could you please explain the answer to 3rd requirement, 3rd box, "combined cash budget" 2nd quarter totals. thank you.

ACCT 2332 MANAGERIAL ACCOUNTING GROUP PROJECT - SPRING 2017 V4 REQUIRED: This project is worth 24 points. It is an opportunity to put together some of the things you have learned in different parts of this course. You can work in groups of three (maximum), two or individually. Read the case and answer the requirements below. The names, usernames and Peoplesoft numbers of the group members must be written clearly below. To receive credit you must write full answers, using the templates provided for each requirement. We must ask you to handwrite your answers and show any calculations you feel are needed. Hand your project in to the accounting lab 133MH during lab hours on or before Thursday April 20 at 3 PM. (Syllabus says 3 pm so Lab can close at \"normal\" time) 1) GROUP MEMBERS: NAME Blackboard Username YOUR RECEIPT NUMBER Peoplesoft Number (lab assistants will give you this) PROJECT FACTS Manny Fold owns a factory that specializes in making titanium valves for high performance engines on a just in time basis. Thus, Manny produces what he sells in a particular month. There are no inventories of finished goods or work in process. However, Manny does require that an inventory of direct raw materials equal to 20% of next month's production requirement be available at the end of each month. To build his business and gain new customers Manny has extended generous credit terms to his customers. While Manny is confident about the fundamentals of his business, he is concerned about the possible income and cash flow implications. The variable costs of producing a valve are budgeted at $7.20 per valve for direct materials (3/4 pound of titanium alloy costing $9.60 per pound), $2.80 per valve for direct labor, and $5.50 per valve for variable manufacturing overhead. Fixed manufacturing overhead is budgeted at $74,700 per month during the 2nd quarter. The detailed components of variable and fixed overhead are as listed below. For variable overhead, electric power is budgeted at $2.30 per unit, indirect labor is budgeted at $2.50 per unit, and supplies are budgeted at $.70 per unit. For fixed overhead depreciation is budgeted at $10,000 per month, Supervision and other factory salaries are budgeted at $40,000 per month, property tax and insurance combined are budgeted at $8,000 per month (which have been paid in advance through June 15 - see below), maintenance is budgeted at $7,000 per month, licensing fees and permits to use proprietary technology are budgeted at $3,400 per month, and other miscellaneous fixed overhead expenses are budgeted at $6,300 per month. Manny's customers drive a hard bargain because they can easily switch suppliers. They all do pay eventually, but many of them take their time about doing so and Manny is reluctant to get tough with them for fear they will take their business elsewhere. He tells you that all his sales are on credit (no cash sales). He typically collects only 10% of sales in the month of the sale, 30% of sales in the month after the sale and 60% of sales two months later (for example 10% of June sales would be collected in June, 30% in July and 60% in August). On the other hand, he must pay for 70% of his materials purchases in the same month of the purchase and 30% in the month after. Cash costs of labor and overhead other than depreciation, property taxes and insurance are paid in the same month they are incurred. Property taxes and insurance are paid in advance through June 15. The amount due for the next 6 months (starting June 16) must be paid in early June. All of the selling and administrative expenses are fixed. Monthly fixed selling and administrative costs, other than interest, amount to $43,600, of which $6,000 is depreciation. These operating costs, excepting depreciation, are paid in cash in the month incurred. Manny has large tax loss carry forwards from a previous unsuccessful business venture. Therefore, he does not expect to pay any income taxes this year. (In other words you may ignore income taxes). Manny plans to buy new equipment costing $80,000 during the month of June. This equipment will