Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 7, Problem 48P
Condensed monthly income data for Thurber Book Stores are presented in the following table for November 20x1. (Ignore income taxes.)
Additional Information:
- Management estimates that closing the downtown store would result in a 10 percent decrease in mall store sales, while closing the mall store would not affect downtown store sales.
- One-fourth of each store’s fixed expenses would continue through December 31, 20x2, if either store were closed.
- The operating results for November 20x1 are representative of all months.
Required:
- 1. Calculate the increase or decrease in Thurber’s monthly operating income during 20x2 if the downtown store is closed.
- 2. The management of Thurber Book Stores is considering a promotional campaign at the down town store that would not affect the mall store. Annual promotional expenses at the downtown store would be increased by $60,000 in order to increase downtown store sales by 10 percent. What would be the effect of this promotional campaign on the company’s monthly operating income during 20x2?
- 3. One-half of the downtown store’s dollar sales are from items sold at their variable cost to attract customers to the store. Thurber’s management is considering the deletion of these item’s, a move that would reduce the downtown store’s direct fixed expenses by 15 percent and result in the loss of 20 percent of the remaining downtown store’s sales volume. This change would not affect the mall store. What would be the effect on Thurber’s monthly operating income if the items sold at their variable cost are eliminated?
- 4. Build a spreadsheet: Construct an Excel spreadsheet to solve all of the preceding requirements. Show how the solution will change if the following information changes: the downtown store’s sales amounted to $126,000 and its variable expenses were $86,000.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Neat Logos buys logo-imprinted merchandise and then sells it to university bookstores. Sales are expected to be
$2,009,000 in September, $2,250,000 in October, $2,378,000 in November, and $2,560,000 in December. Neat Logos sets its prices to earn an average 30% gross profit on sales revenue. The company does not want inventory to fall below $440,000 plus 10% of the next month's cost of goods sold.
Prepare a cost of goods sold, inventory, and purchases budget for the months of October and November.
1. If last year's sales were $906,050 and a store was planning an increase in sales of 3.75% and a markdown percent of 18.25%, what is the planned markdown in dollars? (Present your answer rounded to the dollar with a dollar sign and comma separator (i.e. $109,455).)
2. Using the following data, calculate the planned April purchases at cost.
(Present your answer rounded to the dollar with a dollar sign and comma separator (i.e. $109,455).)
Sales
$220,000
BOM Stock for April
$380,000
BOM Stock for May
$240,000
Markup
51%
Markdowns
2.3%
College Logos buys logo-imprinted merchandise and then sells it to university bookstores. Sales are expected to be
$2,003,000 in September, $2,230,000 in October, $2,376,000 in November, and $2,520,000 in December. College
Logos sets its prices to earn an average 30% gross profit on sales revenue. The company does not want inventory to
fall below $435,000 plus 15% of the next month's cost of goods sold.
Prepare a cost of goods sold, inventory, and purchases budget for the months of October and November.
College Logos
Cost of Goods Sold, Inventory, and Purchases Budget
For the Months of October and November
October
Cost of goods sold
Plus: Desired ending
inventory
Total inventory required
Less: Beginning inventory
Purchases
November
Chapter 7 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 7 - Prob. 1RQCh. 7 - What is the meaning of the term unit contribution...Ch. 7 - What information is conveyed by a...Ch. 7 - What does the term safety margin mean?Ch. 7 - Prob. 5RQCh. 7 - Delmarva Oyster Company has been able to decrease...Ch. 7 - In a strategy meeting, a manufacturing companys...Ch. 7 - What will happen to a companys break-even point if...Ch. 7 - Prob. 9RQCh. 7 - How can a profit-volume graph be used to predict a...
