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					Task 1: Budget General Ledger
                                                       Budgeted
                                                       Amount in
Sales:                                                  Dollars
  4-1000 Sales - Retail                                   4,162,500             1,850,000 tickelopes at       2.25 each
  4-1020 Sales - Direct Marketing                           500,000               250,000 tickelopes at       2.00 each


Cost of Goods Manufactured:                                           DM DL Variable MOH      Fixed MOH
  5-1000 Foam Sheets                                      1,383,800
  5-1020 Address Card                                       242,000
  5-1040 Envelope                                           198,000
  5-1060 Insert Card                                         44,000
  5-1080 Plastic Bag                                         88,000
  5-2000 Indirect Materials                                  11,500
  5-5000 Wages - Marking/Cutting                             28,600
  5-5010 Wages - Cutting Machine                             37,400
  5-5030 Wages - Attach Foam                                 28,600
  5-5040 Wages - Fold Envelopes                              33,000
  5-5050 Wages - Glue Station                                83,600
  5-5060 Wages - Packaging                                   88,000
  5-7000 Rent - Manufacturing                                85,000
  5-7020 Utilities - Manufacturing                           70,000
  5-7040 Depreciation - Manufacturing Equipment              16,000
  5-7060 Maintenance - Manufacturing                         12,500
  5-8000 Manufacturing Manager Salary                        90,000
  5-8020 Payroll Taxes - Manufacturing                       33,000
  5-8030 Health Insurance - Manufacturing                    28,000
  5-9000 Meals & Entertainment - Manufacturing                1,200

                     Total Variable and Fixed Manufacturing Overhead Costs:               0               0


                                                          Period Costs


Warehouse Costs:                                                               Variable         Fixed
  6-1000 Depreciation - Equipment                             5,000
  6-1020 Supplies                                             1,750
  6-1040 Utilities                                            9,200
  6-1060 Rent                                                18,000
  6-2000 Salaries - Receiving/Shipping/Inventory            122,000
  6-2020 Payroll Taxes - Warehouse                           10,370
  6-2040 Health Insurance - Warehouse                         9,000

                                             Total Warehouse Costs:




                                                               T1
Task 1: Budget General Ledger




Administrative Costs:                                                    Variable     Fixed
  7-1010 Office Supplies/Postage                                2,500
  7-1020 ADP/Bank Charges                                       1,200
  7-1030 Bad Debt Expense                                      46,625
  7-1040 Internet/Web/ Data Hosting                             2,400
  7-1050 Computer Consulting                                    4,000
  7-1070 Legal and Professional                                 8,400
  7-2000 Meals and Entertainment                                3,600
  7-3010 Telephone/Cell Phones                                  2,200
  7-3020 Travel - Executives                                   12,000
  7-4000 Rent                                                  12,000
  7-4020 Utilities - Office                                     7,800
  7-4030 Deprecation and Amortization                           7,500
  7-4040 Maintenance - Office Equipment                         1,500
  7-4060 Cleaning/Janitorial Supplies                           3,600
  7-4080 Security                                               1,800
  7-4090 Trash/Document Shredding                               2,400
  7-5000 Salaries - Administrative                            375,000
  7-5010 Payroll Taxes - Administrative                        32,000
  7-5020 Health Insurance - Administrative                     14,000
  7-6000 Insurance - Property/Liability                        12,500

                                           Total Administrative Costs:




Selling Costs:                                                           Variable     Fixed
  8-1000 Commissions                                          233,125
  8-2000 Salaries - Sales                                     200,000
  8-2010 Payroll Taxes - Sales                                 36,816        19,816      17,000
  8-2020 Health Insurance                                       4,800
  8-2030 Meals and Entertainment                               20,000
  8-2050 Depreciation - Office Equipment                        2,500
  8-2060 Office Supplies - Sales                                3,000
  8-2070 Telephone/Cell Phones                                  7,800
  8-2080 Travel and Mileage                                    96,000


                                                  Total Selling Costs:




                                                                 T1
Task 1: Budget General Ledger




Marketing Costs:                                                    Variable   Fixed
  8-5000 Advertising                                      45,000
  8-5010 Postage - Marketing                               8,000
  8-5030 Supplies - Marketing                              2,500
  8-5050 Brochures/Catalogs                               24,000
  8-6000 Display Rack Costs                               20,000
  8-6020 Samples                                          32,000
  8-6050 Trade Shows                                      15,000


                                           Total Marketing Costs:




Product Development Costs:                                          Variable   Fixed
  8-8000 Salaries                                        125,000
  8-8010 Payroll Taxes                                    10,625
  8-8020 Health Insurance                                  4,800
  8-8040 Die Design Costs                                  2,750
  8-8050 Supplies                                          3,600
  8-8060 Customer Research                                 5,000

                                Total Product Development Costs:




Shipping Costs:                                                     Variable   Fixed
  9-0000 Shipping                                        140,000
  9-1000 Boxes/Shipping Materials                          8,000
                                            Total Shipping Costs:




Total Period Costs:


Total Company Costs (excluding Direct Costs):




                                                            T1
 100,000 Increase Inventory
2,200,000 Make Tickelopes




               T1
T1
T1
Task 2: Cost Sheet: Current Year for One Tickelope
Direct Materials:                                  Quantity              Cost Per:        Total Cost:
   Foam - 1st Color (8" x 8" square)               0.01389           $        28.25                  0.392
   Foam - 2nd Color (6" x 7" square)               0.00833           $        28.25                  0.235
   Address Card                                     1.0000           $         0.11                  0.110
   Envelope                                         1.0000           $         0.09                  0.090
   Insert Card                                      1.0000           $         0.02                  0.020
   Plastic Bag                                      1.0000           $         0.04                  0.040
      Total Direct Materials Cost:                                                    $               0.89
                                             Hours required to
Direct Labor:                                  make 1 unit     Cost per hour              Total Cost:
   Marking/Cutting Squares                         0.00133           $        12.00                  0.016
   Cutting Machine Operator                        0.00111           $        15.00                  0.017
   Attaching Foam Together                         0.00111           $        12.00                  0.013
   Folding Envelopes                               0.00167           $         9.00                  0.015
   Glue Station                                    0.00417           $         9.00                  0.038
   Packaging                                       0.00333           $        12.00                  0.040
      Total Direct Labor:                                    0.013                    $               0.14


                                               Rate per DLH          Total Direct
                                             (see computation        Labor Hours
Manufacturing Overhead Costs:                     below)               per Unit
   Variable ($ per hour x hours for 1)
   Fixed ($ per hour x hours for 1)
      Total Manufacturing Overhead Costs:


Total Cost to Manufacture 1 Tickelope:



Manufacturing Overhead Calculation:
 Total hours required to make 1 unit
x Total Budgeted Manufactured Units for the year (stated in Task 2)
= Total Budgeted Direct Labor Hours for the year


