F&M Accounting individual assignment 2022

Question

Required
Compute and compare the following ratios for the year 2020 & comment it based on the

Industry standard indicated below (1 point each and 10 points in total):

Answer No 1
Industry Calculate
S.No Ratios average d result Comment based on industry standard
.
1 Current ratio 2.4 2 The ratio is weaker than the industry average
2 Inventory turnover 5 6 Better inventory turnover
3 Total assets turnover 1.2 1 Weak total assets turnover ratio (less assets
utilization to generate sales )
4 Average collection 60 days 73 days They take extra days to collect account
period receivable (poor collection)
5 Total debt to assets 53% 40% Less assets to cover company debt relative to
the industry
6 Interest coverage 5 times 6 times Better interest coverage ratio.
ratios
7 Gross profit margin 30% 40% Higher gross margin that the industry average
8 Net profit margin 20% 17.5% Less profit margin, it indicates the company
has higher expenses than others.
9 Return on investment 21% 17.5% Less Return on investment, less asset
utilization in the process of generating
revenue.
Question 2:-
The following information is taken from Mega Company’s production budget for three models
of fax machines in October 2001 (all in units):

Required: - Fill in the missing numbers

Answer No 2
S.No Model 101 Model 201 Model 301
1 Beginning finished goods inventory 11 8 45
2 Targeted ending finished goods 14 6 33
inventory
3 Budgeted production 183 191 855
4 Budgeted sales 180 193 867
5 Total required units (2+4) 194 199 900

Question 3:- Consider the following independent cases

a. The Mendez Company expects sales in 2002 of 100,000 units of serving trays. Mendez’s
beginning inventory for 2002 is 7,000 trays; target ending inventory, 11,000 trays.
Compute the number of trays budgeted for production in 2002.

Answer No 3a

Sales and production budget

Budgeted sales in unit 100,000

Add targeted ending finished goods inventory 11,000

Total requirement 111,000

Deducts finished goods inventory 7,000

Unites to be produced 104,000

2
 b. Inglenook Co. produces wine. The company expects to produce 1,500,000 2-liter bottles
of Chablis in 2002. Inglenook purchases empty glass bottles from an outside vendor. Its
target-ending inventory of such bottles is 50,000; its beginning inventory is 20,000. For
simplicity, ignore breakage. Compute the number of bottles to be purchase in 2002.

Answer No 3b

Direct materials purchases budget.

Direct materials to be used in production (2-lit bottles) 1,500,000

Add target ending direct materials inventory (2-lit bottles) 50,000

Total requirements (2-lit bottles) 1,550,000

Deduct beginning direct materials inventory (2-lit bottles) 20,000

Direct materials to be purchased (2-lit bottles) 1,530,000

c. The Mahoney Company has prepared a sales budget of 42,000 finished units for a three
month period. The company has an inventory of 22,000 units of finished goods on hand
at December 31 and has a target finished foods inventory of 24,000 units at the end of the
succeeding quarter. It takes 3 gallons of direct materials to make one unit of finished
product. The company has an inventory of 90,000 gallons of direct materials at December
31 and has a target ending inventory of 110,000 gallons at the end of the succeeding.
How many gallons of direct material should be purchased during the three months
ending March 31?

Answer No 3c
Budgeting material purchases.

Production Budget: Finished Goods (unit)

Budgeted sales 42,000

Add target ending finished goods inventory 24,000

Total requirements 66,000

Deduct beginning finished goods inventory 22,000

Units to be produced 44,000

3
Direct Materials Purchases Budget: (in gallons)

Direct materials needed for production (44,000 * 3) 132,000

Add target ending direct materials inventory 110,000

Total requirements 242,000

Deduct beginning direct materials inventory 90,000

Direct materials to be purchased 152,000

Question 4

Purity, Inc., bottles and distributes mineral water from the company’s natural springs in northern
Oregon. Purity markets two products 12-ounce disposable plastic bottles and 4-gallon reusable
plastic containers.

Required: revenue and production budget

A. For the year 2001, purity-marketing mangers project monthly sales of 400,000 12 ounce
units and 100,000 4-gallon units. Average selling prices are estimated at $0.25 per 12-
ounce unit and $1.50 per 4-gallon unit. Prepare a revenues budget for purity, Inc, for the
year ending December 31, 2001.

Answer No 4A
Expected unit of 12 ounce for year = Monthly units *12

= 400,000*12

= 4,800,000 units

Expected unit of 4-gallon units for years = Monthly units*12

= 100,000*12

= 1,200,000 units

4
Revenue budget

Expected units for 12 ounce 4,800,000

Selling price * $0.25

Revenue for 12 ounce $1,200,000

Expected unit for 4-gallon 1,200,000

Selling price * $1.50

Revenue for 4-gallon $1,800,000

Budgeted total revenue for both $3,000,000

B. Purity begins 2001 whit 900,000 12-ounce units in inventory. The vice president of
operations requests that 12-ounce ending inventory on December 31, 2001 be no less
than 600,000 units. Based on sales projections as budgeted above, what is the minimum
number of 12-ounce units purity must produce during 2001?

Answer No 4B

Production Budget: For 12-ounce units

Budgeted sales 4,800,000

Add target ending inventory for 12-ounce ≥ 600,000

Total requirements 5,400,000

Deduct beginning inventory for 12-ounce 900,000

Units to be produced (minimum No of 12-ounce) 4,500,000

Question 5

The Suzuki Co. in Japan has a division that manufactures two-wheel motorcycle. Their budgeted
sale for Model G in 2002 is 800,000 units. Suzuki’s target ending inventory is 100,000 units, and
its beginning inventory is 120,000 units. The company’s budgeted selling price to its distributors
and dealers is 400,000 yen per motorcycle. Suzuki buys all its wheels from and outside supplier.
No defective wheels are accepted. (Suzuki’s needs for extra wheels for replacement parts are
ordered by a separate division of the company.) The company’s target ending inventory is 30,000
wheels, and its beginning inventory is 20,000 wheels. The budgeted purchase price is 16,000 per
wheel.

Required

5
1. Compute the budgeted revenues in yen

2. Compute the number of motorcycles to be produced.

3. Compute the budgeted purchases of wheels in units and in yen.

Answer No 5

1. Budgeted revenue in ¥
Expected units for Model G two wheel motorcycle 800,000
Selling price * ¥ 400,000
Revenue budget ¥ 320,000,000,000
2. Production budget (Model G two wheel motorcycle )

Budgeted sales 800,000

Add target ending finished goods inventory 100,000

Total requirements 900,000

Deduct beginning finished goods inventory 120,000

Units to be produced 780,000

3. Direct material purchasing budget (wheel)

Each motorcycle uses two wheels therefore the required wheels will be
800,000*2= 1,600,000 wheels

Direct materials needed for production (wheels) 1,600,000

Add target ending direct materials inventory 30,000

Total requirements 1,630,000

Deduct beginning direct materials inventory 20,000

Direct materials to be purchased (wheels) 1,610,000

Cost per wheel * ¥ 16,000

Direct material purchasing cost in ¥ ¥ 25,760,000,000