Please help me check the income statement and help me with the Cash Budget, Balance sheet, and evaluation. Thank you!

Exhibit A Variable Direct Costs Direct materials cost per unit Direct labor costs per unit $ 0.75 1.25 $ 2.00 Total Variable Overhead e Indirect labor cost per unit Electricity cost per unit Other overhead cost per unit produced Total $ 0.20 0.10 0.50 $ 0.80 $ Fixed Costs Indirect labor per week Indirect material per week Electricity per week Factory insurance per week Other overhead per week 100 300 75 125 110 710 Total $ Office expenses are very close to $781 per week. Of this amount, the breakdown seems to be: Salaries (including fringe benefits and payroll tax) $ Rent of office Depreciation of office equipment Utilities Total $ 400 200 81 100 781 Direct labor is paid on a piece-rate (or piecework) basis. Workers are paid $1.25 per unit produced. Average rate of accounts receivable collections is as follows: 30% During the month in which sale is made 1st month after sale 2nd month after sale 3rd month after sale 40% 20% 10% 100% See Exhibit B for an estimation of the Balance Sheet as it will appear on January 1, when Robert Darnell takes complete control of the business. Exhibit B Darnell Manufacturing Company Balance Sheet For the Year Ended, December 31, (Beginning Balance, January 1) $ 10,000.00 14,700 600 Liabilities and Owners' Equity Accounts payable $ 1,275 Notes payable 30,000 Total Liabilities 31,275 Assets Cash Receivables Raw material inventory Finished goods inventory ($4.72 per unit) Office equipment Factory equipment Land Total Assets Capital: Robert Darnell 85,687 3,540 13,122 70,000 5,000 116,962 Total Liabilities and Owners' Equity $ 116,962 Several other notations by Bailey Edison a. Robert expected to draw $1,400 per month for personal use. b. Consulting fees will be billed at about $225 per week or $900 per month. c. A reasonable estimation of the value of factory and equipment is $70,000. Depreciation should be monthly on the basis of an average useful life of 5 years. This equipment will have a salvage value of $2,500. d. Darnell produces a single product, Darn Good, and the production process is fairly simple. Raw materials consist of a single item, which is usually entered into the process in the morning. Various machining operations take place during the day. At the end of each day, all the finished units are moved into the storeroom. Because started units are finished by the end of the day, there is never a work-in-process inventory overnight. e. Ignore taxes. f. The inventory of raw materials at the beginning of the coming year will be 800 units, and there will be 750 units of finished product. General guidelines set by Bailey Edison These guidelines should be followed through the year, at which time they are to be reviewed and revised. a. The estimates of variable costs of production are almost certainly correct. 8. Fixed costs of production are almost certainly at $710 per week, except that there is no estimation or allowance for depreciation. Take fixed cost of production to equal $710 plus depreciation. c. Fixed amounts for overhead and fixed office expenses are listed at the per week amounts. To convert weekly fixed costs to monthly costs, multiply the weekly amount by 4. d. Establish cost accounting records on the basis of full cost, assuming that normal output is 500 units per week, or 2,250 units per month. Thus, budgeted full cost is $4.72. Note: this means that we assume that the dollar value of ending inventory for finished goods should be number of units valued at $4.72 per unit. e. Selling commission should be 10% on all sales, and the price on regular sales should be set at $7.00 for at least the first quarter of the year. f. All depreciation should be on straight-line basis. Having developed that data in assignments 1 and 2, Alice decided to prepare projected income statements for January, February and March. 4. Cash Budgets After developing the incomes statements, Alice decided to see what would happen to the cash position of Darnell during the quarter. When Mr. Darnell actually turns the business over to Robert, Mr. Darnell will withdraw all cash. All receivables will be due to Robert, and all payable will be his responsibility. Robert expects to pay $30,000 for the business, which will be a liability of the business, and he intends to deposit $10,000 in the firms' checking account to establish a working balance. (Both amounts are included on the Balance Sheet as of Jan. 1) Raw materials are always purchased on a 30-day-due basis. Consequently, payments are always made in the month following the purchase of materials. It is expected that 1,700 units of materials will be purchase during the December prior to the coming year. Direct labor, all overhead, commissions, salaries, rent, and utilities are paid in the month incurred. 5. Balance Sheet e libra tohoto 2028 As a final step in the general budget process, Alice decided to prepare a projected Balance Sheet as of the coming year's April 1. 