Accounts 18
Question One (25 marks)
Based on module 7 – Budgeting
Retail outlets purchase snowboards from Slopes Ltd., throughout the year. However, in anticipation of late summer and early autumn purchases, outlets ramp up inventories from January through May. Outlets are billed when boards are ordered. Invoices are payable within 60 days. From past experience, Slopes’ accountant projects 20% of invoices are paid in the month invoiced, 50% are paid in the following month, and 30% of invoices are paid two months after the month of invoice. The average selling price per snowboard is $450.
To meet demand, Slopes increases production from December through March, because the snowboards are produced a month prior to their projected sale. Direct materials are purchased in the month of production and are paid for during the following month (terms are payment in full within 30 days of the invoice date).
Direct manufacturing labour and manufacturing overhead are paid monthly. Variable manufacturing overhead is incurred at the rate of $7 per direct manufacturing labour-hour. Variable marketing costs are driven by the number of sales visits. However, there are no sales visits during the months studied. Slopes, also incurred fixed manufacturing overhead costs of $5,500 per month and fixed non-manufacturing overhead costs of $2,500 per month.
Projected Sales:
January 80 units April 100 units
February 120 units May 60 units
March 200 units June 40 units
Direct Materials and Direct Manufacturing Labour Utilisation and Cost Unit per Board Price per Unit Unit
Wood 5 $30 Board feet
Fiberglass 6 5 Yard
Direct manufacturing labour 5 25 Hour
The beginning cash balance for March, 2010, is $10,000. On June 1, 2009 Slopes had a cash crunch and borrowed $30,000 on a 6% one-year note with interest payable monthly. The note is due June 1, 2010. Using the information provided, you will need to determine whether Slopes will be in a
Based on module 7 – Budgeting
Retail outlets purchase snowboards from Slopes Ltd., throughout the year. However, in anticipation of late summer and early autumn purchases, outlets ramp up inventories from January through May. Outlets are billed when boards are ordered. Invoices are payable within 60 days. From past experience, Slopes’ accountant projects 20% of invoices are paid in the month invoiced, 50% are paid in the following month, and 30% of invoices are paid two months after the month of invoice. The average selling price per snowboard is $450.
To meet demand, Slopes increases production from December through March, because the snowboards are produced a month prior to their projected sale. Direct materials are purchased in the month of production and are paid for during the following month (terms are payment in full within 30 days of the invoice date).
Direct manufacturing labour and manufacturing overhead are paid monthly. Variable manufacturing overhead is incurred at the rate of $7 per direct manufacturing labour-hour. Variable marketing costs are driven by the number of sales visits. However, there are no sales visits during the months studied. Slopes, also incurred fixed manufacturing overhead costs of $5,500 per month and fixed non-manufacturing overhead costs of $2,500 per month.
Projected Sales:
January 80 units April 100 units
February 120 units May 60 units
March 200 units June 40 units
Direct Materials and Direct Manufacturing Labour Utilisation and Cost Unit per Board Price per Unit Unit
Wood 5 $30 Board feet
Fiberglass 6 5 Yard
Direct manufacturing labour 5 25 Hour
The beginning cash balance for March, 2010, is $10,000. On June 1, 2009 Slopes had a cash crunch and borrowed $30,000 on a 6% one-year note with interest payable monthly. The note is due June 1, 2010. Using the information provided, you will need to determine whether Slopes will be in a