   Total Budgeted Variable Manufacturing Overhead (Task 1)
  Total Budgeted Direct Labor Hours for the year (from above)                         per direct labor hour


    Total Budgeted Fixed Manufacturing Overhead (Task 1)
  Total Budgeted Direct Labor Hours for the year (from above)                         per direct labor hour




                                                   T2
Task 3: Cost/Volume/Profit Planning


A. Show all the components of variable costs on a per unit basis.
Product costs per unit can be found on the cost sheet (Task 2). Calculate the following to get the total variable period cost
per unit:


 Total budgeted variable period costs (Task 1)                                          variable period cost per unit
                                                  =                   =
   Total estimated units to be sold (Task 1)


   Direct Material
   Direct Labor
   Variable Manufacturing Overhead
   Variable Period Costs (from above)
      Total Variable Cost per Unit


B. Compute the contribution margin for the tickelope assuming all products are sold to retailers.
   Retail sales price per unit
  - Total variable costs per unit
  =Contribution Margin per Unit


C. Compute the contribution margin percentage (ratio) for the tickelope sold to retailers.
          Contribution Margin per Unit
                                                  =                   =
              Sales Price per Unit




               Total Fixed Costs                                                        units
                                                  =                   =
          Contribution Margin per Unit


E. Compute the annual break-even point in sales dollars of tickelopes sold to retailers.
               Total Fixed Costs                                                        to breakeven
                                                  =                   =
           Contribution Margin Ratio


F. The owners desire to earn an annual operating income of $400,000. How many tickelopes must be sold to generate
this level of profitability?                                                                                                    400000
       Total Fixed Costs + Desired Profit                                               units
                                                  =                   =
          Contribution Margin per Unit


G. How many sales dollars must be generated to earn an annual operating income of $500,000?
       Total Fixed Costs + Desired Profit                                                                                       500000
                                                  =                   =
           Contribution Margin Ratio




                                                                     T3
Task 3: Cost/Volume/Profit Planning


H. Calculate the current margin of safety in units and in sales dollars (based on budget). Use the total sales dollars in the
budget general ledger.
                                                          Units             Sales $
                        Current Budgeted Sales
                              - Breakeven Sales
                              = Margin of Safety


I. Calculate operating leverage for the company based on a budget of 2,100,000 units sold to retailers.


 Contribution Margin per Unit
x Budgeted Sales in Units
= Total Contribution Margin
- All Fixed Costs
= Operating Income (Loss)


 Total Contribution Margin
÷ Operating Income (Loss)
= Operating Leverage Factor


J. If sales increase by 20%, what percentage is operating income expected to increase?                                          0.2


 Sales Increase
x Operating Leverage Factor
= Expected Increase in Income


K. Given sales increase by 20%, what is the expected operating income?
 Current operating Income/Loss (see I. above)
x Expected increase in income (see J. above)
= Expected change in operating income
+ Current operating income (see I above)
= Expected operating income (loss)




                                                                     T3
Task 3: Cost/Volume/Profit Planning




                                      T3
Task 4: Flexible Budget

The chief executive office has asked for projected operating income at various sales volumes. Using
the contribution margin income statement format, determine budgeted (projected) operating income at
retail sales volumes of 1,800,000; 2,000,000; and 2,200,000 tickelopes.
                                       $ Per Unit
                                      (round to 2
                                       decimals)
Sales (Task 1)
Less: Variable Costs
   Total Material (Task 2)
   Total Labor (Task 2)
   Variable MOH (Task 2)
   Variable Period Costs (Task 3)
Total Variable Costs
Contribution Margin
Less: Fixed Costs (Task 1)
   Manufacturing Overhead
   Warehouse
   Administrative
   Selling
   Marketing
   New Product Development
Total Fixed Costs
Operating Income (Loss)




                                                T4
Task 5: Short Term Decisions

A. The company is considering purchasing the envelope already folded. A local stationary
company has quoted the company of price of $0.12 per envelope, pre-folded in boxes of 500.
The production manager has estimated that approximately $4,000 of labor benefits will be
saved in addition to direct labor costs (treat benefits as a fixed cost.)


Determine the variable cost per unit to buy and fold the envelopes. Consider fixed costs that will
change if the envelopes are purchased already folded. Use estimated manufactured units.

How much will operating income change if the envelope is purchased already folded?


                                                                      Make              Buy
  Direct materials: Envelope
+ Direct Labor: Folding envelopes
 = Variable cost per unit
x Budgeted # of Units Manufactured
=Total relevant variable costs
- Fixed cost saved: labor benefits
= Total cost to make or buy


Change in operating income if envelopes are bought folded:


How much will it change the time required to manufacture a job of 500 tickelopes if the
envelopes are purchased pre-folded?

 Hours to fold one envelope
x Tickelopes per job
= Total hours saved per job
x Minutes per hour
= Time saved per job (in minutes) by purchasing pre-folded
B. The company has received an order for 150,000 tickelopes from a new direct marketing
customer. The customer is willing to pay $1.50 per tickelope and wants the product in 10
business days. All workers will have to work overtime to complete the job timely. All direct
labor will be paid a rate of one and a half times regular pay for all time worked on this order.
The foam is a special color and will have to be rush ordered from a new supplier at an
additional cost of 40%.

Calculate the contribution margin, considering all variable costs, related to the order. What will
be the change in operating income if the order is accepted?


Sales (per unit)
Less: Variable costs (per unit)
   Material:
      Foam
      Address card
      Envelope
      Insert card
      Plastic Bag
   Labor
   Variable Manufacturing Overhead
   Variable Period Cost per unit (Task 3)
- Total variable costs (per unit)
= Contribution Margin (per unit)
x Number of units
= Increase (decrease) in operating income if the order is accepted
C. The company is considering adding a new product line that will be marketed to children
graduating from pre-school. The product will be an invitation to graduation and will have the
school’s mascot in foam behind the address card. The invitation will be two thirds the size of
the current tickelope and will be sold to the student in packages of 25 for a price of $35.00.
Approximately three fourths as much foam will be used for each tickelope in the new product
line. The paper and plastic direct materials are estimated to cost approximately 70% of current
costs. Labor costs per tickelope are expected to be the same as for a larger tickelope as the
production process will be similar. The company expects to incur additional selling costs of
$0.07 for each tickelope. Additional fixed marketing and product development costs are
expected to be $50,000. The company expects to generate annual sales of approximately
400,000 individual tickelopes from the new product line. Current capacity is adequate to
produce the new product line.

What is the expected change to operating income if the new product line is added?

