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Ch.08 Kinney 9e SM - Final
Ch.08 Kinney 9e SM - Final
19. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
A 600,000 300,000 640,000 460,000
$17 $16 $14 $12
$10,200,000 $ 4,800,000 $ 8,960,000 $5,520,000 $29,480,000
B 400,000 700,000 250,000 650,000
$17 $16 $14 $12
$ 6,800,000 $11,200,000 $ 3,500,000 $7,800,000 $29,300,000
C 530,000 480,000 800,000 190,000
$17 $16 $14 $12
$ 9,010,000 $ 7,680,000 $11,200,000 $2,280,000 $30,170,000
The most financially beneficial scenario would be C; however, given the large
discrepancies in sales quantities per quarter, Pataky Company may not be able
to smooth production activities over the year. There would need to be a large
inventory build-up for the third quarter, which would increase the costs of non-
value-added costs of moving and storing units. The extreme decline in fourth
quarter sales might result in layoffs, if other value-added activities could not be
developed for direct labor employees.
Scenario A might actually be a better situation because of the less dramatic ad-
justments between quarters.
223
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224 Chapter 8
Concrete Gravel
Production in feet 187,750 187,750
Pounds per foot 4 7.5
Pounds for production 751,000 1,408,125
EI 34,300 46,250
Total pounds needed 785,300 1,454,375
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accessible website, in whole or in part.
Chapter 8 225
BI (41,000) (32,650)
Purchase (pounds) 744,300 1,421,725
Cost per pound $0.10 $0.04
Total cost $ 74,430 $ 56,869
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accessible website, in whole or in part.
226 Chapter 8
December collections:
From October billings ($100,000 0.30) $30,000
From November billings ($65,000 0.55) 35,750
From December billings ($15,000 0.15) 2,250
Total December collections $68,000
c. y = $250,000 + $17.50X
y = $250,000 + ($17.50 7,500)
y = $250,000 + $131,250 = $381,250 total overhead
Cash overhead cost = $381,250 $95,000 = $286,250
d. Beginning cash balance $ 15,000
Cash collections 470,500
Total cash available $ 485,500
Disbursements:
Payoff of note payable $ 52,500
Interest on note payable 4,700
Purchase of computer system 17,900
Operating costs and inventory purchases 193,500
Direct labor wages 110,000
Overhead costs 106,400
Selling and administrative costs 94,800 (579,800)
Cash deficiency $ (94,300)
Borrowings needed 100,000
Ending cash balance $ 5,700
(December 11, 2003), p. A14.
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.