Question

having issues with 9,10,11

Problem 9-73 Understanding Relationships, Master Budget, Comprehensive Review Optima Company is a high-technology organization that produces a mass-storage system. The design of Optima's system is unique and represents a breakthrough in the industry. The units Optima produces combine positive features of both compact and hard disks. The company is completing its fifth year of operations and is preparing to build its master budget for the coming year (20X1). The budget will detail each quarter's activity and the activity for the year in total. The master budget will be based on the following information: a. Fourth-quarter sales for 20X0 are 55,000 units. b. Unit sales by quarter (for 20X1) are projected as follows: First quarter Second quarter Third quarter Fourth quarter 65,000 70,000 75.000 90,000 The selling price is $400 per unit. All sales are credit sales. Optima collects 85% of all sales within the quarter in which they are realized; the other 15% is collected in the following quarter. There are no bad debts. c. There is no beginning inventory of finished goods. Optima is planning the following ending finished goods inventories for each quarter: First quarter 13,000 units Second quarter 15.000 units Third quarter 20,000 units Fourth quarter 10,000 units (Continued)

Answer 1

Optima Company
Cash Budget for 20X1
	Q1	Q2	Q3	Q4
Opening balance of Cash	$250,000	$5,400,000	$13,250,000	$21,700,000
Receipts
Collection from Customers	$25,400,000	$27,700,000	$29,700,000	$35,100,000
Total Cash Available	$25,650,000	$33,100,000	$42,950,000	$56,800,000
Payment
Paid to raw material suppliers	$16,800,000	$16,200,000	$17,400,000	$19,800,000
Fixed overheads	$650,000.00	$650,000.00	$650,000.00	$650,000.00
Variable overheads	$1,950,000.00	$2,100,000.00	$2,250,000.00	$2,700,000.00
Fixed Selling and Administrative expenses	$200,000	$200,000	$200,000	$200,000
Variable Selling and Administrative expenses	$650,000	$700,000	$750,000	$900,000
Total Payment	$20,250,000	$19,850,000	$21,250,000	$24,250,000
Ending cash balance	$5,400,000	$13,250,000	$21,700,000	$32,550,000

Optima Company
Proforma Income Statement for year 20X1
	Q1	Q2	Q3	Q4
Sales	$26,000,000	$28,000,000	$30,000,000	$36,000,000
Less : Cost Sale	$15,080,000	$19,720,000	$20,300,000	$29,000,000
Gross Margin	$10,920,000	$8,280,000	$9,700,000	$7,000,000
Less : Variable Overheads
Variable overheads	$1,950,000	$2,100,000	$2,250,000	$2,700,000
Variable Selling and Administrative expenses	$650,000	$700,000	$750,000	$900,000
Total variable overheads	$2,600,000	$2,800,000	$3,000,000	$3,600,000
Contribution Margin	$8,320,000	$5,480,000	$6,700,000	$3,400,000
less : Fixed Overheads
Fixed Overheads	$1,000,000	$1,000,000	$1,000,000	$1,000,000
Fixed Selling and Administrative expenses	$250,000	$250,000	$250,000	$250,000
Total Fixed Overheads	$1,250,000	$1,250,000	$1,250,000	$1,250,000
Profit Before income tax	$7,070,000	$4,230,000	$5,450,000	$2,150,000

Working :

Quarter wise Sales :-

Q4 20X0 = 55000 units x $400 =$2,200,0000

Q1 20X1= 65000 units x $400=$2,600,0000

Q2 20X1 =70000 units x $400 =$2,800,0000

Q3 20X1= 75000 units x $400=$3,000,0000

Q3 20X1= 90000 units x $400=$3,600,0000

Projected Collection from customers :-

Collection to be done 85% of sale in same Quarter and rest following quarter

Hence ,

Quarter 1 Collection = Q4 20X0 x15% + Q1 20X1 x 85% = $2,200,0000 x15%+$2,600,0000 x 85%=$2,540,0000

