Requirement 2 On the basis of financial considerations only, what should Magnuson do?

Recommendation

Explanation for recommendation

What happens under alternative 1 (use numbers to support)

What happens under alternative 2 (use numbers to support)

What effect does each have on principal repayments and interest?

Requirement 3 What nonfinancial factors should Magnuson consider?

Consideration 1

Why

Consideration 2

Why

(Feel free to add more)

Requirement 1 information (completed for you)

Cash BudgetAlternative 1: Weave place mats in cotton using existing loom.

ANNE MAGNUSON, WEAVER
Cash Budget
For the Four Months Ending December 31, 2014
Beginning cash balance	$ 25
Cash receipts from the local craft shop [25 sets {$20/set (10% $20/set)}]	450
Cash available	475
Cash payments:
Accounts payable balance August 31, 2014	74
Ending cash balance	$ 401

Cash BudgetAlternative 2: Weave place mats in linen using new loom.

ANNE MAGNUSON, WEAVER
Cash Budget
For the Four Months Ending December 31, 2014
Beginning cash balance	$ 25
Cash receipts from the local craft shop [15 sets {$50/set (10% $50/set)}]	675
Cash available	700
Cash payments:
Accounts payable balance August 31, 2014	74
Purchases of linen (15 sets $18/set)	270
Purchase of new loom	1,000
Interest expense ($1,000 18% 4/12)	60
Total cash payments	1,404
Ending cash balance before financing	(704)
Financing:
Borrowing	1,000
Principal repayments	(200)
Total effects of financing	800
Ending cash balance	$ 96

Decision Case 22-2, cont.

Requirement 1, cont.

Budgeted Income StatementAlternative 1: Weave place mats in cotton using existing loom.

ANNE MAGNUSON, WEAVER
Budgeted Income Statement
For the Four Months Ending December 31, 2014
Sales Revenue (25 sets $20/set)		$ 500
Cost of Goods Sold (25 sets $7/set)		175
Gross Profit		325
Operating Expenses
Sales Commission (10% of sales)	$ 50
Depreciation Expense (4 months $10/month)	40
Total Operating Expenses		90
Net Income		$ 235

Budgeted Income StatementAlternative 2: Weave place mats in linen using new loom.

ANNE MAGNUSON, WEAVER
Budgeted Income Statement
For the Four Months Ending December 31, 2014
Sales Revenue (15 sets $50/set)		$ 750
Cost of Goods Sold (15 sets $18/set)		270
Gross Profit		480
Operating Expenses
Sales Commission (10% of sales)	$ 75
Depreciation Expense [($10/mth. 4 mths.) + ($20/mth. 4 mths.)]	120
Total Operating Expenses		195
Operating Income		285
Interest Expense ($1,000 18% 4/12)		60
Net Income		$ 225

Decision Case 22-2, cont.

Requirement 1, cont.

Budgeted Balance SheetAlternative 1: Weave place mats in cotton using existing loom.

ANNE MAGNUSON, WEAVER
Budgeted Balance Sheet
December 31, 2014
Assets
Current Assets:
Cash		$ 401
Property, Plant, and Equipment:
Loom	500
Less: Accumulated Depreciation ($240 + $40)	(280)	220
Total Assets		$ 621
Liabilities		$ 0
Stockholders Equity
Stockholders equity ($386 + $235)		621
Total Liabilities and Stockholders Equity		$ 621

Budgeted Balance SheetAlternative 2: Weave place mats in linen using new loom.

ANNE MAGNUSON, WEAVER
Budgeted Balance Sheet
December 31, 2014
Assets
Current Assets:
Cash	$ 96
Inventory of Cotton	175
Total Current Assets		$ 271
Property, Plant, and Equipment:
Looms ($500 + $1,000)	1,500
Less: Accumulated Depreciation ($240 + $120)	(360)	1,140
Total Assets		$ 1,411
Liabilities
Current Liabilities:
Note Payable ($1,000 $200)		$ 800
Stockholders Equity
Stockholders equity ($386 + $225)		611
Total Liabilities and Stockholders Equity		$ 1,411

Ethical Issue 22-1

Requirement 1

Ethical issue 1 (Discuss issue and why it is an issue)

Ethical issue 2 (Discuss issue and why it is an issue)

Ethical issue 3 (Discuss issue and why it is an issue)

Requirement 2

Option 1

Option 2

Option 3 -

Requirement 3

Possible consequences of each of the options listed in Requirement 2 include the following.

Discussion option 1 consequences what might happen, what has Dunn already done, what else might Dunn do?

Discussion option 2 consequences what might happen, what has Dunn already done, what else might Dunn do?

Discussion option 3 consequences what might happen, what has Dunn already done, what else might Dunn do?

Requirement 4 What should you do?

Option you recommend -

Why?

anna Kendall sat down at her desk with anticipation. Hanna, the newly promoted manager of her division at B&T Manufacturing, was ready to begin preparing the budget for the way to know the direction in which the division should progress and a way to determine whether the division met its goals. manager of her diiion at Hanna considered how to begin the process. next year. At the last B&T division managers She knew she needed to study last years budget meeting, most of the other managers were grum- prepared by the previous manager, compare it to bling about the process. No one else seemed to actual results to see which goals had been met, like the task, but Hanna felt differently. She re and consider outside influences such as the eco membered from her managerial accounting class nomic conditions for B&T's industry. Hanna also that budgeting can have many benefits. When used appropriately, budgets help managers lan and control activities for their divisions by providing guidance and benchmarks or the budgeting period. Hanna considered the budget to be a roadmap of sorts for her division-a wanted to get input from her employees to ensure the goals set for the division were realistic, obtainable, and a source of motivation. Hanna had seen bud- gets used to punish employees when budget goals were set at an unob- tainable level, but she was not that type of manager. Hanna wanted high morale in her division, with everyone working toward the gh morale in her division, WI same goals