Serial Problem — SP 22
Serial Problem, Business Solutions (50 minutes)
Part 1
BUSINESS SOLUTIONS
Budgeted Income Statements
For Months of April, May, and June
April May June
Sales*……………………………………………..…. $69,600 $75,550 $81,500
Cost of goods sold**……………..………...... 54,000 57,750 61,500
Gross profit……………….………………..…….. 15,600 17,800 20,000
Expenses
*Results from per month volume increases for the next 3 months
Desks Units Sales (@ $1,150) Variable Cost of Sales (@ $750)
April……………………………………………………………48 $55,200 $36,000
May………………………………………………………….…52 59,800 39,000
June…………..………….………........…..........…..56 64,400 42,000
Chairs Units Sales (@ $450) Variable Cost of Sales (@ $250)
Total Desk & Chairs Sales Variable Cost of Sales
April……………………………………………………………$69,600 = $55,200 + $14,400 $44,000 = $36,000 + $8,000
June…………..………….………........…..........…..$81,500 = $64,400 + $17,100 $51,500 = $42,000 + $9,500
**Total Cost of Sales Variable Fixed Total Cost of Sales
Serial Problem, Business Solutions (Concluded)
Part 2
The plan for increasing sales volume by reducing the price and increasing
advertising would cause the company to generate a loss in the first month
of the next quarter. This result is not encouraging. However, the company
Reporting in Action — BTN 22-1
1. Apple’s statement of cash flows would report cash paid for acquisitions
2. a. Cash paid for acquisitions of property, plant and equipment and
b. Given the assumption—that Apple’s annual cash payments for
acquisitions of property and equipment equal 20% of the prior year’s
3. Answers will depend on Apple’s results obtained.
Comparative Analysis — BTN 22-2
1. Computation of inventory reduction under new distribution system
Amount of ending inventory required at the 30% rule
[$1 billion x (1- 0.20) x 0.30]…………………..………………..……$240,000,000
2. An analysis such as in part 1 along with an explanation can make clear
to management the cost of funds necessary to support ending
energy to investigate and implement a JIT inventory system.
To further illustrate, assuming a 15% interest cost of resources tied up
in inventory, a company can save money by reducing its inventory
level. In particular, by reducing its ending inventory by $160,000,000,
Google would save $24,000,000 per year ($160,000,000 difference x 15%
Ethics Challenge — BTN 22-3
Report on “Use It or Lose It” Budgeting
Instructor note: There is no widely accepted solution to this problem. The key is for the student to
think about the problem and work to at least modify the negative behavioral consequences of this
practice.
Upper management must also keep in mind that efficient and effective
allocation of resources is necessary to provide high-quality services to
customers and the public. All spending behavior must be monitored.
Without monitoring in the budgeting system, even more money will be
wasted or used inefficiently.
Communicating in Practice — BTN 22-4
MEMORANDUM
TO: ____________________
FROM: ____________________
DATE: ____________________
SUBJECT: ____________________
The content of this memorandum will vary among students. The student
must emphasize the need to know the compensation structure of the sales
staff to understand any potential bias in the information provided to the
budget process.
The memorandum should explain why a concern with bias in the
Taking It to the Net — BTN 22-5
1. The “e-budgets” Website lists a number of benefits such as accuracy, timeliness, ease of
sharing information, ease of updating, real-time comparison of actual performance vs.
estimates, and so on.
2. As a senior manager, my biggest concern would be security, particularly
when the system is easily accessible and usable. It would be important
Teamwork in Action — BTN 22-6
There is no specific solution to this assignment. The instructor should
watch for proper development and identification of all reasonable costs.
Entrepreneurial Decision — BTN 22-7
1. Budgeting allows an organization to plan its activities better by
2. To expand his operations, Daniel will need financing. Budgets will help
company’s forecasted plans.
Hitting the Road — BTN 22-8
1. & 2.
The types of external factors identified by the student for consideration in
part (1), or selected as an explanatory factor for part (2), might include the
following:
Global Decision — BTN 22-9
1. The selling and administrative expenses budget is likely to be an
important budget in the master budgeting process at Samsung. In 2013,
selling and administrative expenses comprised about 23.7%
2. General office expenses
Top management salaries
3. The initial responsibility usually rests with a vice president or an