Sales (per unit)
Less: Variable costs (per unit)
   Material:
      Foam
      Address card
      Envelope
      Insert card
      Plastic Bag & Total Material
   Direct Labor
   Variable Manufacturing Overhead
   Variable Period (Task 3)
   Additional selling
- Total variable costs (per unit)

= Contribution Margin (per unit)
x Number of units
= Increase (decrease) in operating income if the product line is added
- Added fixed costs
= Increase (decrease) in operating income if the product line is added
D.1. The company is considering adding a scent to the happy birthday tickelope that smells like
chocolate cake and a sweet scent to the thank you card. The scent will come in liquid bottles
and will be applied manually at the glue station. The cost of the scent is estimated to be $0.02
per tickelope. Additional labor to apply the scent is expected to cost $0.002 per tickelope.
There will be no change to any other manufacturing processes. The company estimates that a
scented tickelope can be sold for an additional $0.05.

What will be the change in operating income if scent is added to the tickelope?


Additional revenues (per unit)
Less: Additional costs (per unit)
   Direct materials
   Direct labor and total added variable costs
= Additional Contribution Margin (per unit)
x Total units expected to be sold (Task 1)
= Increase (decrease) in operating income if scent is added




D.2. The sales manager who recommended scenting the product also wants to reduce the price
to $2.15 each. She expects sales to increase by 100,000 if the price is reduced. How would
this change the company’s operating income?


                                                                      Old             New
Sales (per unit)
Less: Variable Costs (per unit)
   Total variable costs (per unit) (Task 3)
   Additional variable costs (Task 5 - E.1.)
= Contribution Margin (per unit)
x Total units expected to be sold (Task 1)
= Total Contribution Margin


  Change in Contribution Margin and Operating Income
Task 6: Long Term Decisions

The company is considering the purchase of a custom made machine that will glue the address
card and the envelope to the foam. The cost of the machine is $50,000. The life of the
machine is expected to be 7 years and have a residual value of $5,000. Annual maintenance
on the machine is expected to cost $2,500. Training and installation costs are expected to be
$4,000. The machine is expected to increase utility costs by 5%. The machine is expected to
bend 0.5% of the tickelopes. The bent tickelopes cannot be sold and will be discarded. The
change in variable manufacturing overhead costs is expected to be immaterial. The machine is
capable of gluing 500 tickelopes per hour. The machine operator will be paid $12 per hour. The
company uses straight-line depreciation. Use budgeted units manufactured and budgeted
costs. The impact of income taxes is ignored. What is the net present value of purchasing the
machine given the shareholders require a 10% return. The net present value factor for 7 years
and 10% for $1 is .513 and for an ordinary annuity is 4.868

Scrap Computation

# of units manufactured                                                                2,200,000
x scrap rate (1/2 %)                                                                       0.005
= Total units scrapped                                                                   11,000
Materials and labor cost per unit

   Direct Materials

     Foam - 1st color                               $      0.392

     Foam - 2nd color                               $      0.235

     Address card                                   $      0.110

     Envelope                                       $      0.090   $       0.827
   Direct Labor

     Marking/Cutting                                $      0.016

     Cutting Machine                                $      0.017

     Attaching foam                                 $      0.013

     Folding envelopes                              $      0.015

     New machine operator (See Below)               $      0.024   $       0.085
   Material & Labor cost per unit                                                  $      0.912
Annual scrap cost (# of units scrapped x material & labor cost per unit)           $     10,032
New Machine Operator

 Number of units manufactured                       2,200,000

÷ Tickelopes manufactured per hour                        500

= Machine operator hours                                4,400

x Rate per hour                                $        12.00

= Annual direct labor cost: Machine Operator   $       52,800

÷ Number of units manufactured                      2,200,000
= Machine operator cost per tickelope          $        0.024



Current Budget Manufacturing Utilities Cost    $       70,000

  x 5%                                                    0.05

= Estimated increase in Utilities Cost              $3,500



Units Made                                         2,200,000

X Labor per unit to glue the envelope          $        0.038

= Glue Direct Labor Savings                        $83,600



Depreciation on new equipment
    Cost of the equipment                      $       50,000
  + Installation                               $        4,000
  = Total cost of equipment                    $       54,000
  - Residual value                             $       (5,000)
  = Depreciable cost                           $       49,000
  ÷ Useful life (in years)                                  7
  = Annual depreciation expense                $        7,000
A. What is the net present value of purchasing the machine given the shareholders require a 10% return.
              Cash Flow Description                     Years          Amount      PV Factor   Present Value

Purchase of machine                                      Now

Residual value of new machine                             7

Annual maintenance                                       1-7

Training and installation                                Now

Additional utilities                                     1-7

Annual scrap cost                                        1-7

Machine operator                                         1-7

Labor savings                                            1-7
                                         Net Present Value



B. Calculate the internal rate of return for the investment in the glue machine.

  Initial investment
÷ Net annual cash flows
= PV factor for an annuity
Internal rate of return (refer to PV tables )


C. Calculate the simple rate of return for the investment in the glue machine.

  Net annual cash inflows
- Depreciation on new equipment
= Incremental Net Income
÷ Initial investment

= Simple rate of return


D. Compute the payback period for the investment in the glue machine.
  Initial Investment
÷ Net annual cash flows
= Payback Period (in years)
t Value
Task 7: Activity Based Costing



Management believes that tickelopes sold to direct marketing customers are more profitable
than tickelopes sold to retail customers. Direct materials required for manufacturing direct
marketing tickelopes is about 80% of the materials for tickelopes sold to retailers. All other
manufacturing costs are the same. Management has assumed that less sales and
administrative support is required for sales to direct marketing customers. The perception of
less cost has led the company to price tickelopes to direct marketing customers at a lower price
than to retail customers.

The chief executive officer has requested the managerial accountant do an analysis to
determine the profitability of tickelopes sold to retailers and tickelopes sold to direct marketers.
The analysis is to include all indirect support costs.

Information Gathered by the Managerial Accountant:

            Cost Pools                      Cost                   Activity         Retailers          Direct Marketing


Warehouse                                 $175,320        # Tickelopes Sold            1,850,000           250,000
Fixed Administrative                      $506,400        # Tickelopes Sold            1,850,000           250,000
Bad Debt Expense                          $46,625         # Bad Debt Customers             79                  0
All Selling Costs                         $604,041        # Tickelopes Sold            1,850,000           250,000
Marketing Costs                           $146,500        # Customers                     3,500               14
Product Development                       $151,775        # New Products                    0                 14
Shipping                                  $148,000        # Orders Shipped               16,198               22
    Total                                $1,778,661


Cost Per Activity:                          Cost               Total Activity                          Cost Per Activity

Warehouse                                 $175,320               $175,320                                          $0.083
Fixed Administrative                      $506,400               $506,400                                          $0.241
Bad Debt Expense                          $46,625                 $46,625                                     $590.190
All Selling Costs                         $604,041               $604,041                                          $0.288
Marketing Costs                           $146,500               $146,500                                      $41.690
Product Development                       $151,775               $151,775                                  $10,841.071
Shipping                                  $148,000               $148,000                                          $9.125
    Total                                $1,778,661             $1,778,661
Allocate Costs to Each Product:    Retailers        Direct Marketing