Ch. 7 - List the most important assumptions of...Ch. 7 - Why do many operating managers prefer a...Ch. 7 - Prob. 13RQCh. 7 - East Company manufactures VCRs using a completely...Ch. 7 - When sales volume increases, which company will...Ch. 7 - What does the term sales mix mean? How is a...Ch. 7 - A car rental agency rents subcompact, compact, and...Ch. 7 - How can a hotels management use cost-volume-profit...Ch. 7 - How could cost-volume-profit analysis be used in...Ch. 7 - Prob. 20RQCh. 7 - Prob. 21RQCh. 7 - Explain briefly how activity-based costing (ABC)...Ch. 7 - Fill in the missing data for each of the following...Ch. 7 - Prob. 24ECh. 7 - Rosario Company, which is located in Buenos Aires,...Ch. 7 - The Houston Armadillos, a minor-league baseball...Ch. 7 - Prob. 27ECh. 7 - Europa Publications, Inc. specializes in reference...Ch. 7 - Tims Bicycle Shop sells 21-speed bicycles. For...Ch. 7 - A contribution income statement for the Nantucket...Ch. 7 - Refer to the income statement given in the...Ch. 7 - Hydro Systems Engineering Associates, Inc....Ch. 7 - Disk City, Inc. is a retailer for digital video...Ch. 7 - CollegePak Company produced and sold 60,000...Ch. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Consolidated Industries is studying the addition...Ch. 7 - Serendipity Sound, Inc. manufactures and sells...Ch. 7 - Prob. 41PCh. 7 - The European Division of Worldwide Reference...Ch. 7 - Prob. 43PCh. 7 - Celestial Products, Inc. has decided to introduce...Ch. 7 - Prob. 45PCh. 7 - Jupiter Game Company manufactures pocket...Ch. 7 - Prob. 47PCh. 7 - Condensed monthly income data for Thurber Book...Ch. 7 - Cincinnati Tool Company (CTC) manufactures a line...Ch. 7 - Ohio Limestone Company produces thin limestone...Ch. 7 - Prob. 51PCh. 7 - Colorado Telecom, Inc. manufactures...Ch. 7 - Prob. 53CCh. 7 - Prob. 54CCh. 7 - Niagra Falls Sporting Goods Company, a wholesale...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- a. Calculate the average aggregate inventory value.b. Calculate the inventory turnover.c. The grocery store operates 52 weeks per year. Calculate the weeks of supply.d. The weekly average inventory listed above cannot change much since the grocery store is limited in storage capacity, and can therefore assumed to remain constant over time. The store has calculated that having less than 3 weeks of supply will create problems keeping stock available for clients. What annual cost of goods sold will bring about this condition (3 weeks of supply)?e. The grocery store is increasingly popular and management has calculated that, on average, the cost of goods sold increase by $5 million per year, reflecting better sales. How many years will it take for the grocery store to require expansion?arrow_forwardPoleski Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year: The selling price of Poleskis single product is 16. In recent years, profits have fallen and Poleskis management is now considering a number of alternatives. Poleski wants to have a net income next year of 250,000, but expects to sell only 120,000 units unless some changes are made. The president of Poleski has asked you to calculate the companys projected net income (assuming 120,000 units are sold) and the sales needed to achieve the companys net income objective for next year. Also, compute Poleskis contribution margin per unit, contribution margin ratio, and break-even point for next year. The worksheet CVP has been provided to assist you. Note that the data from the problem have already been entered into the Data Section of the worksheet.arrow_forwardSuppose the company has to revise its estimates because of a downturn in the economy. Unit sales for August, September, and October will be half (50%) of the original estimates. Revise the estimates in cells 1311 through 1313. After this is done, check your forecasted balance sheet. It should still balance! What effect will this new state of affairs have on net income and borrowing? Explain why these items changed.arrow_forward
- Ranger Industries has provided the following information at June 30: Other information: Average selling price, 196 Average purchase price per unit, 110 Desired ending inventory, 40% of next months unit sales Collections from customers: In month of sale20% In month after sale50% Two months after sale30% Projected cash payments: Inventory purchases are paid for in the month following acquisition. Variable cash expenses, other than inventory, are equal to 25% of each months sales and are paid in the month of sale. Fixed cash expenses are 40,000 per month and are paid in the month incurred. Depreciation on equipment is 2,000 per month. REQUIREMENT You have been asked to prepare a master budget for the upcoming quarter (July, August, and September). The components of this budget are a monthly sales budget, a monthly purchases budget, a monthly cash budget, a forecasted income statement for the quarter, and a forecasted September 30 balance sheet. The worksheet MASTER has been provided to assist you. Ranger Industries desires to maintain a minimum cash balance of 8,000 at the end of each month. If this goal cannot be met, the company borrows the exact amount needed to reach its goal. If the company has a cash balance greater than 8,000 and also has loans payable outstanding, the amount in excess of 8,000 is paid to the bank. Annual interest of 18% is paid on a monthly basis on the outstanding balance.arrow_forwardBeech's managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $280,000, $300,000, $290,000, and $310,000, respectively. 2. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. 3. Each month's ending inventory must equal 25% of the cost of next month's sales. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. 4. Monthly selling and administrative expenses are always $52,000. Each month $5,000 of this total amount is depreciation expense and the remaining $47,000 relates to expenses that are paid in the month they are incurred. 5. The…arrow_forwardThe Constantine Corporation purchases robes for $12 per unit and then sells them for $25 per unit. The company estimated the following sales for the first four months of the current year: January 8,000 units, February 12,000 units, March 9,000 units and April 7,000 units. The company has rent expense of $5,600 and personnel salaries of $32,000 each month as well as variable advertising costs of $3 per unit based on monthly sales. Ending inventory at December 31st is 2.000 units and for each month after that is expected to be 10% of the next month's sales. What total dollar amount of purchases is projected for March?arrow_forward
- JVA store serves an approximate 1,200 customers annually. These are the breakdown of its customers: Teens - 500 Middle Age - 450 Senior Citizen - 250 All customers spend an average of Php500.00 per visit. Assuming the customers visit CGK Store every 2 months, what is the projected annual market size for JVA Store? However, during the 3-month lockdown, salons are not allowed to operate. What is the projected loss in revenues for CGK Store?arrow_forwardDER Corp will open a new store on January 1. Based on experience form its other retail outlets, DER is making the following sales projections: Cash sales Jan 600 000 Feb 300 000 Mar 400 000 Apr 400 000 Credit sales 400 000 500 000 600 000 800 000 DER Corp estimates that 70% of the credit sales will be collected in the month following the month of the sale, with the balance collected in the second month following the sale. 1. Based on these data, the balance in accounts receivable on January 31 will be increased by:arrow_forwardPortis, Business requirements $8,000,000 in monthly sales, $5,600,000 in variable expenses, and $1,440,000 in regular bills. There are no initial or final inventory for the business. Last month, 80,000 units were created and sold. (Note that this information was previously provided in response to the prior inquiry.) How many units must be sold by the business to make the required profit of? $1,200,000? 88,000 100,000 106,668 150,000arrow_forward
- Jane MacDonald, Carroll Financial Analyst, prepared the following sales and cash disbursement estimates for the February-June period of this year. Month Sales Cash Disbursements February 500 400 March 600 300 April 400 600 May 200 500 June 200 200 MacDonald indicates that 30% of sales have been, historically, in cash. 70% of credit sales are collected one month after the sale, and the remaining 30% are collected two months after the sale. The company wants to keep a minimum final balance in its $ 25 cash account. Balances in excess of this amount will be invested in short-term government securities (marketable securities), while any deficits will be financed through short-term bank borrowing (payable securities). The cash balance initially on April 1 is $ 115. Prepare cash budgets for April, May, and June. How much, if any, of the maximum funding would Carroll require to meet its obligations within this three-month period?…arrow_forwardHonesty Company has been experiencing a decrease in sales for the past three months since its competitor opened a shop right in front of Hail's store. To increase its sales, Hail is considering a expects that 9% of the new accounts will be uncollectible. Collection costs are 5% of new sales, production and selling costs are 78%, and accounts receivable turnover is five times. Assume income taxes of 30% and an increase in sales of P80,000. No other asset buildup will be required to service the new accounts. liberal credit policy However, by doing so, more it What would be Honesty's incremental after-tax return investment? on Your answerarrow_forwardactures and sells adjustable windows for remodeling homes and new housing. Clifford developed its budget for the current year assuming that the windows would sell at a price of $500 each. The variable costs for each window were forecasted to be $250 and the annual fixed costs were forecasted to be $130,000. Clifford had targeted a profit of $450,000. While Clifford's sales usually increase during the second quarter, the May financial statements reported that sales were not meeting expectations. For the first five months of the year, only 400 units had been sold at the established price, with variable cost as planned, and it was clear that the target profit for the year would not be reached unless some actions were taken. Clifford's president assigned a management committee to analyze the situation and develop several alternative courses of action. The following three alternatives were presented to the president, only one of which can be selected. •Reduce the selling price by $50. The…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Cost-Volume-Profit (CVP) Analysis and Break-Even Analysis Step-by-Step, by Mike Werner; Author: Accounting Step by Step;https://www.youtube.com/watch?v=D0MOfse9OWk;License: Standard Youtube License