General Business 519: Measurement and Decision Making

Subject: Business    / Accounting
Question

The Unit 3 Assignment includes the following textbook problems:

Exercise 9-35 – found on page 350 in your textbook

Problem 10-43 – found on page 407 in your textbook

Submit your assignment using a single Excel workbook. Place each exercise/problem on a separate tab (sheet). Format the Excel spreadsheet to make all computations. The computations must be included in the assignment solutions. Be sure that you highlight or otherwise distinguish the answers.

When you have completed the assignment, upload your completed Excel document to the Unit 3 Assignment Dropbox before Tuesday, 11:59 PM (ET) of Unit 3. Name your assignment filename using this format: LastName_FirstName_Unit#_AssignmentName. For example, the Unit 3 assignment would be named:

10-43 Accounts Receivable Collections Esplanade Company’s credit sales have the following historical

pattern:

70 percent collected in the month of sale

15 percent collected in the first month after month of sale

10 percent collected in the second month after month of sale

4 percent collected in the third month after month of sale

1 percent uncollectible

The following sales on open account (credit sales) have been budgeted for the last six months in

2010:

July $60,000 October 90,000

August 70,000 November 100,000

September 80,000 December 85,000

Required

1. Determine the estimated total cash collections from accounts receivable during October 2010.

2. Compute the estimated total cash collections during the fourth quarter from credit sales of the fourth quarter

9-35 CVP Analysis Connelly, Inc., a manufacturer of quality electric ice cream makers, has experienced

a steady growth in sales over the past few years. Since her business has grown, Jan DeJaney, the

president, believes she needs an aggressive advertising campaign next year to maintain the company’s

growth. To prepare for the growth, the accountant prepared the following data for the current year:

Variable costs per ice cream maker

Direct labor $ 13.50

Direct materials 14.50

Variable overhead 6.00

Total variable costs $ 34.00

Fixed costs

Manufacturing $ 82,500

Selling 42,000

Administrative 356,000

Total fixed costs $480,500

Selling price per unit $ 65.00

Expected sales (units) 30,000

Required

1. If the costs and sales price remain the same, what is the projected operating profit for the coming year?

2. What is the breakeven point in units for the coming year?

3. Jan has set the sales target for 35,000 ice cream makers which she thinks she can achieve by an additional

fixed selling expense of $200,000 for advertising. All other costs remain as in requirement 1. What will

be the operating profit if the additional $200,000 is spent on advertising and sales rise to 35,000 units?

4. What will be the new breakeven point if the additional $200,000 is spent on advertising?

5. If the additional $200,000 is spent for advertising in the next year, what is the required sales level in

units to equal the current year’s income at 30,000 units?