complete all of the requested budget schedules correctly, you should get to an operating loss of ($9,979). Your cash balance as of April 30^th should be $6.349.

The CEO is not happy having a budget for next year that results in a loss. Instead, he wants the Accounting Team to come up with some ideas so that Operating Income will be at least $20,000 or higher and the cash on hand will be higher as well.

6-41 Cash budget (continuation of 6-40). Refer to the information in Problem 6-40. Assume the following: Animal Gear (AG) does not make any sales on credit. AG sells only to the public and accepts cash and credit cards; 90% of its sales are to customers using credit cards, for which AG gets the cash right away, less a 2% transaction fee. Purchases of materials are on account. AG pays for half the purchases in the period of the purchase and the other half in the following period. At the end of March, AG owes suppliers $8,000. AG plans to replace a machine in April at a net cash cost of $13,000. Labor, other manufacturing costs, and nonmanufacturing costs are paid in cash in the month incurred except of course depreciation, which is not a cash flow. Depreciation is $25,000 of the manufacturing cost and $10,000 of the nonmanufacturing cost for April. AG currently has a $2,000 loan at an annual interest rate of 12%. The interest is paid at the end of each month. If AG has more than $7,000 cash at the end of April it will pay back the loan. AG owes $5,000 in income taxes that need to be remitted in April. AG has cash of $5,900 on hand at the end of March. 1. Prepare a cash budget for April for Animal Gear. 2. Why do Animal Gear's managers prepare a cash budget in addition to the revenue, expenses, and operating income budget? 6-40 Comprehensive problem with ABC costing. Animal Gear Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for the month of April is given in the following tables: Input Prices Direct materials Plastic Metal Direct manufacturing labor $5 per pound $ 4 per pound $10 per direct manufacturing labor-hour Input Quantities per Unit of Output Cat-allac Dog-eriffic Direct materials Plastic Metal Direct manufacturing labor-hours Machine-hours (MH) 4 pounds 0.5 pounds 3 hours 11 MH 6 pounds 1 pound 5 hours 19 MH Inventory Information, Direct Materials Beginning inventory Target ending inventory Cost of beginning inventory Plastic 290 pounds 410 pounds $1,102 Metal 70 pounds 65 pounds $217 Animal Gear accounts for direct materials using a FIFO cost-flow assumption. Sales and Inventory Information, Finished Goods Cat-allac Dog-eriffic Expected sales in units 530 225 Selling price $ 205 $ 310 Target ending inventory in units 30 10 Beginning inventory in units 10 19 Beginning inventory in dollars $1,000 $4,650 Animal Gear uses a FIFO cost-flow assumption for finished-goods inventory. Animal Gear uses an activity-based costing system and classifies overhead into three activity pools: Setup, Processing, and Inspection. Activity rates for these activities are $105 per setup-hour, $10 per machine-hour, and $15 per inspection-hour, respectively. Other information follows: Animal Gear uses a FIFO cost-flow assumption for finished-goods inventory. Animal Gear uses an activity-based costing system and classifies overhead into three activity pools: Setup, Processing, and Inspection. Activity rates for these activities are $105 per setup-hour, $10 per machine-hour, and $15 per inspection-hour, respectively. Other information follows: Cost-Driver Information Cat-allac Number of units per batch 25 Setup time per batch 1.50 hours Inspection time per batch 0.5 hour Dog-eriffic 9 1.75 hours 0.7 hour If necessary, round up to calculate number of batches. Nonmanufacturing fixed costs for March equal $32,000, half of which are salaries. Salaries are ex- pected to increase 5% in April. Other nonmanufacturing fixed costs will remain the same. The only variable nonmanufacturing cost is sales commission, equal to 1% of sales revenue. Prepare the following for April: 1. Revenues budget 2. Production budget in units 3. Direct material usage budget and direct material purchases budget 4. Direct manufacturing labor cost budget 5. Manufacturing overhead cost budgets for each of the three activities 6. Budgeted unit cost of ending finished-goods inventory and ending inventories budget 7. Cost of goods sold budget 8. Nonmanufacturing costs budget 9. Budgeted income statement (ignore income taxes) 10. How does preparing the budget help Animal Gear's management team better manage the company? 