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Serial Problem — SP 20
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
Sales commissions (10%) ......................
6,960
7,555
8,150
Advertising ($3,000 x 1.10) ....................
3,300
3,300
3,300
Other fixed expenses .............................
6,000
6,000
6,000
Total expenses ..........................................
16,260
16,855
17,450
Net income .................................................
$ (660)
$ 945
$ 2,550
*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)
April ................................
32
$14,400
$8,000
May ................................
35
15,750
8,750
June................................
38
17,100
9,500
Total Desk & Chairs
Sales
Variable Cost of Sales
April ................................
$69,600 = $55,200 + $14,400
$44,000 = $36,000 + $8,000
May ................................
$75,550 = $59,800 + $15,750
$47,750 = $39,000 + $8,750
June................................
$81,500 = $64,400 + $17,100
$51,500 = $42,000 + $9,500
**Total Cost of Sales
Variable
Fixed
Total Cost of Sales
April ................................
$44,000
$10,000
$54,000
May ................................
47,750
10,000
57,750
June
51,500
10,000
61,500
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
would expect profits in each of the next two months of the quarter, and the
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
reported on the statement of cash flows for the year ended
3. Answers will depend on Apple’s results obtained.
1. Computation of inventory reduction under new distribution system
Amount of ending inventory required at the 30% rule
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
inventory levels. Unless this type of information and analysis are
prepared, it is unlikely management will dedicate valuable time and
energy to investigate and implement a JIT inventory system.
of a JIT inventory system, or any system, that reduces its inventory
level. Extending this analysis to all markets and product models, the
benefits can be seen to be substantial.
Ethics Challenge — BTN 20-3
Report on “Use It or Lose It” Budgeting
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 20-4
MEMORANDUM
budget, then the sales staff is likely to underreport achievable sales to
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
to determine who in the organization will have access to the information,
and who will have the authority to change information. Also, it would be
1. Budgeting allows an organization to plan its activities better by
2. To expand his operations, Daniel will need financing. Budgets will help
Daniel determine how much additional financing is needed. Likewise,
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:
1. The selling and administrative expenses budget is likely to be an
important budget in the master budgeting process at Samsung. In 2013,
2. General office expenses
Top management salaries
3. The initial responsibility usually rests with a vice president or an
