Question: Refer to the information in Problem 6-
Refer to the information in Problem 6-40. Assume the following: Animal Gear (AG) does not make any sales on credit. AG sells only to the public and accepts cash and credit cards; 90% of its sales are to customers using credit cards, for which AG gets the cash right away, less a 2% transaction fee. Purchases of materials are on account. AG pays for half the purchases in the period of the purchase and the other half in the following period. At the end of March, AG owes suppliers $8,000.
AG plans to replace a machine in April at a net cash cost of $13,000.
Labor, other manufacturing costs, and nonmanufacturing costs are paid in cash in the month incurred except of course depreciation, which is not a cash flow. depreciation is $25,000 of the manufacturing cost and $10,000 of the nonmanufacturing cost for April.
AG currently has a $2,000 loan at an annual interest rate of 12%. The interest is paid at the end of each month. If AG has more than $7,000 cash at the end of April it will pay back the loan. AG owes $5,000 in income taxes that need to be remitted in April. AG has cash of $5,900 on hand at the end of March.
Required:
1. Prepare a cash budget for April for Animal Gear.
2. Why do Animal Gear’s managers prepare a cash budget in addition to the revenue, expenses, and operating income budget?
From problem 40:
Animal Gear Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for the month of April is given in the following tables:
Input Prices
Direct materials Plastic……………………………………….………………..$ 5 per pound
Metal……………………………………………………..……………………………$ 4 per pound
Direct manufacturing labor…………. $10 per direct manufacturing labor-hour
Animal Gear accounts for direct materials using a FIFO cost-flow assumption.
Animal Gear uses a FIFO cost-flow assumption for finished-goods inventory.
Animal Gear uses an activity-based costing system and classifies overhead into three activity pools: Setup, Processing, and Inspection. Activity rates for these activities are $105 per setup-hour, $10 per machine-hour, and $15 per inspection-hour, respectively. Other information follows:
If necessary, round up to calculate number of batches.
Nonmanufacturing fixed costs for March equal $32,000, half of which are salaries. Salaries are expected to increase 5% in April. Other nonmanufacturing fixed costs will remain the same. The only variable nonmanufacturing cost is sales commission, equal to 1% of sales revenue.
Transcribed Image Text:
Input Quantities per Unit of Output Cat-allac Dog-eriffic Direct materials 6 pounds 1 pound Plastic 4 pounds 0.5 pounds Metal Direct manufacturing labor-hours Machine-hours (MH) 3 hours 5 hours 11 MH 19 MH Inventory Information, Direct Materials Plastic Metal Beginning inventory Target ending inventory Cost of beginning inventory 290 pounds 410 pounds $1,102 70 pounds 65 pounds $217 Sales and Inventory Information, Finished Goods Cat-allac Dog-eriffic Expected sales in units Selling price Target ending inventory in units Beginning inventory in units Beginning inventory in dollars 530 225 $ 205 $ 310 30 10 10 19 $1,000 $4,650 Cost-Driver Information Cat-allac Dog-eriffic Number of units per batch Setup time per batch Inspection time per batch 25 9 1.50 hours 1.75 hours 0.5 hour 0.7 hour
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