Group Work: Answer the following exercise problems. Show the calculations/working on an excel sheet. Submit your answers in a word doc. Chapter 6: Variable Costing and Segment Reporting: Tools for Management (10 marks) Chapter 7; Master Budgeting (10 marks) PROBLEM 6-24A Companywide and Segment Break-Even Analysis; Decision Making Toxaway Company is a merchandiser that segments its business into two divisions-Commercial and Residential. The company's accounting intern was asked to prepare segmented income statements that the company's divisional manapers could use to calculate their break-even points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented income statement shown below: In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company"s total fived expenses include $72,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, 538,000 of fixed expenses that would be avoided if the Residential segment is dropped, and $55,000 of fixed expenses that would be avoided if the Commericial segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? Why? No, we do not agree with the intern's decision to use an absorption format for her segmented income statement. $34,000 Common fixed expenses to the Residential segment = $38,000 1 ado the intern's segmented income statement using the contribution format. 4. Compute the companywide break-even point in dollar sales. 4. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. Company's Break-even Point in dollars CM Ratio =$175000/$750,000=0.2333 Total Fixed Cost =$93,000+$72,000=$165,000 Break even Point =$165,000/0.2333%=$707.244 4. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $15,000 and $30,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division. After implementing changes that include paying monthly salaries of $15,000 for the Commercial Division and $30,000 for the Residential Division, and reducing the commission rate from 10% to 5%, the new break-even point in dollar sales for the Commercial Division is approximately $177,800, and for the Residential Division is approximately $17,800 Chapter 7: Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below: Chapter 7: Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below: The company is in the process of preparing a budget for May and has assembled the following data- a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 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 $120,000 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 $40,000. 4. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month. 2. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.) 1. New refrigerating equipment costing $6,500 will be purchased for cash during May 2. During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year. You are required to: 1. Prepare a cash budget for May, Support your budget with a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases. 2. Prepare a budgeted income statement for May. Use the absorption costing income statemeat format as shown in Schodule 9. 3. Prepare a budgeted balance sheet as of May 31 . Group Work: Answer the following exercise problems. Show the calculations/working on an excel sheet. Submit your answers in a word doc. Chapter 6: Variable Costing and Segment Reporting: Tools for Management (10 marks) Chapter 7; Master Budgeting (10 marks) PROBLEM 6-24A Companywide and Segment Break-Even Analysis; Decision Making Toxaway Company is a merchandiser that segments its business into two divisions-Commercial and Residential. The company's accounting intern was asked to prepare segmented income statements that the company's divisional manapers could use to calculate their break-even points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented income statement shown below: In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company"s total fived expenses include $72,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, 538,000 of fixed expenses that would be avoided if the Residential segment is dropped, and $55,000 of fixed expenses that would be avoided if the Commericial segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? Why? No, we do not agree with the intern's decision to use an absorption format for her segmented income statement. $34,000 Common fixed expenses to the Residential segment = $38,000 1 ado the intern's segmented income statement using the contribution format. 4. Compute the companywide break-even point in dollar sales. 4. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. Company's Break-even Point in dollars CM Ratio =$175000/$750,000=0.2333 Total Fixed Cost =$93,000+$72,000=$165,000 Break even Point =$165,000/0.2333%=$707.244 4. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $15,000 and $30,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division. After implementing changes that include paying monthly salaries of $15,000 for the Commercial Division and $30,000 for the Residential Division, and reducing the commission rate from 10% to 5%, the new break-even point in dollar sales for the Commercial Division is approximately $177,800, and for the Residential Division is approximately $17,800 Chapter 7: Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below: Chapter 7: Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below: The company is in the process of preparing a budget for May and has assembled the following data- a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 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 $120,000 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 $40,000. 4. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month. 2. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.) 1. New refrigerating equipment costing $6,500 will be purchased for cash during May 2. During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year. You are required to: 1. Prepare a cash budget for May, Support your budget with a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases. 2. Prepare a budgeted income statement for May. Use the absorption costing income statemeat format as shown in Schodule 9. 3. Prepare a budgeted balance sheet as of May 31