Management Finance & Decision Making

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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.

 

 

 

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

 

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.

 

  • 9 years ago
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