Warehouse
Fixed Administrative
Bad Debt Expense
All Selling Costs                     $532,800                $72,000
Marketing Costs                       $145,915                   $584
Product Development                            $0            $151,775
Shipping                              $147,807                   $201
 Total Cost                           $826,522               $224,560

Divide by Total Units Sold

Support Cost Per Unit



Profitability by Product:          Retailers        Direct Marketing


 Sales Price per Unit

- Direct Materials Cost per Unit
- Direct Labor Cost per Unit

- Variable MOH Cost per Unit
- Fixed MOH Cost per Unit
- Support Costs per Unit


= Estimated Profit Per Unit
Exhibit 3: Actual General Ledger

                                                           Actual
                                                          Amount in
Sales:                                                     Dollars
    4-1000 Sales - Retail                                    4,374,740               1,944,329 tickelopes at       2.25 each
    4-1020 Sales - Direct Marketing                           296,000                  148,000 tickelopes at       2.00 each


Cost of Goods Manufactured:                                                DM DL Variable MOH      Fixed MOH
    5-1000 Foam Sheets                                       1,558,700     x
    5-1020 Address Card                                       180,400      x
    5-1040 Envelope                                           250,800      x
    5-1060 Insert Card                                          52,800     x
    5-1080 Plastic Bag                                        110,000      x
    5-2000 Indirect Materials                                   13,412                  13,412
    5-5000 Wages - Marking/Cutting                              32,873         x
    5-5010 Wages - Cutting Machine                              44,927         x
    5-5030 Wages - Attach Foam                                  29,562         x
    5-5040 Wages - Fold Envelopes                               31,249         x
    5-5050 Wages - Glue Station                                 88,421         x
    5-5060 Wages - Packaging                                    75,103         x
    5-7000 Rent - Manufacturing                                 85,000                                  85,000
    5-7020 Utilities - Manufacturing                            73,249                  73,249
    5-7040 Depreciation - Manufacturing Equipment               17,500                                  17,500
    5-7060 Maintenance - Manufacturing                           9,845                   9,845
    5-8000 Manufacturing Manager Salary                         87,500                                  87,500
    5-8020 Payroll Taxes - Manufacturing                        33,119                  33,119
    5-8030 Health Insurance - Manufacturing                     29,655                  29,655
    5-9000 Meals & Entertainment - Manufacturing                    694                                      694

                         Total Variable and Fixed Manufacturing Overhead Costs:        159,280         190,694


                                                            Period Costs


Warehouse Costs:                                                                    Variable         Fixed
    6-1000 Depreciation - Equipment                              5,900                                   5,900
    6-1020 Supplies                                                 986                                      986
    6-1040 Utilities                                             9,812                                   9,812
    6-1060 Rent                                                 18,000                                  18,000
    6-2000 Salaries - Receiving/Shipping/Inventory            124,562                                  124,562
    6-2020 Payroll Taxes - Warehouse                            10,588                                  10,588
    6-2040 Health Insurance - Warehouse                          9,264                                   9,264

                                               Total Warehouse Costs:                          0       179,112




                                                               Exhibit 3
Exhibit 3: Actual General Ledger




Administrative Costs:                                                       Variable     Fixed
    7-1010 Office Supplies/Postage                                1,976                      1,976
    7-1020 ADP/Bank Charges                                       1,412                      1,412
    7-1030 Bad Debt Expense                                      74,732         74,732
    7-1040 Internet/Web/ Data Hosting                             2,400                      2,400
    7-1050 Computer Consulting                                    6,500                      6,500
    7-1070 Legal and Professional                                 6,200                      6,200
    7-2000 Meals and Entertainment                                4,998                      4,998
    7-3010 Telephone/Cell Phones                                  2,435                      2,435
    7-3020 Travel - Executives                                    7,438                      7,438
    7-4000 Rent                                                  12,000                     12,000
    7-4020 Utilities - Office                                     9,439                      9,439
    7-4030 Deprecation and Amortization                           7,500                      7,500
    7-4040 Maintenance - Office Equipment                         1,187                      1,187
    7-4060 Cleaning/Janitorial Supplies                           3,850                      3,850
    7-4080 Security                                               1,965                      1,965
    7-4090 Trash/Document Shredding                               2,650                      2,650
    7-5000 Salaries - Administrative                            392,000                   392,000
    7-5010 Payroll Taxes - Administrative                        33,320                     33,320
    7-5020 Health Insurance - Administrative                     13,140                     13,140
    7-6000 Insurance - Property/Liability                        12,500                     12,500

                                             Total Administrative Costs:        74,732    522,910




Selling Costs:                                                              Variable     Fixed
    8-1000 Commissions                                          233,537        233,537
    8-2000 Salaries - Sales                                     220,000                   220,000
    8-2010 Payroll Taxes - Sales                                 38,551         19,851      18,700
    8-2020 Health Insurance                                       4,762                      4,762
    8-2030 Meals and Entertainment                               26,394                     26,394
    8-2050 Depreciation - Office Equipment                        2,500                      2,500
    8-2060 Office Supplies - Sales                                2,853                      2,853
    8-2070 Telephone/Cell Phones                                  8,349                      8,349
    8-2080 Travel and Mileage                                   103,460        103,460


                                                    Total Selling Costs:       356,848    283,558




                                                                Exhibit 3
Exhibit 3: Actual General Ledger




Marketing Costs:                                                              Variable           Fixed
    8-5000 Advertising                                         39,452                               39,452
    8-5010 Postage - Marketing                                  7,494                                7,494
    8-5030 Supplies - Marketing                                 3,297                                3,297
    8-5050 Brochures/Catalogs                                  22,465                               22,465
    8-6000 Display Rack Costs                                  21,560                               21,560
    8-6020 Samples                                             29,025                               29,025
    8-6050 Trade Shows                                         12,153                               12,153


                                                Total Marketing Costs:                   0         135,446




Product Development Costs:                                                    Variable           Fixed
    8-8000 Salaries                                           121,000                              121,000
    8-8010 Payroll Taxes                                       10,285                               10,285
    8-8020 Health Insurance                                     5,610                                5,610
    8-8040 Die Design Costs                                     2,210                                2,210
    8-8050 Supplies                                             4,290                                4,290
    8-8060 Customer Research                                    4,159                                4,159

                                   Total Product Development Costs:                      0         147,554




Shipping Costs:                                                               Variable           Fixed
    9-0000 Shipping                                           151,253            151,253
    9-1000 Boxes/Shipping Materials                             9,563              9,563
                                                Total Shipping Costs:            160,816                 0


Total Period Costs:                                                       $     592,396      $   1,268,580


Total Company Costs (excluding Direct Costs):                             $     751,676      $   1,459,274




                                                              Exhibit 3
Task 8: Calculate the Actual Cost of Goods Manufactured for the Year
 Beginning Direct Materials - Total (A-2)
+ Total Purchases of Direct Materials (Exhibit 1)
- Ending Direct Materials - Total (A-2)
= Total Direct Materials Used


