Otten Corp. produces one product that sells at $20 per unit and sells best on Mother's Day.As a result peak sales occur in May of each year.Additional information about budgeted sales for the second quarter is:

Budgeted Sales units:

April 20,000 units

May 30,000 units

June 15,000 units

Total 65,000 units

Past experience shows that the company collects 25% of a month's sales in the month of sale.Another 65% is collected in the month following sale, and the remaining 10% is collected in the second month following sale.Bad debts are negligible and can be ignored.February sales totaled $330,000, and March sales totaled $360,000.

8.From data above, calculate budgeted sales in dollars and prepare a schedule of cash collections from sales, by month and in total, for the second quarter. (12 marks)

9.From data above, if the company prepares a budgeted balance sheet as of June 30, compute the accounts receivable balance as of that date. (5 marks)

Hint: You must first calculate the budgeted sales in dollars. You may wish to create the collection schedule.

1. MEG Associates is reeling from a decline in profits because of competition.For its most recent year end, its controller has prepared following variance analysis and concluded that the company has done very well controlling its costs:

BudgetedActualVariance

Variable costs:

Professional Labour$1,000,000$ 940,000$60,000F

Travel50,00040,00010,000F

Supplies100,00090,00010,000F

Fixed Costs:

Professional Labour400,000 405,000(5,000)U

Facilities Cost250,000 265,000(15,000)U

Insurance80,00078,0002,000F

Totals$1,880,000$1,818,000$62,000F

For the year MEG Associates projected (budgeted) that it would generate $2,000,000 in revenues; it actually generated $1,800,000. In this case sales $ are the activity. The company has consulted with you for help in understanding what is happening.You decide to address the following items.

Required:

a)What is the major weakness in the report above and how do you recommend addressing it? (3 marks)

b)Recast the report (using a flexible budget instead of the static one presented) to enable a more meaningful way to enable cost control evaluation. (5 marks)

c)MEG Associates uses a management by exception philosophy.Use the report you prepared in (b) above and explain which costs are likely to receive additional investigation. (4 marks)