Module 3 (Ch 8,9 & 10) Case 3 Purpose: You will apply skills to determine loon borrowings, repayments including interest and analyze the impact of these calculations to determine if the line of credit is sufficient as well as analyze variances and make recommendations to management for corrective actions needed). Upon successful completion of this project you will (1) better understand how to determine the financing section of the cash budget opply skills to evaluate the line of credit and (2) apply skills to analyze and evaluate material and labor variances Tesks Work within your team. Review Mr. Puffin's Muffins operation. Determine the Financing Section of the Cash Budget for Months 1, 2 and 3. Evaluate whether the line of credit is sufficient and why. Review the material and labor variances, evaluate couses and recommend action plans Colter for Delverable: Individually prepare a 12 poge memo addressed to Mr. Puffin. The memo should NOT be overly technical and should address the following: 1. Create the Financing Section of the Cash Budget for Months 1, 2 and 3. Determine if the line of credit is sufficient and why. 2. Provide explanations for the material and labor variances and recommend actions plans. Mr. Puffin is currently developing its cash budget for the first three months of operation as well as an Investment in machinery in the 3 month. Mr. Puffin needs assistance determining its financing needs. Specifically, he wants to know how much to borrow or repay, including interest, each month. The first month's beginning balance is $22,000. Each month requires a minimum balance of $20,000. The cash collections from revenues for months 1, 2, and 3 are $50,000 $90,000, and $70,000, respectively. The operating cost outflows for months 1, 2, and 3 are $60,000, $80,000, and $50,000, respectively. The third month also includes a $100,000 outflow for an investment in new machinery. Mr. Puffin has access to a $80,000 line of credit, with 10% interest. For budgeting purposes, borrowings occur on the 1" day of the month and repayments occur as soon as possible with payment on the last day of the month. Round interest cokulations to nearest whole number. Mr. Puffin developed a budget at the start of the month before the following events occurred: - The company changed vendors of its source of flour to Royal Flour Supply -The company's bakers have worked day and night without many breaks. At the end of the month, Mr. Puffin produced his variance report Below are the following results: -Labor efficiency variance - $5,000 U -Labor rate variance - $7,500 F -Material quantity variance - $8,000 F - Material price variance - $10,000 U Module 3 (Ch 8,9 & 10) Case 3 Purpose: You will apply skills to determine loon borrowings, repayments including interest and analyze the impact of these calculations to determine if the line of credit is sufficient as well as analyze variances and make recommendations to management for corrective actions needed). Upon successful completion of this project you will (1) better understand how to determine the financing section of the cash budget opply skills to evaluate the line of credit and (2) apply skills to analyze and evaluate material and labor variances Tesks Work within your team. Review Mr. Puffin's Muffins operation. Determine the Financing Section of the Cash Budget for Months 1, 2 and 3. Evaluate whether the line of credit is sufficient and why. Review the material and labor variances, evaluate couses and recommend action plans Colter for Delverable: Individually prepare a 12 poge memo addressed to Mr. Puffin. The memo should NOT be overly technical and should address the following: 1. Create the Financing Section of the Cash Budget for Months 1, 2 and 3. Determine if the line of credit is sufficient and why. 2. Provide explanations for the material and labor variances and recommend actions plans. Mr. Puffin is currently developing its cash budget for the first three months of operation as well as an Investment in machinery in the 3 month. Mr. Puffin needs assistance determining its financing needs. Specifically, he wants to know how much to borrow or repay, including interest, each month. The first month's beginning balance is $22,000. Each month requires a minimum balance of $20,000. The cash collections from revenues for months 1, 2, and 3 are $50,000 $90,000, and $70,000, respectively. The operating cost outflows for months 1, 2, and 3 are $60,000, $80,000, and $50,000, respectively. The third month also includes a $100,000 outflow for an investment in new machinery. Mr. Puffin has access to a $80,000 line of credit, with 10% interest. For budgeting purposes, borrowings occur on the 1" day of the month and repayments occur as soon as possible with payment on the last day of the month. Round interest cokulations to nearest whole number. Mr. Puffin developed a budget at the start of the month before the following events occurred: - The company changed vendors of its source of flour to Royal Flour Supply -The company's bakers have worked day and night without many breaks. At the end of the month, Mr. Puffin produced his variance report Below are the following results: -Labor efficiency variance - $5,000 U -Labor rate variance - $7,500 F -Material quantity variance - $8,000 F - Material price variance - $10,000 U