+ Direct Labor (Exhibit 1)
   Marking/Cutting Foam
   Cutting Machine Operator
   Attaching the Foam Together
   Folding Envelopes
   Glue Station
   Packaging
      = Total Direct Labor Used


+ Manufacturing Overhead (Exhibit 1)
   Indirect Materials
   Rent - Manufacturing
   Utilities - Manufacturing
   Depreciation - Manufacturing Equipment
   Maintenance - Manufacturing
   Manufacturing Manager Salary
   Payroll Taxes - Manufacturing
   Health Insurance - Manufacturing
   Meals & Entertainment - Manufacturing
      = Total Manufacturing Overhead Costs Incurred


+ Beginning Work in Process (See Below)
- Ending Work in Process (See Below)
  = Cost of Goods Manufactured




                                          T8-CGM & IS
Task 8: Income Statement using Actual Amounts in Accordance with GAAP


Sales - Retail
Sales - Direct Marketing
   Total Sales
Less: Cost of Goods Sold (calculated below)
Gross Profit
Less: Operating Expenses (Exhibit 1)
   Warehouse
   Administrative
   Selling
   Marketing
   New Product Development
   Shipping
Operating Income (Loss)



Cost of Good Sold Calculation:
   Beginning Finished Goods (A-2)
  + Cost of Goods Manufactured (See Above)
 - Ending Finished Goods (A-2)
  = Cost of Goods Sold




                                       T8-CGM & IS
Task 8: Beginning and Ending Work in Process


Value the Beginning Work In Process:
Raw Materials Used:
   Foam - Both Colors                             0.627
Direct Labor Used:
   Marking & Cutting Squares                      0.016
Fixed Manufacturing Overhead per Unit (50%)       0.045
Variable Manufacturing Overhead per Unit (50%)    0.035
   Total Cost per Unit                            0.723
   x Units in the Job                             $500
= Cost of Beginning Work in Process               $362


Value the Ending Work In Process:
Raw Materials Used:
   Foam - Both Colors                             0.627
   Address Card                                   0.110
   Envelope                                       0.090
   Insert Card                                    0.020
Direct Labor Used:
   Marking & Cutting Squares                      0.016
   Cutting Machine Operator                       0.017
   Attaching Foam Together                        0.013
   Folding Envelopes                              0.015
   Glue Station                                   0.038
Fixed Manufacturing Overhead per Unit (50%)       0.045
Variable Manufacturing Overhead per Unit (50%)    0.035
   Total Cost per Unit                            1.026
   x Units in the Job                             $500
= Cost of Ending Work in Process                  $513




                                    T8-CGM & IS
Task 9: Recording Manufacturing Transactions for the Year


Make journal entries to record the cost of manufacturing the product. You will make
journal entries for the entire year using actual amounts from the general ledger
(Exhibit 1) and direct material inventory usage reports (Exhibit 3.) These entries are
generally made at the end of every month following the same procedures.


A. Purchase direct materials: this entry was actually made by accounting as the materials
were purchased and paid for:
                                                                Debit            Credit
Foam sheets
Address card
Envelope
Insert card
Plastic bag
   Accounts payable



B. Direct materials used in production: this entry is made by the managerial accountant
                                                                Debit          Credit
Work in process
   Foam sheets
   Address card
   Envelope
   Insert card
   Plastic bag




                                            T9
Task 9: Recording Manufacturing Transactions for the Year


C. Direct labor used to manufacture the product: this entry was actually made by
accounting to record direct labor worked using a report that provides time spent at each
work station.
                                                               Debit           Credit
Marking/Cutting                                                    32,873
Cutting machine                                                    44,927
Attaching Foam                                                     29,562
Fold envelopes                                                     31,249
Glue station                                                       88,421
Packaging                                                          75,103
  Salaries Payable                                                                302,135


D. Record direct labor as a product cost: this entry is made by the managerial
accountant.
                                                                Debit          Credit
Work in process
   Marking/Cutting
   Cutting machine
   Attaching Foam
   Fold envelopes
   Glue station
   Packaging




                                            T9
Task 9: Recording Manufacturing Transactions for the Year

The following information applies to part E and F: Manufacturing overhead expenses
have been incurred throughout the year. As they were incurred they were recorded to the
individual general ledger accounts. At year end, the managerial accountant must transfer
the actual manufacturing overhead amounts to the manufacturing overhead accounts.

E. Move all fixed manufacturing overhead accounts to the fixed manufacturing overhead
control account.
                                                              Debit          Credit
Fixed manufacturing overhead
   Rent- manufacturing
   Depreciation - manufacturing equipment
   Manufacturing manager salary
   Meals and Entertainment - manufacturing


F. Move all variable manufacturing overhead accounts to the fixed manufacturing
overhead control account.
                                                               Debit         Credit
Variable manufacturing overhead
   Indirect materials
   Utilities - manufacturing
   Maintenance - manufacturing
   Payroll taxes - manufacturing
   Health insurance - manufacturing




                                            T9
Task 9: Recording Manufacturing Transactions for the Year


G. Apply manufacturing overhead to the cost of the product. This is done using actual
direct labor hours worked and the predetermined manufacturing overhead rates. You will
use the labor report in Exhibit 3 as well as the overhead rate calculated on the cost sheet
in Task 2.


Apply fixed manufacturing overhead:
 Total actual direct labor hours worked (A-3)
x Predetermined fixed MOH rate per hour (Task 2)
      = Fixed overhead to apply


                                                                Debit           Credit
Work in process
   Fixed manufacturing overhead


Apply variable manufacturing overhead:
 Total actual direct labor hours worked
x Predetermined variable MOH rate per hour
       = Variable overhead to apply


                                                                Debit           Credit
Work in process
   Variable manufacturing overhead




                                            T9
Task 10: Determine Ov er or Under Applied Manufacturing Ov erhead


Put the actual dollar amount spent on the debit side. Put the applied amount on the
credit side. Refer to the journal entries you made in Task 9 (E, F, G) for the amounts.
Balance each "T" account.


                                                       Fixed Manufacturing Overhead




  Fill in the "T" accounts for fixed and variable
              manufacturing overhead
                                                     Variable Manufacturing Overhead




 In the space provided below, record the journal entries to get the overhead accounts
to equal 0. The work in process account will be used as the off-setting debit or credit.
                                                           Debit              Credit
Work In Process
Fixed Manufacturing Overhead


Work In Process
Variable Manufacturing Overhead


Note: The above journal entries would be made at the end of each month, however,
you are doing it for the entire year at the end of the year.




