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

		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 182

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 183

Managers use budgeting to control and evaluate their operations. Two types of budgets that are discussed in chapter 6 are the static budget and the flexible budget. How do the two budgets differ and explain how the flexible budget is used in evaluating performance.