Question:

Answer the 2 bullet questions and correct the questions numbered 1 & 2:

• Whatissuesshouldbeconsideredwhenmakingdecisionsaboutoutsourcingandeliminatingtheproductionofakeysub-assemblyforproductsmanufacturedbyacompany?Youranswershouldbepresentedasabulletedlist.

• When considering how much of a product to produce or acquire for the period, describe the specific items you would use in the calculation? Your answer should be based on the budget chapter as well as on the basic formula related to inventory, discussed at various points throughout our class.

The questions below need corrections and include my solutions....The corrections are highlighted in yellow on the attached excel sheet

1) Logan Township acquired its water system from a private company on June 1. No receivables were acquired with the purchase. Therefore, total accounts receivable on June 1 had a zero balance. Logan plans to bill customers in the month following the month of sale, and 70% of the resulting billings will be collected during the billing month. In the next following month, 90% of the remaining balance should be collectable. The remaining uncollectible amounts will relate to citizens who have moved away. Such amounts are never expected to be collected and will be written off. Water sales during June are estimated at $4,000,000, and expected to increase 30% in July. August sales will be 10% less than July sales.

(a) For each dollar of sales, how much is expected to be collected?

(b) Estimate the monthly cash collections for June, July, August, and September.

(c) As of the end of August, how much will be the estimated amount of receivables from which future cash flows are anticipated?

2) Scalia Systems manufactures rugged handheld computers for use in adverse working environments. Scalia tries to maintain inventory at 40% of the following month's expected unit sales. Scalia began the year with 8,000 units in stock, based on the following unit sales projections prepared by the sales manager: January 20,000