                                                                                           T10
T10
T10
Task 11: Record Completion of Work in Process and Sales


The work in process inventory account accumulates the cost of all jobs. When manufacturing is
completed, these costs must be transferred to the finished goods inventory account. When finished
goods are sold, the costs are transferred to the cost of goods sold account. You calculated the value of
beginning and ending work in process in Task 8. These must be added to the account below as the
beginning and ending balances. You made journal entries in Tasks 9 and 10 that added the following
amounts to the work in process account:


                                                                                Work in process
Beginning balance (Task 8)
Material used (Task 9B)
Labor paid (Task 9D)
Manufacturing overhead estimated:
   Fixed (Task 9G)
   Variable (Task 9G)
Overhead adjustment to actual:(debit or credit)
   Fixed (Task 10)
   Variable (Task 10)
Subtotal
Transferred to Finished Goods (Subtotal less ending work in process)
Ending work in process (Task 8)

Make the journal entry to move the costs of completed products to finished goods inventory. Record the
credit amount that will give you a balance equal to the amount calculated in Task 8 for ending work in
process. This is called the cost of goods manufactured and should equal the amount you computed in
Task 8.
                                                                              Debit           Credit
Finished goods
   Work in process




                                                  T11
Task 11: Record Completion of Work in Process and Sales

The cost of goods sold is equal to the cost per unit x units sold. The actual cost per unit is computed in
Exhibit 2.



     Actual Cost Per Unit (See Exhibit 2)
X   Actual Units Sold_________
=   Cost of Goods Sold



Make the journal entry to record cost of goods sold and actual sales.
The sales amount is stated on the actual general ledger (Exhibit 1.)
This journal entry would normally be made at the end of each month.
You will do one entry in total for the year.
                                                                               Debit           Credit
Cost of goods sold
    Finished goods


Accounts receivable
    Sales - retailers
    Sales - direct marketing




                                                   T11
Task 12: Variance Analysis (round all totals to the nearest dollar)

                              Direct Material       Direct Labor

Total Budgeted (Task 1)

Total Actual (Exhibit 1)

Difference (Variance)


Compute the variances below to explain the difference is estimated and actual costs.

DIRECT MATERIAL VARIANCES:
FOAM:
  Actual           Actual       Actual Qty           Standard         Actual Units       Standard Qty
 Quantity          Price        Purchased              Price          Manufactured        for one unit       Standard
              X                                 X                                    X
                                                                                                         X     Price




                        Price Variance

                                 Actual Qty          Standard
                                   Used         X      Price



                                                                         0


                                                                Quantity Variance
ADDRESS CARD:
  Actual      Actual      Actual Qty       Standard        Actual Units       Standard Qty
 Quantity X   Price       Purchased          Price         Manufactured        for one unit       Standard
                                       X                                  X
                                                                                              X     Price




                  Price Variance

                          Actual Qty       Standard
                            Used       X     Price




                                                      Quantity Variance


ENVELOPE:
  Actual       Actual     Actual Qty       Standard        Actual Units       Standard Qty
 Quantity X    Price      Purchased          Price         Manufactured        for one unit       Standard
                                       X                                  X
                                                                                              X     Price




                  Price Variance

                          Actual Qty       Standard
                            Used       X     Price




                                                      Quantity Variance
Insert Card:
   Actual      Actual     Actual Qty       Standard        Actual Units       Standard Qty
  Quantity X   Price      Purchased          Price         Manufactured        for one unit       Standard
                                       X                                  X
                                                                                              X     Price




                  Price Variance

                          Actual Qty       Standard
                            Used       X     Price




                                                      Quantity Variance



PLASTIC BAG:
  Actual       Actual     Actual Qty       Standard        Actual Units       Standard Qty
 Quantity X    Price      Purchased          Price         Manufactured        for one unit       Standard
                                       X                                  X
                                                                                              X     Price




                  Price Variance

                          Actual Qty       Standard
                            Used       X     Price




                                                      Quantity Variance
DIRECT LABOR VARIANCES
MARKING/CUTTING FOAM
                                                             Actual Units       Standard Hrs
                   Actual                         Standard   Manufactured        for one unit       Standard
Actual Hours X                 Actual Hours X                               X
                    Rate                            Rate                                        X     Rate




               Rate Variance                                    Efficiency Variance

CUTTING MACHINE:
                                                             Actual Units       Standard Hrs
                   Actual                         Standard   Manufactured        for one unit       Standard
Actual Hours                   Actual Hours                                 X
               X    Rate                      X     Rate                                        X     Rate




               Rate Variance                                    Efficiency Variance

ATTACH FOAM:
                                                             Actual Units       Standard Hrs
                   Actual                         Standard   Manufactured        for one unit       Standard
Actual Hours                   Actual Hours                                 X
               X    Rate                      X     Rate                                        X     Rate




               Rate Variance                                    Efficiency Variance

FOLD ENVELOPES:
                                                             Actual Units       Standard Hrs
                   Actual                         Standard   Manufactured        for one unit       Standard
Actual Hours                   Actual Hours                                 X
               X    Rate                      X     Rate                                        X     Rate




               Rate Variance                                    Efficiency Variance
GLUE STATION:
                                                               Actual Units       Standard Hrs
                     Actual                         Standard   Manufactured        for one unit       Standard
Actual Hours                     Actual Hours                                 X
               X      Rate                      X     Rate                                        X     Rate




                                                                         Favorable
                Rate Variance                                     Efficiency Variance


PACKAGING:
                                                               Actual Units       Standard Hrs
                     Actual                         Standard   Manufactured        for one unit       Standard
Actual Hours                     Actual Hours                                 X
               X      Rate                      X     Rate                                        X     Rate




                Rate Variance                                     Efficiency Variance


VARIABLE MANUFACTURING OVERHEAD:
Variable Manufacturing Overhead is applied based on direct labor hours
                                                               Actual Units       Standard Hrs
                                                    Standard   Manufactured        for one unit       Standard
Actual Hours       Actual Rate   Actual Hours                                 X
               X                                X     Rate                                        X     Rate




            Spending Variance                                     Efficiency Variance


FIXED MANUFACTURING OVERHEAD:
                                                               Actual Units       Standard Hrs
                                                               Manufactured        for one unit
                                                                              X
       Actual Cost                     Budgeted Cost                                              x




               Budget Variance                                     Volume Variance
Exhibit 2: Variable Cost and Absorption Cost Income Statements


Compute an actual cost per unit for the following costs (round to four decimal places):
Reference Exhibit 1, Inventory Report A-2.


                                     Total actual materials dollars used            $    2,070,802      $ 0.9729 per unit
          Materials:
                                     Total units actually manufactured                   2,128,563


                                         Total actual labor dollars                 $      302,135      $ 0.1419 per unit
           Labor:
                                     Total units actually manufactured                   2,128,563


  Variable Manufacturing             Total actual variable MOH dollars              $      159,280      $ 0.0748 per unit
        Overhead:                    Total units actually manufactured                   2,128,563


    Fixed Manufacturing                Total actual fixed MOH dollars               $      190,694      $ 0.0896 per unit
         Overhead:                   Total units actually manufactured                   2,128,563
                                                                                                       TOTAL        $1.2792

Reconciliation of the difference in actual Operating Income reported on the variable cost income statement and
the absorption cost income statement.


