Question No. 2

Contemporary Trends sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltimore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and earnings Much of this decline is attributable to the internet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow:

Paint and supplies Carpeting wallpaper

Sales 190,000 230,000 70,000

Less variable cost 114,000 161,000 56,000

Fixed costs 28,000 37,500 22,000

Total cost 142,000 198,500 78,000

operating income 48,000 31,500 -8,000

Management is studying whether to drop wallpaper because of the changing market and accompanying loss if the line is dropped the following changes are expected to occur

a.The vacated space will be remodeled at a cost of 15,000 and will be devoted to an expanded line of high and carpet sales of carpet are expected to increase by 100,000 b.Contemporary can cut wallpapers fixed costs by 50%

c.Sales of paint and paint supplies are expected to fall by 30%

d.Considering (a), (b) and (c), explain your decision whether to drop or retain the wallpaper

Question No. 3

HASF PVT.LTD

BUDGETED INCOME STATEMENT

FOR 1st QUARTER 1999

Description JANUARY FEBRUARY MARCH

Sales 285,000 323,000 221,000

Purchases 129,000 168,000 95,000

Wages 35,000 37,000 30,000

Supplies 26,000 23,000 21,500

Utilities 6,500 8,700 7,200

Rent 15,000 12,800 13,600

Insurance 12,000 12,000 12,000

Advertising 24,500 28,500 18,000

Depreciation 20,000 20,000 20,000

Net Profit 17,000 13,000 3,700

Required:

a.Please make a cash budget for the months of January, February and March 1999 based on the data for:

View Receivable Trend:

30% of Sales are collected in the month of sale

30% of Sales are collected after the month of sale

40% of Sales are collected two months after the sale is made

View Payable Trend:

10% of Purchases are paid for in the month of purchase

35% of Purchases are paid after the month of purchase

55% of Purchases are paid two months after the purchase is made

Additional Information:

Rent and Insurance expense were prepaid at the end of 1998

All other expenses are paid for in the month they were incurred

November Sales = 195,000

November Purchases = 100,000

December Sales = 250,000

December Purchases = 165,000

Please see attached Budgeted Income Statement for 1st Quarter 1999

b.Being a CFO of the company, interpret the importance budget in strategic and operational planning of the company (Word limit Max 150-200)

Question No. 4

HASF Corporation manufactures products A, B, and C from a joint process. Joint costs are allocated on the basis of relative sales value at the end of the joint process. Additional information for HASF are as follows:

ABCTotal

Units produced 12,0008,0004,00024,000

Joint costs 144,00060,00036,000240,000

Sales value before additional processing 240,000100,00060,000400,000

Additional costs for further processing28,00020,00012,00060,000

Sales value if processed further280,000120,00070,000470,000

Required:

a.Which, if any, of products A, B, and C should be processed further and then sold?

b.Keeping in view the answer of "part a", write down your critical feedback to support your answer (Word limit Max 200)

Question No. 5-1

In planning its operations for 2011 on the basis of a sales forecast of 6,000,000 ASF Inc. prepared the following estimated data Costs and Expenses

Variable Fixed

Direct Material 1,600,000

Labor 1,400,000

Factory overhead 600,000 900,000

Selling expenses 240,000 360,000

Administrative expenses60,000 140,000

Required:

a.What would be the amount of sales at the breakeven point?

2,250,000

4,000,000

3,500,000

5,300,000