6-41 Cash budget (continuation of 6-40). Refer to the information in Problem 6-40. Assume the following: Animal Gear (AG) does not make any sales on credit. AG sells only to the public and accepts cash and credit cards; 90% of its sales are to customers using credit cards, for which AG gets the cash right away, less a 2% transaction fee. Purchases of materials are on account. AG pays for half the purchases in the period of the purchase and the other half in the following period. At the end of March, AG owes suppliers $8,000. AG plans to replace a machine in April at a net cash cost of $13,000. Labor, other manufacturing costs, and nonmanufacturing costs are paid in cash in the month incurred except of course depreciation, which is not a cash flow. Depreciation is $25,000 of the manufacturing cost and $10,000 of the nonmanufacturing cost for April. AG currently has a $2,000 loan at an annual interest rate of 12%. The interest is paid at the end of each month. If AG has more than $7,000 cash at the end of April it will pay back the loan. AG owes $5,000 in income taxes that need to be remitted in April. AG has cash of $5,900 on hand at the end of March. 1. Prepare a cash budget for April for Animal Gear. 2. Why do Animal Gear's managers prepare a cash budget in addition to the revenue, expenses, and operating income budget? 6-40 Comprehensive problem with ABC costing. Animal Gear Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for the month of April is given in the following tables: Input Prices Direct materials Plastic Metal Direct manufacturing labor $5 per pound $ 4 per pound $10 per direct manufacturing labor-hour Input Quantities per Unit of Output Cat-allac Dog-eriffic Direct materials Plastic Metal Direct manufacturing labor-hours Machine-hours (MH) 4 pounds 0.5 pounds 3 hours 11 MH 6 pounds 1 pound 5 hours 19 MH Inventory Information, Direct Materials Beginning inventory Target ending inventory Cost of beginning inventory Plastic 290 pounds 410 pounds $1,102 Metal 70 pounds 65 pounds $217 Animal Gear accounts for direct materials using a FIFO cost-flow assumption. Sales and Inventory Information, Finished Goods Cat-allac Dog-eriffic Expected sales in units 530 225 Selling price $ 205 $ 310 Target ending inventory in units 30 10 Beginning inventory in units 10 19 Beginning inventory in dollars $1,000 $4,650 Animal Gear uses a FIFO cost-flow assumption for finished-goods inventory. Animal Gear uses an activity-based costing system and classifies overhead into three activity pools: Setup, Processing, and Inspection. Activity rates for these activities are $105 per setup-hour, $10 per machine-hour, and $15 per inspection-hour, respectively. Other information follows: Animal Gear uses a FIFO cost-flow assumption for finished-goods inventory. Animal Gear uses an activity-based costing system and classifies overhead into three activity pools: Setup, Processing, and Inspection. Activity rates for these activities are $105 per setup-hour, $10 per machine-hour, and $15 per inspection-hour, respectively. Other information follows: Cost-Driver Information Cat-allac Number of units per batch 25 Setup time per batch 1.50 hours Inspection time per batch 0.5 hour Dog-eriffic 9 1.75 hours 0.7 hour If necessary, round up to calculate number of batches. Nonmanufacturing fixed costs for March equal $32,000, half of which are salaries. Salaries are ex- pected to increase 5% in April. Other nonmanufacturing fixed costs will remain the same. The only variable nonmanufacturing cost is sales commission, equal to 1% of sales revenue. Prepare the following for April: 1. Revenues budget 2. Production budget in units 3. Direct material usage budget and direct material purchases budget 4. Direct manufacturing labor cost budget 5. Manufacturing overhead cost budgets for each of the three activities 6. Budgeted unit cost of ending finished-goods inventory and ending inventories budget 7. Cost of goods sold budget 8. Nonmanufacturing costs budget 9. Budgeted income statement (ignore income taxes) 10. How does preparing the budget help Animal Gear's management team better manage the company