i More Info - X (Unless otherwise noted, assume all of the following events occurred during 2018 and that any balances given are stated as of December 31, 2018.) a. Budgeted sales are 1,100 sets for the first quarter and expected to increase by 100 sets per quarter. Cash sales are expected to be 40% of total sales, with the remaining 60% of sales on account Sets are budgeted to sell for $80 per set. b. Finished Goods Inventory on December 31, 2018, consists of 200 sets at $25 each. c. Desired ending Finished Goods Inventory is 30% of the next quarter's sales; first quarter sales for 2020 are expected to be 1,500 sets. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2018, consists of 600 pounds. Direct materials requirement is 3 pounds per set. The cost is $1 per pound. e. Desired ending Raw Materials Inventory is 10% of the next quarter's direct materials needed for production, desired ending inventory for December 31, 2019. is 600 pounds; indirect materials are insignificant and not considered for budgeting purposes. f. Each set requires 0.20 hours of direct labor, direct labor costs average 58 per hour. g. Variable manufacturing overhead is $1.60 per set. h. Fixed manufacturing overhead includes $4.000 per quarter in depreciation and $1.250 per quarter for other costs, such as utilities, insurance and property taxes. i. Fixed selling and administrative expenses include $12.500 per quarter for salaries: $2,400 per quarter for rent: $1,200 per quarter for insurance and $1.500 per quarter for depreciation i More Info i. Fixed selling and administrative expenses include $12,500 per quarter for salaries; $2,400 per quarter for rent; $1,200 per quarter for insurance, and $1,500 per quarter for depreciation j. Variable selling and administrative expenses include supplies at 1% of sales. k. Capital expenditures include $50,000 for new manufacturing equipment, to be purchased and paid for in the first quarter. 1. Cash receipts for sales on account are 60% in the quarter of the sale and 40% in the quarter following the sale; Accounts Receivable balance on December 31, 2018, is expected to be received in the first quarter of 2019, uncollectible accounts are considered insignificant and not considered for budgeting purposes m. Direct materials purchases are paid 80% in the quarter purchased and 20% in the following quarter, Accounts Payable balance on December 31, 2018 is expected to paid in the first quarter of 2019. n. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. o. Income tax expense is projected at $2,000 per quarter and is paid in the quarter incurred. p. Trevor desires to maintain a minimum cash balance of $40,000 and borrows from the local bank as needed in increments of $1,000 at the beginning of the quarter principal repayments are made at the beginning of the quarter when excess funds are available and in increments of $1,000: interest is 6% per year and paid at the beginning of the quarter based on the amount outstanding from the previous quarter - X Data Table Trevor Toy Company Balance Sheet December 31, 2018 Assets Current Assets: Cash $ 15,000 Accounts Receivable 40,000 Raw Materials Inventory 600 5,000 $ 60,600 Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment 199.000 (42,000) 157.000 Less: Accumulated Depreciation Data Table Total Current Assets $ 60,600 Property, Plant, and Equipment: Equipment 199,000 (42,000) Less: Accumulated Depreciation 157,000 $ Total Assets 217,600 Liabilities Current Liabilities: Accounts Payable S 9,000 Stockholders' Equity $ Common Stock, no par 170,000 38,600 Retained Earnings Total Stockholders' Equity 208.600 S Total Liabilities and Stockholders' Equity 217,600 Print Done Requirements 3. Trevor sold 5,800 sets in 2019, and its actual operating income was as follows: (Click the icon to view the actual income statement.) Prepare a flexible budget performance report through operating income for 2019. Show product costs separately from selling and administrative costs. To simplify the calculations due to sets in beginning inventory having a different cost than those produced and sold in 2019, assume the following product costs: (Click the icon to view the product costs.) 4. What was the effect on Trevor's operating income of selling 800 sets more than the static budget level of sales? 5. What is Trevor's static budget variance for operating income? 6. Explain why the flexible budget performance report provides more useful information to Trevor's managers than the static budget performance report. What insights can Trevor's managers draw from this performance report? 7. During 2019, Trevor recorded the following cost data: B (Click the icon to view the standard cost data.) E (Click the icon to view the actual cost data.) Compute the cost and efficiency variances for direct materials and direct labor Requirements What insights can Trevor's managers draw from this performance report? 7. During 2019, Trevor recorded the following cost data: (Click the icon to view the standard cost data.) (Click the icon to view the actual cost data.) Compute the cost and efficiency variances for direct materials and direct labor. 8. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. 9. Prepare the standard cost income statement for 2019. 10. Calculate Trevor's ROI for 2019. To calculate average total assets, use the December 31, 2018, balance sheet for the beginning balance and the budgeted balance sheet for December 31, 2019, for the ending balance. Round all of your answers to four decimal places 11. Calculate Trevor's profit margin ratio for 2019. Interpret your results. 12. Calculate Trevor's asset turnover ratio for 2019. Interpret your results 13. Use the expanded ROI formula to confirm your results from Requirement 10. Interpret your results 14. Trevor's management has specified a 30% target rate of return. Calculate Trevor's RI for 2019. Interpret your results Print mona Data Table Trevor Toy Company Income Statement For the Year Ended December 31, 2019 Net Sales Revenue $ 464,000 Cost of Goods Sold: Variable $ 36,426 18,500 Fixed 54.926 Gross Profit 409,074 Selling and Administrative Expenses: Variable 4,640 70.400 Fixed 75 040 Operating Income Other Income and (Expenses) 334,034 i Data Table Cost of Goods Sold: Variable $ 36,426 18.500 Fixed 54,926 Gross Profit 409,074 Selling and Administrative Expenses Variable 4,640 70 400 Fixed 75,040 334,034 Operating Income Other Income and (Expenses) (575) Interest Expense Income Before Income Taxes 333 459 16.000 Income Tax Expense Net Income $ 317 459 Print Done i Data Table - X rements Variable Fixed Total $ 32,960 $ 21,000 $ Static budget Flexible budget lick the ic 53,960 56,226 35,226 21,000 Yas the et tic budge Trevor's Data Table - Standard Cost Information Quantity Cost 3 pounds per sets 100 per pound 0.20 hours per set 8.00 per hour 0.20 hours per set S 8.00 per hour 0.20 hours per set S 22.40 per hour Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Static budget amount $21.000 S * Data Table Actual Cost Information Direct materials 20,400 Direct labor 17.000 pounds @ S 1.140 hours @ $ 1.140 hours @ $ 1.20 per pound) $ 8.60 per hour 7.90 per hour) 9.804 9.006 Variable manufacturing overhead Fixed manufacturing overhead 18.500 Print Done - X Selling and Administrative Expense Budget Trevor Toy Company Selling and Administrative Expense Budget For the Year Ended December 31, 2019 First Second Third Fourth Quarter Quarter Quarter Quarter Total S 12.500 $ 12.500 $ 12,500 $ 2.400 12.500 5 2.400 2.400 2.400 50.000 9.600 4.800 1200 1,200 1.200 1.200 Salaries Expense Rent Expense Insurance Expense Depreciation Expense Supplies Expense Total budgeted selling and administrative expense 1,500 1.500 1.500 880 1.500 960 6,000 4.000 1,040 1.120 S 18.480S 18,560 S 18.6405 18.7205 74.400 i Sales Budget x Trevor Toy Company Sales Budget For the Year Ended December 31, 2019 First Second Third Quarter Quarter Quarter Fourth Quarter Total Budgeted sets to be sold 1.100 80$ 1,200 80||$ 1,300 80$ $ 1,400 80$ Sales price per unit 5,000 80 Total sales $ 88,000 $ 96,000 $ 104,000 $ 112,000 $ 400,000 Income Statement Trevor Toy Company Budgeted Income Statement For the Year Ended December 31, 2019 Net Sales Revenue $ 400,000 Cost of Goods Sold 53.960 Gross Profit 346.040 74.400 Selling and Administrative Expenses Operating Income Other Income and (Expenses): Interest Expense 271,640 (75) Income Before Income Taxes 271,565 8.000 Income Tax Expense Net Income $ 263,565 Print Done The Trevor Toy Company manufactures to building blocksets for children Trevor la planning for 2019 by developing a master budget by quarters Trevor's balance sheet for December 31, 2018, follows Click the icon to view the balance sheet Other budget data for Trevor Toy Company (Click the icon to view the other data) Read the resicements Requirement. Trevor sold 5.800 sets in 2019. and its actual operating income was as follows (Click the icon to view the actual income statement) Prepare a fexible budget performance report through operating income for 2019 Show product costs separately from selling and administrative come To simplify the calculations due to set in beginning inventory having different cost than those produced and sold in 2019. assume the following product costs (Click the icon to view the product costs) Review the sales budget. Det Review the sing dadd above Review the income statement ou de (Label each variances as favorable for unfavorable Enero for any zero balance For any so variances leave the favorable Flavorable (U) input bilan) Trevor Toy Company Flexible Budget Performance Report For the Year Ended December 31, 2019 Read the requirements Trevor Toy Company Flexible Budget Performance Report For the Year Ended December 31, 2019 2 4 5 (1)-(3) (3) - (5) Sales Flexible Budget Amounts Actual Flexible Volume Static Budget Variance Per Unit Results Variance Budget 5,800 Budget 1200 Units 5.800 Net Sales Revenue Read the requirements Units 5,800 5,800 1200 F Net Sales Revenue Variable Costs Product Costs Selling and Admin Costs Contribution Margin Fixed Costs F Product Costs F 70,400 70,400 70.400 Selling and Admin Costs Operating Income