6. Evaluation of the Budget Armed with the material developed in Items 1 through 5, Alice, Edison and Robert had a meeting to discuss problems that were likely to arise. What points would be likely to dominate such a meeting? Why? Darnel Manufaturing Company Budgeted Inome Statement January February 2000 2200 March 1900 Unit Sale $ $ 14,000 $ 15,400 $ 13,300 Sale COGS: DM DL OH VC OH FC Total COGS Gross Profit SG&A Expenses : Office Expenses Consulting Commision NOI Interest expense Profit $ $ $ $ $ $ 0.75 $ 1.25 $ 0.80 $ 1.36 $ 8,319 $ 5,681 $ 0.75 $ 1.25 $ 0.80 $ 1.56 $ 9,589 $ 5,811 $ 0.75 1.25 0.80 1.60 8,355 4,945 $ $ $ $ $ $ 3,515 $ 900 $ 1,400 $ (134) $ $ (134) $ 3,515 $ 900 $ 1,540 $ (143) $ $ (143) $ 3,515 900 1,330 (800) (800) Exhibit A Variable Direct Costs Direct materials cost per unit Direct labor costs per unit $ 0.75 1.25 $ 2.00 Total Variable Overhead e Indirect labor cost per unit Electricity cost per unit Other overhead cost per unit produced Total $ 0.20 0.10 0.50 $ 0.80 $ Fixed Costs Indirect labor per week Indirect material per week Electricity per week Factory insurance per week Other overhead per week 100 300 75 125 110 710 Total $ Office expenses are very close to $781 per week. Of this amount, the breakdown seems to be: Salaries (including fringe benefits and payroll tax) $ Rent of office Depreciation of office equipment Utilities Total $ 400 200 81 100 781 Direct labor is paid on a piece-rate (or piecework) basis. Workers are paid $1.25 per unit produced. Average rate of accounts receivable collections is as follows: 30% During the month in which sale is made 1st month after sale 2nd month after sale 3rd month after sale 40% 20% 10% 100% See Exhibit B for an estimation of the Balance Sheet as it will appear on January 1, when Robert Darnell takes complete control of the business. Exhibit B Darnell Manufacturing Company Balance Sheet For the Year Ended, December 31, (Beginning Balance, January 1) $ 10,000.00 14,700 600 Liabilities and Owners' Equity Accounts payable $ 1,275 Notes payable 30,000 Total Liabilities 31,275 Assets Cash Receivables Raw material inventory Finished goods inventory ($4.72 per unit) Office equipment Factory equipment Land Total Assets Capital: Robert Darnell 85,687 3,540 13,122 70,000 5,000 116,962 Total Liabilities and Owners' Equity $ 116,962 Several other notations by Bailey Edison a. Robert expected to draw $1,400 per month for personal use. b. Consulting fees will be billed at about $225 per week or $900 per month. c. A reasonable estimation of the value of factory and equipment is $70,000. Depreciation should be monthly on the basis of an average useful life of 5 years. This equipment will have a salvage value of $2,500. d. Darnell produces a single product, Darn Good, and the production process is fairly simple. Raw materials consist of a single item, which is usually entered into the process in the morning. Various machining operations take place during the day. At the end of each day, all the finished units are moved into the storeroom. Because started units are finished by the end of the day, there is never a work-in-process inventory overnight. e. Ignore taxes. f. The inventory of raw materials at the beginning of the coming year will be 800 units, and there will be 750 units of finished product. General guidelines set by Bailey Edison These guidelines should be followed through the year, at which time they are to be reviewed and revised. a. The estimates of variable costs of production are almost certainly correct. 8. Fixed costs of production are almost certainly at $710 per week, except that there is no estimation or allowance for depreciation. Take fixed cost of production to equal $710 plus depreciation. c. Fixed amounts for overhead and fixed office expenses are listed at the per week amounts. To convert weekly fixed costs to monthly costs, multiply the weekly amount by 4. d. Establish cost accounting records on the basis of full cost, assuming that normal output is 500 units per week, or 2,250 units per month. Thus, budgeted full cost is $4.72. Note: this means that we assume that the dollar value of ending inventory for finished goods should be number of units valued at $4.72 per unit. e. Selling commission should be 10% on all sales, and the price on regular sales should be set at $7.00 for at least the first quarter of the year. f. All depreciation should be on straight-line basis. Having developed that data in assignments 1 and 2, Alice decided to prepare projected income statements for January, February and March. 4. Cash Budgets After developing the incomes statements, Alice decided to see what would happen to the cash position of Darnell during the quarter. When Mr. Darnell actually turns the business over to Robert, Mr. Darnell will withdraw all cash. All receivables will be due to Robert, and all payable will be his responsibility. Robert expects to pay $30,000 for the business, which will be a liability of the business, and he intends to deposit $10,000 in the firms' checking account to establish a working balance. (Both amounts are included on the Balance Sheet as of Jan. 1) Raw materials are always purchased on a 30-day-due basis. Consequently, payments are always made in the month following the purchase of materials. It is expected that 1,700 units of materials will be purchase during the December prior to the coming year. Direct labor, all overhead, commissions, salaries, rent, and utilities are paid in the month incurred. 5. Balance Sheet e libra tohoto 2028 As a final step in the general budget process, Alice decided to prepare a projected Balance Sheet as of the coming year's April 1. 6. Evaluation of the Budget Armed with the material developed in Items 1 through 5, Alice, Edison and Robert had a meeting to discuss problems that were likely to arise. What points would be likely to dominate such a meeting? Why? Darnel Manufaturing Company Budgeted Inome Statement January February 2000 2200 March 1900 Unit Sale $ $ 14,000 $ 15,400 $ 13,300 Sale COGS: DM DL OH VC OH FC Total COGS Gross Profit SG&A Expenses : Office Expenses Consulting Commision NOI Interest expense Profit $ $ $ $ $ $ 0.75 $ 1.25 $ 0.80 $ 1.36 $ 8,319 $ 5,681 $ 0.75 $ 1.25 $ 0.80 $ 1.56 $ 9,589 $ 5,811 $ 0.75 1.25 0.80 1.60 8,355 4,945 $ $ $ $ $ $ 3,515 $ 900 $ 1,400 $ (134) $ $ (134) $ 3,515 $ 900 $ 1,540 $ (143) $ $ (143) $ 3,515 900 1,330 (800) (800)