Super Rich Business Person (SRBP) is opening a new merchandising company, COMPANY 2. SRBP owns several companies, but COMPANY 1 is very similar to COMPANY 2 (market size and characteristics, product types, expected demand/supply, etc.). Because the two companies are so similar, SRBP is going to use COMPANY 1 as a source of estimated prices and costs for COMPANY 2. COMPANY 1 has been in operation for seven years, and it's most recent Income Statement is presented below. Note that this income statement has been prepared especially for this purpose. SRBP's accountant prepared it to show both cost function AND cost behavior. COMPANY 1 Income Statement For the year ended 20X6 Total Units = 2,500) 275,000 (2,000) (5,500) Sales, Gross Sales Discounts Sales Returns & Allowances Sales, Net Cost of Goods Sold (variable) Gross Profit Variable Selling Expenses Variable Administrative Expenses Fixed Selling & Administrative Expenses Net Income (7,500) 267,500 (165,000) 102,500 (19,250) (13,750) (43,250) (76,250) 26,250 A total of 2,500 units were sold at COMPANY 1 during the year. All sales accounts are variable in nature (Sales, Gross; Sales Discount; Sales Returns & Allowances, and Sales, Net). Based on the information given above, answer the following Cost-Volume-Profit Analysis questions: 1. SRBP will be using COMPANY 1 as an estimate for all information in COMPANY 2. Please list all revenues and expenses of COMPANY 1 (i.e., Sales and Expenses) as constants, whether the per unit or total amount (.e, If an A total of 2,500 units were sold at COMPANY 1 during the year. All sales accounts are variable in nature (Sales, Gross; Sales Discount; Sales Returns & Allowances; and Sales, Net). Based on the information given above, answer the following Cost-Volume-Profit Analysis questions: 1. SRBP will be using COMPANY 1 as an estimate for all information in COMPANY 2. Please list all revenues and expenses of COMPANY 1 (.e., Sales and Expenses) as constants, whether the per unit or total amount (.e., if an amount is constant as a per unit amount, calculate it as a per unit amount, if constant at the total amount, list it as a total amount). 2. Based on these estimates, what is the expected Contribution Margin per unit for COMPANY 2? 3. What is COMPANY 2's expected Breakeven Point in units? 4. If COMPANY 2 wants an expected yearly profit of $50,000, how many units would they need to sell? Based on the information given above, complete the following Master Budget requirements for COMPANY 2 (again, using the numbers for COMPANY 1 as estimates): 5. Assume COMPANY 2 sells 3,450 units in 20X7, prepare the Sales, Inventory Purchases, and Selling & Administration Expense budgets based on the following additional assumptions. a. Prepare the Master Budget for 20x7 (.e., only one unit amount, 3,450 units). b. Use the Sales, Net price for budgeting purposes, this allows us to ignore the impact of Sales Discounts and Sales Returns & Allowances in the Master Budget. c. Assume that 90% of all Sales, Net will be received in cash during the year, the remainder will be Accounts Receivable. d. For Inventory Purchases, assume a Desired Ending Inventory amount of 400 units for 2017. Ignore discounts and return for the Master Budget. e. Assume that 85% of all purchases will be paid in cash during the year, the remainder will be Accounts Payable. f. All Selling (Marketing) and Administrative amounts can go in the same Expenditure Budget. This will include the variable amounts related to selling and administrative, as well as the fixed amounts. Now assume that COMPANY 2 has the following transactions in 20x7. Unless specified, assume all sales and purchases are on account (i.e., receivables and payables). 1. Issued common stock for 75,000 in buildings and equipment and 100,000 in cash. 2. Purchased inventory on account, 195,322. 3. Paid for freight in with cash (inventory shipping), 16,000. 4. Paid a cash advance for business insurance for the year, 7,500 5. Purchased supplies for cash, 30,000. 6. Sold products that cost 128,700 to customers for 214,500 on account. 7. Paid cash for shipping cost of sale, 15,000. 8. Received payment in cash from customer. Discount of 2,145, cash of 212,355 received. 9. Customer returned products costing 924. The sales return amount is 1,540. A cash refund is provided. 10. Pald salaries in cash, 6,250 11. Sold products that cost 99,000 to customers for 134,750 on account. 12. Paid cash for shipping cost of sale, 12,000. 13. Paid cash of 195,322 for previous on account purchase. 14. Products costing 1,320 were returned by customers, the sale price for the returned goods is 2,200. A cash refund is provided. 15. Received payment in cash from customer. Discount of 1,348, cash of 133,402 received. 16. Purchased inventory on account, 57,950. 17. Paid for freight in with cash (inventory shipping), 4,750. 18. Returned damaged inventory, $3,050. 19. Received professional services on account (accounting and legal), 3,250. 20. Paid cash for advertising costs for the year, 5,000. 21. Supplies of $26,250 were used during the year. 22. Customer returned products costing 792. The sales return amount is 1,320. 23. Recognized salaries incurred at the end of the year, but not yet paid, 6,250. 24. Recognize insurance used for the year, 7,500. 25. Depreciation recognized for buildings and equipment, 15,000. Required: 1) Journalize and post the above transactions. 2) Prepare an Adjusted Trial Balance (adjusting entries are included in the list of transactions above.) 3) Prepare an Income Statement, Statement of Retained Earnings, and Balance Sheet for COMPANY 2. COMPANY 1 Income Statement For the year ended 20X6 Total Uits - 2,500) Total 275,000 (2,000) (5,500) Sales, Gross Sales Discounts Sales Returns & Allowances Sales, Net Cost of Goods Sold (variable) Gross Profit Variable Selling Expenses Variable Administrative Expenses Fixed Selling & Administrative Expenses Net Income (7,500) 267,500 (165,000) 102,500 (19,250) (13,750) (43,250) (76,250) 26,250 Constant Amounts Sales. Gross: Sales Discounts: Sales Returns & Allowances: Sales, Net: Cost of Goods Sold: Variable Selling Expense Variable Administrative Expense: Fixed Selling & Administrative Expenses: 25 28 2 Contribution Margin: 3 Breakeven Point in Units Show equation and calculation below Equation: Numbers TA Target Profit in Units: Show equation and calculation below. Equation: Numbers NE X A B Sales Budget Sales in Units Price per unit Total Sales Cash Receipts from Sales Accounts Receivable Purchases Budget Sales in Units Cost per unit Cost of Goods Sold Cost of Desired Ending Inventory Cost of Inventory Available Cost of Beginning Inventory Inventory Purchases Cash Payments for Inventory Accounts Payable Selling & Administrative Budget Variable Selling Cost Variable Administrative Cost Fixed S&A Costs Total Selling & Administrative Costs Chart of Accounts General Journal Adjusted Trial Balance Account Title ebit Credit Income Statement Revenue S8 Gode Total Revenues Expenses Statement of Stockholders' Equity Common Stock Retained Earnings Beginning Balance Ending Balance Balance Sheet Liabilities Total Liabilities Stockholders' Equity Total Stockholders' Equity Total Assets Total Liabilities and Stockholders' Equity