February 25,000

March 25,000

April 22,000

Logan Township acquired its water system from a private company on June 1. No receivables were acquired with the purchase. Therefore, total accounts receivable on June 1 had a zero balance. Logan plans to bill customers in the month following the month of sale, and 70% of the resulting billings will be collected during the billing month. In the next following month, 90% of the remaining balance should be collectable. The remaining uncollectible amounts will relate to citizens who have moved away. Such amounts are never expected to be collected and will be written off. Water sales during June are estimated at $4,000,000, and expected to increase 30% in July. August sales will be 10% less than July sales. (a) For each dollar of sales, how much is expected to be collected? (b) Estimate the monthly cash collections for June, July, August, and September. (c) As of the end of August, how much will be the estimated amount of receivables from which future cash flows are anticipated? (a) $0.97 will be collected for each dollar of sales. (b) Estimated Sales June July August September $ 4,000,000 $ 5,200,000 $ 4,680,000 Sales Billed 4000000 5200000 4680000 Same month collection 2800000 3640000 3276000 1 month collection $ 1,080,000 $ 1,404,000 $ 2,800,000 $ 4,720,000 $ 4,680,000 June July August Total Receivables $ 4,000,000 $ 5,200,000 $ 4,680,000 $ 13,880,000 $ 2,800,000 $ $ - $ 2,800,000 - 4,720,000 140,400 416,400 Total Collection (c) Estimated Sales Less: Collected in July Collected in August 1,080,000 To be written off (3%) 120,000 ### 3,640,000 156,000 ### $ 4,000,000 ## $ 3,796,000 ## $ Remaining balance $ 140,400 ## $ 7,936,400 ## $ 1,404,000 ## $ 4,539,600 $ 5,943,600 Scalia Systems manufactures rugged handheld computers for use in adverse working environments. Scalia tries to maintain inventory at 40% of the following month's expected unit sales. Scalia began the year with 8,000 units in stock, based on the following unit sales projections prepared by the sales manager: January 20,000 February 25,000 March 25,000 April 22,000 Prepare a schedule of planned unit production for January through March. Planned production in units: January Estimated units sold February March 20,000 25,000 25,000 8,000 10,000 10,000 28,000 35,000 35,000 8,000 8,000 10,000 20,000 27,000 25,000 January 20,000 10,000 30,000 8,000 22,000 February 25,000 10,000 35,000 10,000 25,000 March 25,000 8,800 33,800 10,000 23,800 Desired Ending Finished Goods Total Units Needed Less: Beginning finished goods inventor Scheduled Production Planned production in units: Estimated units sold Desired ending finished goods* Total units needed Less: Beginning finished goods inventor Scheduled production * 40% of following month's anticipated sales Prepare a direct materials purchasing plan for January, February, and March, based on the following facts: Lana Gonzales owns a business that assembles ceiling fan units. Each fan requires one motor system and four blades. Motors cost $40 each, and blades are $3.50 each. Lana is able to reliably obtain motors as needed, and does not maintain them in inventory. However, blades are stocked in inventory sufficient to produce 30% of the following month's expected production. Planned production is as follows: January 10,000 February 12,000 March 15,000 April 11,000 In accordance with the stocking plan, January's beginning inventory included 12,000 blades. Direct materials purchasing plan: January Scheduled production February March 10,000 12,000 15,000 10,000 12,000 15,000 Raw materials needed: Motors (1 per unit) Estimated cost per motor Total estimated motor cost $ 40.00 $ 40.00 $ 40.00 $ 400,000.00 $ 480,000.00 $ 600,000.00 Fan blades (4 per unit) 40,000 48,000 60,000 Plus: Target ending raw materials 14,400 18,000 13,200 54,400 66,000 73,200 12,000 14,400 18,000 Fan blades purchases 42,400 51,600 55,200 Estimated Cost per blade $3.50 $3.50 $3.50 $148,400.00 $180,600.00 $193,200.00 $548,400.00 $660,600.00 $793,200.00 Fan blades needed Less: Target beginning raw materi Total estimated motor blade Total Estimated Costs (blade & m Nolan Johnson is CFO for a newly formed furniture manufacturing company. Below is the anticipated monthly production for the first year of operation, and beyond. Nolan is interested in learning which of the first twelve months will require cash outlays of more than $100,000 toward the purchase of lumber. Each unit requires 20 board feet of lumber at $5.80 per board foot. All lumber is purchased in the month prior to its expected use. Lumber purchases are paid for 10% in the month of purchase, 40% in the month following the month of purchase, and 50% in the second month following the month of purchase. Month Units January 0 February 800 March 500 April 1,200 May 700 June 900 July 300 August 600 September 800 October 1,300 November 400 December 400 January 600 Which months will require cash outlays in excess of the $100,000 amount? Does the production in any given month necessarily correspond to the cash flow for that same month? What are the business implications