WF222 MBA W3 Week 3 Practice Set -HOANG KIM TO

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Webster University *

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5200

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Accounting

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Apr 3, 2024

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docx

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Week 3 – Practice Set Name _HOANG KIM TO___________________ Please type a numerical solution to the problems below: 1. (2 points) Mike Corporation has 80,000 units in beginning inventory and expects to sell 400,000 units over the year. Mike wants to have 60,000 units at the end of the year to be ready for the additional sales in the following year. How many units should Mike Corporation produce to make this happen? Mike Corporation should produce 380000 units to make this happen Units to produce = Expected sales + Desired ending inventory - Beginning inventory = 400,000 + 60,000 - 80,000 = 380,000 units 2. (2 points) Marsha Corporation expects $2,800,000 in cash receipts this year and has $2,600,000 budgeted in cash disbursements. Marsha begins the year with $500,000 in cash and has a policy of keeping 15% of next year’s sales in the ending cash balance for the year. Next year’s sales are budgeted at $8,500,000. Will Marsha Corporations have to borrow money and if so, how much? Marsha Corporation will need to borrow $575,000 to meet its desired ending cash bal- ance Desired ending cash balance = 0.15* 8500000= 1275000 Projected ending cash balance = $500,000 + $2,800,000 - $2,600,000 = $700,000 Need to borrow = 1275000-700000= 575000 3. (2 points) Martin Corporation expects sales to be $2,400,000 next year and for sales to grow at 10% for two additional years. Martin expects variable costs to be 50% of that year’s sales and fixed cost to be $340,000 for each of the next three years. Taxes will be 28% of operating profit. Please prepare a budgeted income statement for the next three years. Budgeted income statement for the next three years Year 1 Year 2 Year 3 Sales 2400000 2640000 2904000 Variable cost 1200000 1320000 1452000 Fixed cost 340000 340000 340000 Operating profit 860000 980000 1112000 Taxes (28% profit) 240800 274400 311360 Net profit 619200 705600 800640 4. (2 points) At the beginning of the year Myles Corporations assembled a budget calling for sales of 50,000 units. After the year is over, Myles Corporation closed the books and recorded sales of 45,000 units. Using the data below, assemble a static budget and flexible budget for Myles using the projected and actual sales units. Selling prices per unit are budgeted at $60 Variable material costs are budgeted at $6.00 per unit Variable labor costs are budgeted at $8.00 per unit Variable factory overhead costs are budgeted at $3.00 per unit Fixed selling expense is budgeted at $65,000 Fixed administrative costs are budgeted at $121,000 Taxes are budgeted at 28% of operating profit.
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