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 - i Requirements 1. Prepare Trevor's operating budget and cash budget for 2019 by quarter. Required schedules and budgets include: sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, cost of goods sold budget, selling and administrative expense budget, schedule of cash receipts, schedule of cash payments, and cash budget. Manufacturing overhead costs are allocated based on direct labor hours. (Round all calculations to the nearest dollar) 2. Prepare Trevor's annual financial budget for 2019, including budgeted income statement and budgeted balance sheet. 3. Trevor sold 5,800 sets in 2019, and its actual operating income was as follows: 33 (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? Print Done - X i Requirements 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: (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. 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. Print Done 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.) E (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 Done Data Table Trevor Toy Company Income Statement For the Year Ended December 31, 2019 Net Sales Revenue $ 464,000 Cost of Goods Sold: Variable LA 36,426 18,500 Fixed 54,926 Gross Profit 409,074 Selling and Administrative Expenses Variable 4,640 70,400 75,040 Fixed Operating Income Other Income and (Expenses); 334,034 Data Table - X 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 $ 317,459 Net Income Print Done - X Data Table Actual Cost Information Direct materials 20,400 ( ( 17,000 pounds @ $ 1.20 per pound) $ 1,140 hours $ 8.60 per hour) 1,140 hours @ $7.90 per hour) a Direct labor Variable manufacturing overhead Fixed manufacturing overhead 9,804 9,006 18,500 - X i Data Table Standard Cost Information Direct materials Quantity Cost 3 pounds per set $ 1.00 per pound 0.20 hours per set 8.00 per hour 0.20 hours per set 8.00 per hour 0 20 hours per set $ 22.40 per hour CA Direct labor Variable manufacturing overhead Fixed manufacturing overhead Static budget amount $21.000 $ - X ta Table Variable Fixed Total $ 32,960 $ 21,000 $ 53.960 Static budget Flexible budget 35 226 21,000 56.226 Print Done The Trevor Toy Company manufactures toy building block sets for children. Trevor is planning for 2019 by developing a master budget by quarters Trever'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 requirements Income Taxes: Total payments for income taxes 2016 1968 2128 2288 8400 Capital Expenditures: Total payments for capital expenditures 8000 8000 8000 8000 8000 45000 Total cash payments (before interest) Accounts Payable balance, December 31, 2019: The Trevor Toy Company manufactures toy building block sets for children. Trevor is planning for 2019 by developing a master budget by quarte (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 requirements Tour payments for come taxes ETU JUU EEUU UT Capital Expenditures: Total payments for capital expenditures 8000 8000 8000 8000 8000 Total cash payments (before interest) 45000 Accounts Payable balance, December 31, 2019: 4th Qtr. Qtr. 4 direct material purchases paid in Qtr 1 of 2020 The Trevor Toy Company manufactures toy building block sets for children. Trevor is planning for 2019 by developing a master budget (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 requirements Rent Expense 2,400 2.400 2,400 2.400 9,600 Insurance Expense 1,200 1,200 1,200 1,200 4,800 Total payments for Selling and Admin. expenses 16,980 17,060 17,140 17,220 68,400 Income Taxes: Total payments for income taxes 2016 1968 2128 2288 8400 Capital Expenditures: Total payments for capital expenditures 8000 8000 8000 8000 8000