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ACC 560 Managerial Accounting Case 6 Week 11 Sweats Galore_Answer

ACC 560 Managerial Accounting Case 6 Week 11 Sweats Galore_Answer

ACC 560 Managerial Accounting Case 6 Week 11 Sweats Galore_Answer

ACC 560 Managerial Accounting Case 6 Week 11 Sweats Galore_Answer

ACC 560 Managerial Accounting Case 6 Week 11 Sweats Galore_Answer

ACC 560 Managerial Accounting Case 6 Week 11 Sweats Galore_Answer

ACC 560 Managerial Accounting Case 6 Week 11 Sweats Galore_Answer

ACC 560 Managerial Accounting Case 6 Week 11 Sweats Galore_Answer

ACC 560 Managerial Accounting Case 6 Week 11

Sweats Galore Course: Managerial Accounting (ACC 560)

1. Do you think it was important for Michael to stipulate his four criteria for the business, including the goal of generating a net income of at least $25,000 annually? Why or why not?
2. If Michael has sales of $12,000 during January of his first year of business, determine the amount of variable and fixed costs associated with utilities and maintenance using the high-low method for each.
3. Using the format below, prepare a sales budget for the year ending 2008.
4. Prepare a schedule of expected collections from customers. $800,000

5. Michael learned from talking with Jayne that the supplier is so focused on making quality sweatshirts that many times the shirts are not available for several days. She encouraged Michael to maintain an ending inventory of shirts equal to 25% of the next quarter’s sales. Prepare a shirt purchases budget for shirts using the format provided.

6. Prepare a schedule of expected payments for purchases.

7. Prepare a silk-screen labor budget.

8. Prepare a selling and administrative expenses budget for Sweats Galore for the year ending December 31, 2008.

9. Prepare a silk-screen overhead expenses budget for Sweats Galore for the year ending December 31, 2008.

10. Using the information found in the case and the previous budgets, prepare a budgeted income statement for Sweats Galore for the year ended December 31, 2008.

11. Using the information found in the case and the previous budgets, prepare a cash budget for Sweats Galore for the year ended December 31, 2008.

12. Using the information contained in the case and the previous budgets, prepare a budgeted balance sheet for Sweats Galore for the year ended December 31, 2008.

13. (a) Using the information contained in the case and the previous budgets, calculate the estimated contribution margin per unit for 2008. (Hint: Silk-screened labor and the taxes are both fixed costs.)

13.(b) Calculate the total estimated fixed costs for 2008 (including interest and taxes).

13.(c) Compute the break-even point in units and dollars for 2008.

14.(a) Michael is very disappointed that he did not have an income of $25,000 for his first year of budgeted operations as he had wanted. How many shirts would Michael have had to sell in order to have had a profit of $25,000? (Ignore changes in income-tax expense.)

14.(b) Why does Michael’s net income differ from his ending cash balance?

14 (c) Do you think it was a good idea to offer Cary Sue a salary plus 10% of sales? Why or why not?

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Case 6

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ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc. Capital Budgeting Course

1. Calculate the net present value using the numbers provided. Assume that annual cash flows occur at the end of the year.

Initial investment $800,000
Estimated useful life 5 years
Estimated salvage value -0-

Estimated annual cash flows
Annual cash flow savings for Wall Décor $175,000
Annual additional store cash flow from increased sales 100,000
Sale of ink and paper supplies 10,000
Net annual cash flow $285,000

Present Value
at 12%
Discount factor for 5 periods 3.60478

Present value of net cash flows
$$285,000 X 3.60478 $1,027,362

12%
Present value of net cash flows $1,027,362
Capital investment 800,000
Net present value $ 227,362

2. Mr. Burns is concerned that the original estimates may be too optimistic. He has suggested that you do a sensitivity analysis assuming all costs are 10% higher than expected and that all inflows are 10% less than expected.

Initial investment $880,000
Estimated useful life 5 years
Estimated salvage value -0-

Estimated annual cash flows
Annual cash flow savings for Wall Décor $157,500
Annual additional store cash flow from increased sales 90,000
Sale of ink and paper supplies 9,000
Net annual cash flow $256,500

Present Value
at 12%
Discount factor for 5 periods 3.60478

Present value of net cash flows
$$256,500 X 3.60478 $924,626

12%
Present value of net cash flows $ 924,626
Capital investment 880,000
Net present value $ 44,626

3. Identify possible flaws in the numbers or assumptions used in the analysis, and identify the risk(s) associated with purchasing the equipment.

4. In a one-page memo, provide a recommendation based on the above analysis. Include in this memo: (a) a challenge to store and Wall Decor management and (b) a suggestion on how Greetings stores could use the computer connection for related sales.

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Case 4