Subject: Business / Accounting
QuestionUse the following data to answer questions 11, 12, & 13Western Company is an online retailer that purchases merchandise for resale. The company sells a single product. Inventory, production, and sales data (in units) have been forecasted for the next three months and are listed below:JanuaryFebruaryMarchBeginning Inventory10,00010,00010,000Merchandise Purchases60,00070,00035,000Sales60,00070,00040,000Ending Inventory10,00010,0005,000Units are sold for $6 each. One fourth of all sales are paid for in the month of sale and the balance are paid for in the following month. Accounts receivable at December 31 totaled $225,000.Merchandise is purchased for $3.50 per unit. Half of the purchases are paid for in the month of the purchase and the remainder are paid for in the month following purchase. Selling and administrative expenses are expected to total $60,000 each month. One half of these expenses will be paid in the month in which they are incurred and the balance will be paid in the following month. Depreciation is $2,000 per month. The accounts payable balance at December 31 totaled $145,000.Cash at December 31 totaled $40,000. A payment of $150,000 for purchase of equipment is scheduled for February and a dividend of $100,000 is to be paid in March.11. Prepare a schedule of cash collections for each of the months January, February, and March. (10 points)12. Prepare a schedule of showing expected cash disbursements for merchandise purchases and selling and administrative expenses during each of the months January, February, and March. (10 points)13. Prepare a cash budget for each of the months January, February, and March. There is no minimum required ending cash balance. (10 points)Use the following data to answer questions 14 & 15High Prairie Industries produces three products, A, B, & C. The selling price, variable costs, and contribution margin for one unit of each product follow:ProductX Y ZSelling price $120 $180 $160Variable costs:Direct materials 54 28 80Direct labor 24 64 32Variable manufacturing overhead 6 16 8Total variable costs 84 108 120Contribution margin $36 $72 $40Contribution margin ratio 30% 40% 25%Due to a strike in the plant of one of its competitors, demand for the company’s products far exceeds its capacity to produce. Management is trying to determine which product(s) to concentrate on next week in filling its backlog of orders. The direct labor rate is $16 per hour, and only 3,000 hours of labor time are available each week.14. Which orders would you recommend that the company work on next week – the order for Product X, Product Y, or Product Z? Show computations. (6 points)15. By paying overtime wages, more than 3,000 hours of direct labor time can be made available next week. Up to how much should the company be willing to pay per hour in overtime wages as long as there is unfilled demand for the three products? Explain. (4 points)16. Donelan Products makes high-pressure lines for a variety of heavy road-improvement equipment. Donelan Products sells the lines to companies that manufacture and sell the equipment. The company’s market research department has discovered a market for high-pressure lines used in automated manufacturing equipment, which Donelan Products currently does not produce. The market research department has indicated that lines would likely sell for $50 per foot.Assume Donelan Products desires an operating profit of 20 percent of sales. What is the highest acceptable manufacturing cost per foot for which Donelan Products would produce the lines? (5 points)17. Charity Quilt Company produces and sells custom quilts. The company has a standard cost system to help control costs and has established the following labor standards for completing quilt tops. (10 points)Standard labor-hours per unit of output: 5.4 hoursStandard labor rate: $10.20 per hourThe following data pertain to quilt top operations for the last month.Actual hours worked: 1,000 hoursActual labor cost: $10,600Actual output: 200 unitsCompute the following variancesDirect labor rate and efficiency variances.