Required information Problem 13-58 & 13-59 (Static) (LO 13-4, 5) [The following information applies to the questions displayed below.] The following information is available for Fairmount Industries from year 1 operations: Sales revenue (45,000 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits (losses) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $22,000 will be fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent. Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or administrative depreciation. Required: Prepare a budgeted income statement for year 2. Problem 13-58 (Static) Prepare Budgeted Financial Statements (LO 13-5) Fairmount Industries Budgeted Income Statement For Year 2 Sales revenue Manufacturing costs: Materials Variable cash costs Fixed cash costs Depreciation (fixed) Total manufacturing costs Marketing and administrative costs: Marketing (variable, cash) Administrative depreciation Administrative (fixed, cash) Marketing depreciation Total marketing and administrative costs Total costs Operating profit $ 228,000 S 228,000 $ 1,575,000 $ 240,000 545,000 327,000 160,000 15,000 171,000 41,000 162,000 15,000 $ 1,661,000 $ (86,000) 41,000 S 56,000 $ 284,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Required information
Problem 13-58 & 13-59 (Static) (LO 13-4, 5)
[The following information applies to the questions displayed below.]
The following information is available for Fairmount Industries from year 1 operations:
Sales revenue (45,000 units)
Manufacturing costs
Materials
Variable cash costs.
Fixed cash costs
Depreciation (fixed)
Marketing and administrative costs
Marketing (variable, cash)
Marketing depreciation
Administrative (fixed, cash)
Administrative depreciation
Total costs
Operating profits (losses)
All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $22,000 will be
fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to
specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a
per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will
increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent.
Required:
Prepare a budgeted income statement for year 2.
Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent.
Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or
administrative depreciation.
Fairmount Industries
Budgeted Income Statement
For Year 2
Problem 13-58 (Static) Prepare Budgeted Financial Statements (LO 13-5)
Sales revenue
Manufacturing costs:
Materials
Variable cash costs.
Fixed cash costs
Depreciation (fixed)
Total manufacturing costs
Marketing and administrative costs:
Marketing (variable, cash)
Administrative depreciation
Administrative (fixed, cash)
Marketing depreciation
Total marketing and administrative costs
Total costs
Operating profit
$
228,000
$ 228,000
$ 1,575,000
15,000
$ 240,000
545,000
327,000
160,000
41,000
171,000
41,000
162,000
15,000
$ 1,661,000
$ (86,000)
$
56,000
$ 284.000
Transcribed Image Text:! Required information Problem 13-58 & 13-59 (Static) (LO 13-4, 5) [The following information applies to the questions displayed below.] The following information is available for Fairmount Industries from year 1 operations: Sales revenue (45,000 units) Manufacturing costs Materials Variable cash costs. Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits (losses) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $22,000 will be fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent. Required: Prepare a budgeted income statement for year 2. Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent. Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or administrative depreciation. Fairmount Industries Budgeted Income Statement For Year 2 Problem 13-58 (Static) Prepare Budgeted Financial Statements (LO 13-5) Sales revenue Manufacturing costs: Materials Variable cash costs. Fixed cash costs Depreciation (fixed) Total manufacturing costs Marketing and administrative costs: Marketing (variable, cash) Administrative depreciation Administrative (fixed, cash) Marketing depreciation Total marketing and administrative costs Total costs Operating profit $ 228,000 $ 228,000 $ 1,575,000 15,000 $ 240,000 545,000 327,000 160,000 41,000 171,000 41,000 162,000 15,000 $ 1,661,000 $ (86,000) $ 56,000 $ 284.000
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