accounts payable to merchandise creditors at the end of October were €2,112,000. The company’s experience indicates that 70 percent of sales will be collected during the month of sale, 25 percent in the month following the sale, and 3 percent in the second month following the sale; 2 percent will be uncollectible. The company sells various products at an average price of €52 per unit. Selected sales figures are as follows: September actual 50.000 units October actual 70.000 units November forecast 85.000 units December forecast 60.000 units Total forecast for year-end: 900.000 units Because purchases are payable within 15 days, approximately 50 percent of the purchases in a given month are paid in the following month. The average cost of units purchased is €36 per unit. Inventories at the end of each month are maintained at a level of 2,000 units plus 10 percent of the number of units that will be sold in the following month. The inventory on October 1 amounted to 9,000 units. Budgeted operating expenses for November are €1357,000. Of this amount, €350,000 is considered fixed (including depreciation of €150,000). All operating expenses, other than depreciation, are paid in the month in which they are incurred. The company expects to sell fully depreciated equipment in November for €19,000 cash. Instructions Prepare a cash budget for the month of November, supported by schedules of cash collections on accounts receivable and cash payments for purchases of merchandise and let the CEO know if the note payable due Nov, 28th can be paid back in full or not. What happens if Stalk & Case can’t sale the used equipment? (Show all computations.) (25pts.)

2. Stalk & Case manufactures and sells a single product. In preparing the budget for the first quarter, the company’s cost accountant has assembled the following information: The company uses the first-in, first-out (FIFO) method of pricing its inventory of finished goods. (20 pts.) Instructions Compute the following budgeted quantities or dollar amounts:

a) Planned production of finished goods (in units).

b) Cost of finished goods manufactured.

c) Finished goods inventory, March 31. (Remember to use the first-in, first-out method in pricing the inventory.)

d) Cost of goods sold

3. a.) Explain briefly what Standard Costs are. (10 pts.) b.) What are the typical challenges when establishing Standard Costs for Budgeting Purposes? (10 pts.)

4. The Anthony Company, a sole proprietorship, reports the following information pertaining to its operating activities: During the year, the company purchased $40,000 of direct materials and incurred $21,000 of direct labor costs. Total manufacturing overhead costs for the year amounted to $18,000. Selling and administrative expenses amounted to $60,000, and the company’s annual sales amounted to $250,000.

a) Prepare Anthony’s schedule of the cost of finished goods manufactured.

b) Prepare Anthony’s income statement (ignore income taxes) (15 pts.)

Rubrics