3. Award: 8.34 points Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 22% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs Product B $ 380,000 $ 575,000 $ $ $ $ 410,000 186,000 76,000 89,000 $ $ $ $ 490,000 218,000 115,000 70,000 The company's discount rate is 20%. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor using tables. Required: 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the project profitability index for each product. 5. Calculate the simple rate of return for each product. 6a. For each measure, identify whether Product A or Product B is preferred. 6b. Based on the simple rate of return, Lou Barlow would likely: Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 6B Calculate the payback period for each product. (Round your answers to 2 decimal places.) Product A Payback period Product B years years Req 1 Req 2 References Worksheet Learning Objective: 07-02 Evaluate the acceptability of an investment project using the net present value method. Difficulty: 2 Medium Learning Objective: 07-03 Evaluate the acceptability of an investment project using the internal rate of return method. Learning Objective: 07-01 Determine the payback period for an investment. Learning Objective: 07-05 Rank investment projects in order of preference. Learning Objective: 07-06 Compute the simple rate of return for an investment. 1. Award: 8.33 points Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below: Minden Company Balance Sheet April 30 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings Total liabilities and stockholders' equity $ $ $ $ 16,500 67,000 32,000 249,000 364,500 68,750 20,500 180,000 95,250 364,500 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $241,000 for May. Of these sales, $72,300 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May. b. Purchases of inventory are expected to total $191,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May. c. The May 31 inventory balance is budgeted at $86,000. d. Selling and administrative expenses for May are budgeted at $76,200, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $5,300 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $170 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $6,600 will be purchased for cash during May. g. During May, the company will borrow $27,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year. Required: 1. Calculate the expected cash collections from customers for May. 2. Calculate the expected cash disbursements for merchandise purchases for May. 3. Prepare a cash budget for May. 4. Prepare a budgeted income statement for May. 5. Prepare a budgeted balance sheet as of May 31. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 4 Req 5 1. Calculate the expected cash collections from customers for May. 2. Calculate the expected cash disbursements for merchandise purchases for May. Total cash collections Total cash disbursements Req 1 and 2 Req 3 Noreen_5e_Rechecks_2019_10_14 References Worksheet Learning Objective: 08-04 Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. Difficulty: 1 Easy Learning Objective: 08-08 Prepare a cash budget. Learning Objective: 08-02 Prepare a sales budget, including a schedule of expected cash collections. Learning Objective: 08-09 Prepare a budgeted income statement. Learning Objective: 08-10 Prepare a budgeted balance sheet. 2. Award: 8.33 points Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter: a. Budgeted monthly absorption costing income statements for April-July are: Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense* Total selling and administrative expenses Net operating income April $ 810,000 567,000 243,000 May $ 950,000 665,000 285,000 June $ 650,000 455,000 195,000 July $ 560,000 392,000 168,000 95,000 52,500 147,500 $ 95,500 114,000 74,200 188,200 $ 96,800 76,000 47,000 123,000 $ 72,000 56,000 53,000 109,000 $ 59,000 *Includes $37,000 of depreciation each month. b. Sales are 20% for cash and 80% on account. c. Sales on account are collected over a three-month period with 10% collected in the month of sale; 70% collected in the first month following the month of sale; and the remaining 20% collected in the second month following the month of sale. February's sales totaled $305,000, and March's sales totaled $320,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable at March 31 for inventory purchases during March total $146,300. e. Each month's ending inventory must equal 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at March 31 is $113,400. f. Dividends of $44,000 will be declared and paid in April. g. Land costing $56,000 will be purchased for cash in May. h. The cash balance at March 31 is $66,000; the company must maintain a cash balance of at least $40,000 at the end of each month. i. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $200,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Required: 1. Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in total. 2. Prepare the following for merchandise inventory: a. A merchandise purchases budget for April, May, and June. b. A schedule of expected cash disbursements for merchandise purchases for April, May, and June, and for the quarter in total. 3. Prepare a cash budget for April, May, and June as well as in total for the quarter. Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 2B Required 3 Prepare a schedule of expected cash collections for April, May, and June, and for the quarter in total. Schedule of Expected Cash Collections April May June Quarter Cash sales $ 0 Sales on account: February 0 March 0 April 0 May 0 June 0 Total cash collections $ 0 $ 0 $ 0 Required 1 $ 0 Required 2A References Worksheet Learning Objective: 08-02 Prepare a sales budget, including a schedule of expected cash collections. Learning Objective: 08-08 Prepare a cash budget. Difficulty: 2 Medium Learning Objective: 08-04 Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. 3. Award: 8.34 points Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available Deacon Company Balance Sheet March 31 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation $ $ Total assets Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings $ $ Total liabilities and stockholders' equity 71,800 42,800 46,000 149,000 309,600 125,100 70,000 114,500 309,600 Budgeted Income Statements Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income April $ 120,000 72,000 48,000 18,100 $ 29,900 May $ 130,000 78,000 52,000 19,600 $ 32,400 June $ 150,000 90,000 60,000 22,600 $ 37,400 Budgeting Assumptions: a. 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale. b. Budgeted sales for July are $160,000. c. 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. The accounts payable at March 31 will be paid in April. d. Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold. e. Depreciation expense is $1,850 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred. Required: 1. Calculate the expected cash collections for April, May, and June. 2. Calculate the budgeted merchandise purchases for April, May, and June. 3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June. 4. Prepare a budgeted balance sheet at June 30th. (Hint: You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30th balance sheet.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate the expected cash collections for April, May, and June. April May June Quarter Total cash collections Required 1 Required 2 References Worksheet Learning Objective: 08-02 Prepare a sales budget, including a schedule of expected cash collections. Learning Objective: 08-04 Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. Difficulty: 2 Medium Learning Objective: 08-03 Prepare a production budget. Learning Objective: 08-10 Prepare a budgeted balance sheet