be ready for use starting in July. The budgeted selling price of valves for April, May, and June is $23 per valve. Because of market competition there is not much flexibility to adjust the price and the price is expected to be stable during the 2nd quarter. Manny budgeted sales in units for April at 17,000 units. For May he expects to sell only 18,500 units. He has projected sales of 20,000 units for June and 18,000 units for July. Manny requires a minimum cash balance of $10,000 at the end of each month. If the budgeted month end cash balance will fall below this level Manny plans to borrow enough cash at the beginning of that same month to keep his ending balance up to the minimum level. Manny's bank charges him interest at the rate of % per month on the balance outstanding during that month. Manny's bank charges him interest at the rate of % per month on the balance outstanding during that month. Manny pays the interest at the beginning of the following month and plans to repay as much as he can at the beginning of that month without letting his budgeted cash balance go below $10,000 at month end. (On the budgeted income statement round interest expense to the nearest dollar) The company's managerial accountant has resigned unexpectedly before the 2nd quarter budget could be completed. You have been contracted to complete the master budget for June and for the 2nd quarter (including some missing numbers from May). Balances as of March 31 for all relevant accounts have already been calculated by this accountant together with some of the amounts for April and May. You may assume that these balances and amounts shown in the tables below are correct. REQUIREMENTS: (To Equal 24 project points) 1) Construct Manny's budgeted income statement for June and the total for the 2nd quarter. April and May have already been provided. Complete the template provided below. Show any necessary calculations. (7 points) 2) Using the same forecast as in requirement 1 construct Manny's budget for raw materials purchases in June and the total for the 2nd quarter (You will also have to complete the budget for May) Complete the template provided which already has information for April and May. (2 points) 3) Using the same forecast as you used in requirement 1 construct Manny's cash budgets for June and the total for the 2nd quarter (You will also have to provide the missing number for May payments for purchases). Complete the templates provided below which already have information for April and May. Show any necessary calculations. (3 points) 4) Using the same forecast as you used in requirement 1 construct Manny's budgeted balance sheet at the end of June. Complete the template provided which already has the March 31 balances. (3 points) 5) During March Manny actually produced and sold 16,500 valves. Actual sales revenues were $381,950. Actual costs and the original March budget based on 16,000 valves were as detailed in the table below. Complete the table by constructing a flexible budget based on 16,500 valves and determining the variances for the performance report. Use the template provided below for your answer. (7 points) 6) Write a brief report explaining some possible reasons why Manny's profits were different from the amount projected in the master budget for March (2 points). REQUIREMENT 1 Budgeted Income Statement April $391,000 May $425,500 DIRECT MATERIALS USED ($122,400) DIRECT LABOR June 2nd Quarter $460,000 $1276,500 ($133,200) ($144,000) ($399,600) ($47,600) ($51,800) ($56,000) ($155,400) VARIABL E OVERHE AD ($93,500) ($101,750) ($110,000) ($305,250) CONTRIBUTIO N MARGIN $127,500 $150,000 $416,250 FIXED OVERHEAD ($74,700) ($74,700) ($74,700) ($224,100) FIXED OPERATING EXPENSES ($43,600) ($43,600) ($43,600) ($130,800) OPERATIN G INCOME $ 9,200 $20,450 $31,700 $61,350 $0 $0 $0 $20,450 $31,700 $61,350 SALES REVENU ES INTEREST EXPENSE NET INCOME $0 $9,200 $138,750 REQUIREMENT #2 BUDGETED PURCHASES OF TITANIUM ALLOY (direct material) April May June 2nd Quarter Valves to be produced X Pounds per unit 17,000 Titanium to be used 12,750 Desired ending inventory (20%) Pounds of Titaniu m Needed Less: Beginning Inventory Pounds to be purchased Cost per pound Cost of Purcha