       Actual operating loss on the variable cost income statement (Task 13):
     Actual operating loss on the absorption cost income statement (Task 14):
                                               Difference in the two statements:


Reconciliation:
 Total actual units manufactured during the period (A-2)
- Total actual units sold during the period (A-2)
= The change in units in inventory
x Actual fixed overhead rate per unit (See computations above)
= The difference in operating income
                                                                        Small difference due to rounding in FOH cost per unit




                                                         INFO 13&14
Task 13: Variable Cost (Contribution Margin) Income Statement for the Year Using
ACTUAL Amounts.


                                           Units Sold      $ Per Unit    Total Amount
Sales - Retail
Sales - Direct Marketing
   Total Sales
Less: Variable Costs:
   Material:
   Labor:
   Variable Manufacturing Overhead:
   Variable Period Costs
   Total Variable Costs
      = Contribution Margin
Less: Fixed Costs
   Manufacturing Overhead
   Warehouse
   Administrative
   Selling
   Marketing
   New Product Development


     = Operating Income (Loss)
Task 14: Absorption Cost Income Statement for the Year Using ACTUAL Amounts.


                                          Units Sold       $ Per Unit     Total Amount
Sales - Retail
Sales - Direct Marketing
   Total Sales                                      -
Cost of Goods Sold:
   Material:
   Labor:
   Variable Manufacturing Overhead:
   Fixed Manufacturing Overhead:
   - Total Cost of Goods Sold
     = Gross Profit
Less: Operating (Period) Costs
   Warehouse
   Administrative
   Selling
   Marketing
   New Product Development
   Shipping


     = Operating Income (Loss)




                                          T 14
Task 15: Comprehensive Budget for January, February, and March of Next Year:
                                                                                                        Additional computations
                                                                                                      necessary for completing the
Prepare a Sales Budget in Dollars:                                                                              budget
                                                         January           February           March       April          May
 Unit Sales to Retailers                                    90,000               110,000
x Retail Sales Price                                 $        2.25     $             2.25
= Total Sales Dollars: Retailers                          $202,500           $247,500


 Unit Sales to Direct Marketing                             25,000                    -
x Direct Marketing Sales Price                       $        2.00     $             2.00
= Total Sales Dollars: Direct Marketing              $      50,000     $                  -


 = Total Sales Dollars for the Company               $     252,500     $         247,500


Prepare a Collections Budget:
                                                         January           February           March    Collection Percentages
From November Sales                                  $      46,193                                        Sale month:
From December Sales                                  $      70,563     $          25,250              1st month after:
From January Sales                                   $      25,250     $         164,125              2nd month after:
From February Sales                                                    $          24,750
From March Sales
   Total Collected                                   $     142,006     $         214,125

                                                                                                        Additional computations
                                                                                                      necessary for completing the
Prepare a Production Budget in Units:                                                                           budget
                                                         January           February           March       April          May
 Total unit sales                                          115,000               110,000
+ Ending Inventory                                         220,000               310,000
- Beginning Inventory                                     (155,621)              (220,000)
= Units to Produce                                         179,379               200,000


                                                                                                        Additional computations
                                                                                                      necessary for completing the
Prepare a Purchases Budget for Sheets of Foam:                                                                  budget
                                                         January           February           March       April
 Units to produce                                          179,379               200,000
x Foam sheets for each                                      0.0240                0.0240
= Foam sheets required for production                        4,305                  4,800                         -
+ Ending Inventory                                          24,000                19,800
- Beginning Inventory                                      (14,529)               (24,000)
= Sheets of foam to purchase                                13,776                   600
x Cost per sheet                                     $      31.790     $          31.790
= $ to be spent for foam                             $     437,939     $          19,074


                                                                                                        Additional computations
                                                                                                      necessary for completing the
Prepare a Purchases Budget for Paper and Plastics:                                                              budget
                                                         January           February           March       April
 Units to produce                                          179,379               200,000
x Required for each Tickelope                                      1                      1
= Total of each required for production                    179,379               200,000
+ Ending Inventory                                         800,000               660,000
- Beginning Inventory                                     (307,955)              (800,000)
= Quantity of Paper/Plastic to purchase                    671,424                60,000




                                                                           T15
x Total cost for all four paper/plastic items needed
for one unit                                               $       0.270    $            0.270
= $ Total to be spent for 1 product for paper/plastic      $     181,284    $          16,200
+ $ to be spent for foam                                   $     437,939    $          19,074
= Total to be spent on raw materials                       $     619,223    $          35,274


Prepare a Disbursements Budget for Raw Materials Purchases:
                                                               January          February          March      Payment Percentages
From December Purchases                                    $      83,966                                  Purchase month:
From January Purchases                                     $     123,845    $         495,378              1st month after:
From February Purchases                                                     $            7,055
From March Purchases
  Total to Pay                                             $     207,811    $         502,433


Prepare a Direct Labor Budget:
                                                               January          February          March
 Units to produce                                                179,379              200,000
x hours required for one                                            0.013                0.013
= Total hours required                                             2,332                 2,600
x Weighted average per hour                                $       12.00    $            12.00
= Budgeted labor cost                                      $      27,984    $          31,200
Total hours/160 hours = number of employees required                  15                   16



Prepare a Manufacturing Overhead Budget:
                                                               January          February          March
 Units to produce                                                179,379              200,000
x Variable $ MOH per unit                                  $        0.07    $             0.07
= Total variable MOH                                       $      12,557    $          14,000
+ Fixed MOH (Total /12 months)                             $      15,891    $          15,891
- Depreciation expense (Manufacturing) - total/12 months   $      (1,458) $             (1,458)
= Total MOH to pay                                         $      26,990    $          28,433



Prepare a Cash Budget:
                                                               January          February          March
 Beginning cash balance (Exhibit 5)                        $      22,146    $          31,677
+Customer Collections                                            142,006              214,125
- Payments for inventory                                        (207,811)             (502,433)
- Payments for labor                                             (27,984)              (31,200)
- Payments for MOH                                               (26,990)              (28,433)
- Payments for fixed period expenses less depreciation
(total/12)                                                      (104,390)             (104,390)
- Payments for variable period expenses (# sold x $cost
per unit from Task 3)                                            (29,900)              (28,600)
     = Projected cash balance                                   (232,923)             (461,633)
+Borrowings from bank                                            270,000              490,000
- Interest expense paid monthly (see Exhibit 4)                   (5,400)               (8,667)
     = Ending cash balance                                 $      31,677    $          32,079




