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Inventories (5/31 & 6/30) $ 180,000 Cash $ Direct materials used $ 210,000 Equipment, net $ 260,000 Office salaries $ 92,000 Buildings, net $ 400,000 Insurance, factory $ 4,000 Utilities, factory $ Plant wages $ 140,000 Selling expenses $ Bonds payable $ 160,000 Maintenance, factory $ Prepare a budgeted income statement AND a budgeted balance sheet as of June 30, 20X9.(Points : 25) budgeted income statement:
Sales $800,000Cost of goods sold:Depreciation $24,000Materials used $200,000Insurance $4,000Wages $140,000Utilities $16,000 Maintenance $28,000 $412,000Gross profit $388,000Operating expenses:Office salaries $80,000 Selling expenses $60,000 $140,000Net income $248,000budgeted balance sheetAssets:Current asset:Cash $56,000Inventories $ 180,000Accounts receivable $100,000Total current assets $336,000Equipment, net $260,000Buildings, net $400,000Total assets $996,000Liabilities and Owners’ Equity:Current liabilities:Accounts payable $60,000Total current liabilities $60,000Bonds payable $ 160,000Capital stock $ 400,000Retained earnings $376,000Total $996,000Retained earnings was calculated by $996000-($60,000+$160,000+$400,000)=$376,0002. (TCO 5) Paul's Medical Equipment Company manufactures hospital beds. Its most popular model, Deluxe, sells for $5,000. It has variable costs totaling $2,800 and fixed costs of $1,000 per unit, based on an average production run of 5,000 units. It normally has four production runs a year, with $500,000 in setup costs each time. Plant capacity can handle up to six runs a year for a total of 30,000 beds.
A competitor is introducing a new hospital bed similar to Deluxe that will sell for $4,000. Management believes it must lower the price to compete. Marketing believes that the new price will increase sales by 25% a year. The plant manager thinks that production can increase by 25% with the same level of fixed costs. The company sells all the Deluxe beds it can produce.Question 1: What is the annual operating income from Deluxe at the price of $5,000?Question 2: What is the annual operating income from Deluxe if the price is reduced to $4,000 and sales in units increase by 25%?(Points : 25) Question 1:Sales $100,000,000Costs:Variable costs $56,000,000Fixed costs $20,000,000Setup costs $1,600,000 $77,600,000Operating income $22,400,000Working:Sales =20,000 x $5,000=$100,000,000Variable costs 20,000 x $2,800= $56,000,000Fixed costs $1,000 x 5,000 x 4= $20,000,000Setup costs $400,000 x 4= $1,600,000question 2:Sales $100,000,000Costs:Variable costs $70,000,000Fixed costs $20,000,000Setup costs $2,000,000 $92,000,000Operating income $ 8,000,000Working:Sales $25,000 x $4,000=$100,000,000Variable costs=$25,000 x $2,800=$70,000,000Setup costs $400,000 x 5=$2,000,0003. (TCO 7) Mercy Greeting Cards Incorporated is starting a new business venture and is in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows:∙ For 16 times each year, a new card design will be put into production. Each new design will require $100 in setup costs.∙ The parchment grade card product line incurred $75,000 in development costs and is
expected to be produced over the next four years.∙ Direct costs of producing the designs average $0.50 each.∙ Indirect manufacturing costs are estimated at $50,000 per year.∙ Customer service expenses average $0.10 per card.