of your observation? Anticipated cash payments: CASH PAYMENTS Purchasing Activity Units January 0 Total Board Feet (20 per unit) ### 800 16,000 Total Cost of Lumber ($5.80 per foot) $ Paid in Month (10%) 92,800 Paid in Month Relating to Prior Month (40%) Paid in Month Relating to Two Months Prior (50%) $ 9,280 Total $ 9,280 February 800 500 10,000 58,000 5,800 37,120 March 500 1,200 24,000 139,200 13,920 23,200 46,400 83,520 April 1,200 700 14,000 81,200 8,120 55,680 29,000 92,800 May 700 900 18,000 104,400 10,440 32,480 69,600 112,520 June 900 300 6,000 34,800 3,480 41,760 40,600 85,840 July 300 600 12,000 69,600 6,960 13,920 52,200 73,080 August 600 800 16,000 92,800 9,280 27,840 17,400 54,520 September 800 1,300 26,000 150,800 15,080 37,120 34,800 87,000 1,300 400 8,000 46,400 4,640 60,320 46,400 11,360 November 400 400 8,000 46,400 4,640 18,560 75,400 98,600 December 400 600 12,000 69,600 6,960 18,560 23,200 48,720 January 600 October 42,920 In May and October, the total payments exceed $100,000. In May, the production was low and in October, the production was high. The cash flow does not directly effect the monthly production. Proper planning must be done when dealing with chas flow and production. The chief financial officer for Cast In Stone concrete products had previously established a line of credit with a local bank that enables Cast In Stone to borrow 80% of the company's inventory balance. The company currently has 1,000 units in stock, and is performing "on budget." The budget anticipated that direct labor cost would be $15 per hour, and factory overhead is applied to production based on $7.50 per direct labor hour. Each unit requires 2.5 labor hours and 800 pounds of direct material. The direct material costs $0.10 per pound. Determine the amount of credit available under the borrowing agreement. Amount available under line of credit: $109,000.00 Per Unit Total Units Per Unit Cost Direct Material 800 lbs $0.10 Direct Labor 2.5 hrs. $15.00 37.50 Applied facotry overhead 2.5 hrs. $7.50 18.75 Total Cost per Unit $ $ X Units in finished goods inventory Finished goods inventory X Portion available for line of credit Total available under line of credit 80.00 136.25 1,000.00 $ 136,250.00 80% $109,000.00 Nyman Painting Contractors specializes in providing painting services to support residential remodeling projects. Nyman bids jobs based on the following cost assumptions: 1 gallon of paint will cover 450 square feet of interior wall space. 300 square feet can be painted in 1 hour. 1 gallon of paint costs $25. 1 hour of direct labor costs $17. The Sanchez residence was recently repainted. The job consisted of 18,000 square feet of interior wall space. Nyman received a $1 per gallon discount, and a total of $984 was expended for paint. Nyman paid $1,107 for direct labor. The painters took exactly 61.5 hours to paint the residence. (a) Calculate variances for direct material and direct labor. (b) Prepare journal entries to record the acquisition and utilization of materials and labor (variances are recorded into the accounts). (a) Materials variances: Actual Material Cost Gallons ($984/$24) $ 41 Price ($25-$1) $ 24 Actual Direct Material Cost (41*24) $984 Standard Material Cost Output (Number od sq. ft. painted) 18,000 Standard quantity of sq. ft. per gallon /450 Standard quantity of input to achieve output in gallons(18,00 40 gal Standard price per unit of input Standard cost of direct materials (40*$25) $25 $ 1,000 Total materials variances (standard vs. actual costs) $16 Materials Price Variance: standard price $ 25 actual price $ 24 $ 1 actual quantity *41 favorable materails price variance $ 41 Materials quantity variance: standard quanity 40 actual quantity (41) (1) standard price $ unfavorable materials quantity variance 25 $ (25) Labor variances: Actual Labor Cost Actual Labor Hours 61.5 hrs Actual rate ($1,107/61.5hrs) *$18 Actual cost of direct labor $1,107.00 Standard Labor Cost Output (# of sq. ft. painted) 18,000 Standard quantity of sq. ft. per hr. /300 Standard hrs. to achieve output 60 hrs. $17 Standard rate per hour Standard cost od direct labor $1,020.00 ($87.00) Total labor variance (standard cost vs. actual cost) Labor rate variance: standard rate actual rate $ 17.00 (18.00) ($1.00) actual hours unfavorable labor rate variance 61.5 ($65.50) Labor efficiency variance: standard hours actual hours 60 (61.5) (1.5) standard rate unfavorable labor efficiency variance $17.00 ($25.50) GENERAL JOURNAL Date Accounts Raw Materials Inventory Debit Credit 1,025.00 Materials Price Variance 41.00 Accounts Payable 984.00 To record purchase of raw materail at standard price & reated favorable variance Work in Process Materials Quantity Variance 1,000.00 25.00 Raw Materials Inventory 1,025.00 To transfer raw materials to production at standard usage rates & related unfavorable quantity variance Work in Process 1,020.00 Labor Rate Variance 61.50 Labor Efficiency Variance 25.50 Wages Payable To increase work in process for the standard direct labor costs & record the related rate and efficiency variances 1,107.00