Quarter 2 Collection = Q1 20X1 x15% + Q2 20X1 x 85% = $2,6000,000 x 15%+$2,800,0000 x 85%=$2,770,0000

Quarter 3 Collection = Q2 20X1 x15% + Q3 20X1 x 85% = $2,800,0000 x 15%+$3,000,0000 x 85%=$2,970,0000

Quarter 4 Collection = Q3 20X1 x15% + Q4 20X1 x 85% = $3,000,0000 x 15%+$3,600,0000 x 85%=$3,510,0000

Direct Labour & Direct Materials :-

Direct Labour per unit = 5 hr. x $10 =$50 per unit Direct Material per unit = 3 x$80 =$240 per unit

	Q1	Q2	Q3	Q4
Unit Sold	65000	70000	75000	90000
Direct Labor Cost per unit	$50	$50	$50	$50
Direct Labor Costs	$3,250,000	$3,500,000	$3,750,000	$4,500,000
Direct Material Cost per unit	$240	$240	$240	$240
Direct Material Costs	$15,600,000	$16,800,000	$18,000,000	$21,600,000

Requirement of Direct Materials

Opening balance as on Jan 20X1 67500 units . 30% of direct material needed for next Quarter sale hence 67500 units is 30% of Direct Material of Q4 20X0 , Hence Total Direct Materials Purchase of 20X0 is 67500 x100/30=225000 units . Direct Material costs = 225000 x $80 =$1,800,0000

Payment terms of Direct material purchase 50% in same quarter and 50% next Quarter .

Hence ,

Q1 Payment = Q4 20X0 x 50%+Q1 20X1 x 50% =$1,800,0000 x 50% + $15,600,000 x 50% =$1,680,0000

Q2 Payment = Q1 20X1 x 50%+Q2 20X1 x 50% = $15,600,000 x 50%+$1,680,0000 x 50% =$1,620,0000

Q3 Payment = Q2 20X1 x 50%+Q3 20X1 x 50% = $1,680,0000 x 50%+ $1,800,0000 x 50%=$1,740,0000

Q4 Payment = Q3 20X1 x 50%+Q4 20X1 x 50% = $1,800,0000 x 50%+$2,160,0000x 50%=$1,980,0000

Fixed overheads per Quarter = $1,000,000 out of this Depreciation is $350,000 Hence fixed overheads payment per Quarter =( $1,000,000 - $350,000 )=$650,000.

Depreciation will not consider as there is no cash impact on it.

Variable overhead per quarter = $6 per hr.

	Q1	Q2	Q3	Q4
Unit Sold	65000	70000	75000	90000
Total Labour hr (5 hr per unit)	$325,000	$350,000	$375,000	$450,000
Variable Cost per hr	$6	$6	$6	$6
Variable Costs	$1,950,000	$2,100,000	$2,250,000	$2,700,000

Fixed Selling and Administrative expenses paid per Quarter = Selling and Administrative expenses - Depreciation

=$250,000-$50,000 =$200,000

Variable Selling and Administrative expenses paid per Quarter=

	Q1	Q2	Q3	Q4
Unit Sold	65000	70000	75000	90000
Variable Selling and Administrative per unit	$10	$10	$10	$10
Variable Selling and Administrative	$650,000	$700,000	$750,000	$900,000

Computation of Cost of Sale

	Q1	Q2	Q3	Q4
Unit Sold	65000	70000	75000	90000
Opening inventory	0	$3,770,000	$4,350,000	$5,800,000
Direct Materials	$15,600,000	$16,800,000	$18,000,000	$21,600,000
Direct Labor	$3,250,000	$3,500,000	$3,750,000	$4,500,000
Manufacturing overheads	$18,850,000	$20,300,000	$21,750,000	$26,100,000
Manufacturing overheads per unit	$290	$290	$290	$290
Ending inventory in Units	13000	15000	20000	10000
Ending inventory in $	$3,770,000	$4,350,000	$5,800,000	$2,900,000
Cost of Sale	$15,080,000	$19,720,000	$20,300,000	$29,000,000

Answer 2

The Answers above are wrong.