Budgetary Planning and Control All of Gaylord Boutiques sales are on account. In the past, 20% of the amounts charged have been paid in the same month as the sale, 60% were paid in the following month, and the rest were paid in the second month following the sale. Sales for selected months are given below:

Prepare the cash receipts budget for the first three months of 2018.

Clips, Inc. budgets on an annual basis for its fiscal year. The company produces widgets using the raw material, oximate. The following beginning and ending inventory levels are planned for the fiscal year ending June 30, 2017:

July 1, 2017 June 30, 2018

Oxi-mate 40,000 pounds 36,000 pounds

Widgets 80,000 units 50,000 units

Three pounds of oxi-zmate are needed to produce each widget. If Clips plans to sell 480,000 widgets during the year ending June 30, 2018, how many widgets will it need to produce during the year?

East Lansing Mall expects to make purchases in the first quarter of 2018 as follows: January $ 80,000 February 122,000 March 74,000

Purchases in December of 2017 are expected to be $93,000. The company expects that 45% of a months purchases will be paid in the month of purchase and the balance will be paid in the following month. Calculate budgeted cash disbursements related to purchases for February of 2018

Pro Slade expects credit sales in the next quarter as follows: April $ 90,000 May 110,000 June 113,000

Prior experience has shown that 30% of a months sales are collected in the month of sale, 40% in the month following sale, and 28% in the second month following sale. February and March sales were $90,000 and $100,000, respectively. Uncollectible accounts are written off under the allowance method at 80 days after the end of the month in which the sale was made. Calculate budgeted cash receipts for May. How much is Accounts Receivable on Pro Slades May 31 balance sheet?

In the fourth quarter of 2017, Winston Wheels had the following net income: Sales $400,000 Less cost of sales 150,000 Gross margin 250,000 Selling and administration costs 110,000 Income before taxes 140,000 Income taxes 42,000 Net income $ 98,000

Purchases in the fourth quarter of 2017 amounted to $170,000. Estimated data for 2018 follow: First Second Third Fourth Quarter Quarter Quarter Quarter Sales $300,000 $350,000 $400,000 $450,000 Cost of sales 170,000 200,000 230,000 150,000 Purchases 200,000 230,000 250,000 280,000 Selling and admin. 110,000 110,000 110,000 110,000

Taxes are 30% of pretax income and are paid in the month of accrual. All sales are on credit and 30% are collected in the quarter of sale and 70% are collected in the next quarter. 40% of purchases are paid in the quarter of purchase and 60% in the next quarter. Selling and administrative expenses are paid in the quarter incurred. There is $11,000 of depreciation included in selling and administrative expense. A capital expenditure for $40,000 is planned for the fourth quarter of 2018.

Calculate total cash receipts for the second quarter of 2018.

Decentralization and Performance Evaluation

Smith Division produces soap and reported sales of $540,000, which generated a net income after tax deduction of $77,900 for 2017. The division did not incur any interest expenditure during the year. Smith Divisions invested capital for the year amounted to $820,000. Smiths parent corporation has a required rate of return equal to 10 percent and a cost of capital of 8 percent. How is the division performing if it is evaluated using return on investment?

Floyd Productions West Division reported sales of $280,000 and net income totaling $58,800. The invested capital in West Division is $336,000. Calculate West Divisions profit margin, investment turnover, and return on investment.

For fiscal year 2017, Regency Division of Florida Malls had income as follows:

Sales revenue $43,000,000 Expenses: Cost of goods sold $28,400,000 Selling and administrative expense 5,600,000 Interest expense 1,100,000 35,100,000 Income before taxes 7,900,000 Income tax expense 2,765,000 Net income $ 5,135,000

The Regency Divisions total assets were $89,000,000 and its current liabilities totaled $3,200,000 with $700,000 of these being interest-bearing. The company has a required rate of return of 9 percent and a cost of capital of 7.2 percent. Calculate NOPAT, invested capital, and return on investment for Regency Division and comment on the companys performance. The chief operating officer (COO) of the DeSoto Corporation is considering the effect of depreciation on the return on investment of one of its divisions. In the most recent year, the division had net operating profit after taxes totaling $1,377,000 and the invested capital was $16,200,000. The COO has determined that total assets will decline each year by 6 percent due to depreciation of plant and equipment, but NOPAT will remain relatively constant.

Calculate return on investment for each of the next three years considering the change in value of the assets.

Explain why evaluation in terms of return on investment may lead managers to delay purchases of equipment that, in the long-run, will be needed to remain competitive.