ses 2,775 15,525 0.75 2,550 18,500 20,000 55,500 0.75 0.75 0.75 13,875 15,000 41,625 3,000 3,600 9,375 16,875 18,600 51,000 3,000 8,325 2,775 12,975 14,100 15,600 42,675 $9.60 $9.60 $9.60 $9.60 $124,560 $135,360 $149,760 $409,680 REQUIREMENT #3 COMPUTATION OF CASH COLLECTIONS (Use this to calculate March & Feb sales) April May June 2nd Quarter Sales Made 2 Months Ago $213,900 $220,800 $234,600 $669,300 Sales Made 1 Month Ago Sales Made this Month $110,400 $117,300 $127,650 $355,350 $39,100 $42,550 $46,000 $127,650 Total Cash Collectio ns $363,400 $380,650 $408,250 $1,152,300 COMPUTATION OF CASH PAYMENTS April May June 2nd Quarter Payments for purchases of materials $132,120 $122,184 $145,440 $399,744 (used to calculate March purchases) Payments for direct Labor $47,600 $51,800 $56,000 $155,400 Payments for Variable Overhead $93,500 $101,750 $110,000 $305,250 Payments for Fixed Overhead $56,700 $56,700 $56,700 $170,100 Payments for Property Taxes and Insurance Payments for other operating expenses Capital Expenditures $0 $0 $48,000 $48,000 $37,600 $37,600 $37,600 $112,800 $0 $357,584 $0 $80,000 $80,000 $533,740 $1,271,294 Total Cash Payments $379,970 COMBINED CASH BUDGET Beginning Balance of Cash Cash Collections Total cash availabl e Less: Cash Payment s April $10,324 May $16,140 $16,820 $10,324 $363,400 $380,650 $408,250 $1,152,300 $373,724 $396,790 $425,070 $1,162,624 $533,740 $1,271,294 $357,584 $379,970 June 2nd Quarter Ending Cash Balance Before Financing: Borrowings $16,140 $16,820 ($108,670) ($108,670) $0 $0 $118,670 $118,670 Repayments $0 $0 $0 $0 Interest Payme nts End Cash Balanc e $0 $0 $0 $0 $16,140 $16,820 $10,000 $10,000 REQUIREMENT #4: BUDGETED BALANCE SHEET FOR JUNE 30 March 31 June 30 ASSETS: Current Assets Cash $10,324 $10,000 Accounts Receivable $545,100 $669,300 Inventory (raw materials) $24,480 $34,560 Prepaid Insurance and Property Taxes Total Current Assets $20,000 $44,000 Equipment and Furniture Accumulated Depreciation $757,860 $599,904 $960,000 $880,000 ($588,000) ($540,000) Equipment & Furniture (net) $340,000 $372,000 Total Assets $939,904 $1,129,860 LIABILITIES AND EQUITY Liabilities (all current) Accounts Payable $34,992 $44,928 Interest Payable 0 $0 Bank Loans Payable 0 $118,670 Total Liabilities $34,992 Owner's Equity (Net income increases this) Total Liabilities and Equity $904,912 $939,904 $163,598 $966,262 $966,262 $1,129,860 Actual Costs and Template for Requirement #5 Use this page to answer this requirement. Performance Report for March Cost Item Actual results Sales Revenues $381,950 Direct Materials used Direct Labor $118,720 Flexib le Budge t Varian ce Flexible Budget for 16,500 units Sales Volume Variance Static Master Budget for 16,000 units $379,500 $11,250 $368,000 $80 $118,800 $3,600 $115,200 $45,600 $600 $46,200 $1,400 $44,800 Electric Power $38,454 -$504 $37,950 $1,150 $36,800 Indirect Labor $49,360 -$8,110 $41,250 $1,250 $40,000 Supplies $16,686 -$5,136 $11,550 $350 $11,200 Supervision and other salaries Maintenance $37,858 $2,142 $40,000 $0 $40,000 $8,925 -$1,925 $7,000 $0 $7,000 Insurance and property tax Permits and license fees Factory depreciati on Other Overhead expenses Total Production Expenses $8,000 $0 $8,000 $0 $8,000 $3,400 $0 $3,400 $0 $3,400 $10,000 $0 $10,000 $0 $10,000 $8,650 -$2,350 $6,300 $0 $6,300 $345,653 $-15,203 $330,450 $7,750 $322,700 Total Selling & Administrativ e Expenses Total Expenses $39,867 $3,733 $43,600 $0 $43,600 $385,520 -$11,470 $374,050 $7,750 $366,300 Operati ng Income ($3,570) ($9,020) $5,450 $3,750 $1,700 REQUIREMENT 6 (SPACE FOR REPORT) Manny's actual profits were different than the projected budget due to the following reasons: -Although Sales revenue increased, due to a higher number of units being sold, expenses ended up costing more than anticipated. -Indirect labour, supplies, and other expenses, were higher than projected, leading to unfavorable variances. -The increase in these expenses caused the net income to decrease by thousands of dollars. To correct this problem, the company should hire a new managerial accountant that is able to perform proper financial analysis on the expenses the company incurs on a monthly basis, and monitor the cash flow more closely