                                                                                T15
Exhibit 3 Report A-1: Inventory on Hand - December 31

                                       Quantity on      Average Cost
 Inventory #        Description          Hand               Per:     Total on Hand
F1-001         Foam - white                 3,389.10    $     28.340   $   96,047.09
F1-002         Foam - yellow                3,713.12    $     28.340   $ 105,229.82
F1-003         Foam - brown                 2,905.50    $     28.340   $   82,341.87
F1-004         Foam - green                 2,634.33    $     28.340   $   74,656.91
F1-005         Foam - purple                   612.00   $     28.340   $   17,344.08
F1-006         Foam - black                    440.75   $     28.340   $   12,490.86
F1-007         Foam - blue                     521.30   $     28.340   $   14,773.64
F1-008         Foam - red                     312.86    $     28.340   $   8,866.45
 Foam Total                                14,528.96                   $ 411,750.72


A1-001         Address card                  150,770    $      0.082   $   12,363.14
A1-002       Address card                    117,924    $      0.082   $    9,669.77
 Address Total                                                         $   22,032.91


E1-001         Envelope                      180,033    $      0.114   $   20,523.76


C1-001         Insert Card                   230,111    $      0.024   $    5,522.66


B1-001         Plastic Bag                   552,980    $      0.050   $   27,649.00


  Total Direct Materials                                               $ 487,479.05


TC-100         Happy Birthday                  80,482   $    1.41190   $ 113,632.54
TC-200         Thank-you                       60,513   $    1.41190   $   85,438.30
  Total Finished Goods                                                 $ 199,070.84




                                   Exhibit 3 A-1
Exhibit 3 Report A-2:    Inventory Changes in Quantity and Dollars


Inventory Changes in Quantity:


                                      Quantity
Direct Materials:                    Purchased      Quantity Used


Foam - Sheets                             55,000               51,700
Address Card                            2,200,000            2,254,597
Envelope                                2,200,000            2,221,256
Insert Card                             2,200,000            2,299,237
Plastic Bag                             2,200,000            2,246,835


                                   Quantity
Finished Goods:                  Manufactured       Quantity Sold
Retail                                  1,980,563            1,944,329
Direct Marketing                         148,000              148,000
Total                                   2,128,563            2,092,329



Inventory Changes in Dollars:
                                                         Dollars
                                     January 1          Purchased        Dollars Used    December 31
Foam - sheets                    $       318,229    $        1,558,700   $   1,465,178   $   411,751
Address Card                     $        26,510    $         180,400    $    184,877    $    22,033
Envelope                         $        22,947    $         250,800    $    253,223    $    20,524
Insert Card                      $         7,905    $          52,800    $     55,182    $     5,523
Plastic Bag                      $        29,991    $         110,000    $    112,342    $    27,649

Total Direct Materials           $       405,582    $        2,152,700   $   2,070,802   $   487,480


Finished Goods                   $       152,818    $        2,722,760   $   2,676,507   $   199,071




                                             Exhibit 3 A-2
Exhibit 3 Report A-3: Year to Date (YTD) Cost per Unit for Material and Labor:
As of December 31


                                         YTD Dollars       YTD Quantity Average Cost
Direct Materials:                        Purchased          Purchased       Per:


Foam - Sheets                           $    1,558,700          55,000           $28.340
Address Card                            $       180,400       2,200,000           $0.082
Envelope                                $       250,800       2,200,000           $0.114
Insert Card                             $        52,800       2,200,000           $0.024
Plastic Bag                             $       110,000       2,200,000           $0.050
  Total Direct Materials                $    2,152,700


                                                            YTD Actual
                                         YTD Actual $      Labor Hours    Ave. Cost Per
Direct Labor:                               Paid             Worked           Hour
Marking/Cutting Foam                             $32,873         2,922            $11.25
Cutting Machine Operator                         $44,927         2,582            $17.40
Attaching Foam Together                          $29,562         2,384            $12.40
Folding Envelopes                                $31,249         3,205             $9.75
Glue Station                                     $88,421         8,421            $10.50
Packaging                                        $75,103         5,831            $12.88
   Total Direct Labor                   $       302,135         25,345            $11.92




                                      Exhibit 3 A-3
Exhibit 4: Budget Information for Next Year


                                                                                 Direct
                                                                                Marketing
                                                             Retail Sales        Sales
January                                                                90,000       25,000
February                                                           110,000
March                                                              130,000          25,000
April                                                              160,000
May                                                                140,000          25,000
June                                                               140,000
July                                                               150,000          25,000
August                                                             150,000          50,000
September                                                          180,000          50,000
October                                                            225,000
November                                                           225,000          50,000
December                                                           200,000
   Total                                                         1,900,000         250,000

Estimated total units to be manufactured next year               2,150,000

Estimated foam sheets for 1 Tickelope                                   0.024
Estimated cost for 1 sheet of foam                          $           31.79
Estimated total cost for a 4 paper products                 $            0.27
Estimated total direct labor hours for 1 Tickelope                      0.013
Estimated weighted average cost per direct labor hour       $           12.00
Estimated variable manufacturing overhead per unit          $            0.07 No change expected
Estimated fixed manufacturing overhead                      $      190,694 No change expected
Estimated fixed period costs                                $    1,268,580 No change expected
Estimated variable period cost per unit sold                $            0.26 No change expected


Interest is paid at the end of the month at an annual interest rate of 8% on all notes
payable. Notes payable includes amounts owed to the bank and to shareholders.
Interest is calculated including amounts borrowed this month. See the balance sheet
in Exhibit 5 for total notes payable at the end of the current year.




                                               Exhibit 4
Exhibit 5
                                        Tickelope, Inc.
                                       Balance Sheets
                               as of December 31, Current Year

                                                      Current Year         Prior Year
Assets:
Cash                                                  $     22,146     $        39,028
Accounts Receivable, net                                   142,006            279,160
Inventory                                                  687,063            409,153
Prepaid Expenses                                              6,392              5,872
   Total Current Assets                                    857,607            733,213


Property, Plant and Equipment:
   Manufacturing Equipment                                 194,396            194,396
   Office Equipment                                         13,462              11,067
   Furniture & Fixtures                                     47,620              43,966
   Computer Equipment & Software                            39,417              39,417
   Less: Accumulated Depreciation                          (135,089)          (102,449)
      Net Property, Plant and Equipment                    159,806            186,397
Intangible Assets:
   Patent, net                                              10,740              11,447
Total Assets                                          $   1,028,153    $      931,057


Liabilities:
Accounts Payable                                            83,966              95,115
Salaries & Wages Payable                                    28,165              37,953
Accrued Liabilities                                         68,777              24,001
   Total Current Liabilities                               180,908            157,069
L/T Notes Payable - Shareholders                           300,000            300,000
L/T Notes Payable - Bank Line of Credit                    240,000            300,000
  Total Liabilities                                       1,281,501           757,069
Shareholder's Equity:
Common Stock, 1,000 shares, $1 par                            1,000              1,000
Additional Paid in Capital                                 999,000            999,000
Retained Earnings (Deficit)                                (692,755)          (826,012)
   Total Shareholder's Equity                              307,245            173,988
Total Liabilities and Shareholder's Equity            $   1,028,153    $      931,057


                                                                 -


                                          Exhibit 5

				
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posted:1/20/2012
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Description: Study Case Template document sample