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Title: Problem 22-7B
QA_Ori:
Part 1
NABAR MANUFACTURING
Sales Budgets
July, August, and September 2013
Budgeted
Units
Budgeted
Unit Price
Budgeted
Total Dollars
July 2013 21,000 $17.00 $ 357,000
Part 2
NABAR MANUFACTURING
Production Budget
July, August, and September 2013
July August Sept. Total
Next month’s budgeted sales 19,000 20,000 24,000
Ratio of inventory to future sales x 70% x 70% x 70%
Part 3
NABAR MANUFACTURING
Raw Materials Budget
July, August, and September 2013
July August Sept. Total
Production budget (units) 17,500 19,700 22,800
Materials requirement per unit x 0.50 x 0.50 x 0.50
Part 4
NABAR MANUFACTURING
Direct Labor Budget
July, August, and September 2013
July August Sept. Total
Budgeted production (units) 17,500 19,700 22,800
Part 5
NABAR MANUFACTURING
Factory Overhead Budget
July, August, and September 2013
July August Sept. Total
Budgeted production (units) 17,500 19,700 22,800
*$2.70 per direct labor hour x 0.50 direct labor hours per unit
Part 6
NABAR MANUFACTURING
Selling Expense Budgets
July, August, and September 2013
July August Sept. Total
Budgeted sales $357,000 $323,000 $340,000
Part 7
NABAR MANUFACTURING
General and Administrative Expense Budgets
July, August, and September 2013
July August Sept. Total
Part 8
NABAR MANUFACTURING
Cash Budgets
July, August, and September 2013
July August Sept.
Beginning cash balance $ $ 96,835 $141,180
40,000
Cash receipts from customers (note A) 357,000 346,800 328,100
Total cash available 397,000 443,635 469,280
Cash disbursements
Supporting calculations July August Sept. Total
Note A: Cash receipts from customers
Total sales $357,00
0
$323,00
0
$340,00
0
$1,020,0
00
Cash sales (30%)
107,100
96,900
102,000
306,000
Credit sales (70%)
249,900
226,100
238,000
714,000
Part 9
NABAR MANUFACTURING
Budgeted Income Statement
For Three Months Ended September 30, 2013
Sales $1,020,000
Cost of goods sold (60,000 units @ $14.35) 861,000
Gross profit 159,000
Part — Budgeted Retained Earnings & Budgeted Balance Sheet
NABAR MANUFACTURING
Budgeted Balance Sheet
September 30, 2013
ASSETS
Cash $ 40,000 Cash budget
Accounts receivable 238,000 Note C
LIABILITIES AND EQUITY
Accounts payable $ 88,800 Note H
Supporting Footnotes
Note C
Note D
Less materials used in production**
(240,000)
Ending inventory raw materials inventory* $ 15,840
Note E
Beginning finished goods inventory $ 241,080
Note F
Note G
Note H
Note I
67,834
Title: Serial Problem, Success Systems
QA_Ori:
Part 1
SUCCESS SYSTEMS
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
*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
Chairs
Units
Sales (@ $450)
Total Desk & Chairs
Sales
Variable Cost of Sales
April
May
June 113
**Total Cost of Sales
Variable
Fixed
Total Cost of Sales
April
May
47,750
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 would expect profits in each of the
Title: Reporting in Action 1
QA_Ori:
Title: Reporting in Action 2
QA_Ori:
a. Cash paid for acquisitions of property and equipment and reported on the statement
b. Given the assumption—that Polaris’s annual cash payments for acquisitions of
Title: Reporting in Action 3
QA_Ori:
Answers will depend on Polaris’s results obtained.
Title: Comparative Analysis 1
QA_Ori:
Computation of inventory reduction under new distribution system
Amount of ending inventory required at the 30% rule
This result implies that Arctic Cat can reduce its inventory level for the Canadian market
Title: Comparative Analysis 2
QA_Ori:
An analysis such as in part 1 along with an explanation can make clear to management
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
Title: Ethics Challenge
QA_Ori:
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.
Any plan offered as a solution must better align upper management’s expectations with
department managers’ behavior. For example, upper management might only cut by
one-half the amount not spent according to budget. Another potential suggestion is to
allow department managers the option of justifying why the amount was not spent and
explain why current budget levels must be maintained.
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.
QA_Edit:
Title: Communicating in Practice
QA_Ori:
MEMORANDUM
TO: ____________________
FROM: ____________________
DATE: ____________________
SUBJECT: ____________________
The content of this memorandum will vary among students. The student must
The memorandum should explain why a concern with bias in the information does exist.
Specifically, if a bonus is paid when sales go over budget, then the sales staff is likely to
QA_Edit:
MEMORANDUM
TO: ____________________
FROM: ____________________
DATE: ____________________
SUBJECT: ____________________
Title: Taking It to the Net 1
QA_Ori:
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.
In the case of large, multi-divisional companies, coordination across and within divisions
Title: Taking It to the Net 2
QA_Ori:
As a senior manager, my biggest concern would be security, particularly when the
Title: Teamwork in Action
QA_Ori:
There is no specific solution to this assignment. The instructor should watch for proper
Title: Entrepreneurial Decision 1
QA_Ori:
Budgeting allows an organization to plan its activities better by allocating financial
Title: Entrepreneurial Decision 2
QA_Ori:
Sales forecasts and purchases budgets are particularly important in businesses like
Title: Hitting the Road 1 & 2
QA_Ori:
Instructor note: This problem is designed to (1) show that external factors are important
Climatic conditions.
Title: Global Decision 1
QA_Ori:
The infrastructure and administration expense budget is likely to be an important budget
Title: Global Decision 2
QA_Ori:
General office expenses
Top management salaries
Depreciation expense
Title: Global Decision 3
QA_Ori:
The initial responsibility usually rests with a vice president or an equivalent-level
manager. KTM is organized by divisions. Therefore, managers in each division may
have initial responsibility for the infrastructure and administration expense budget.
