Cost Accounting Project Essay

752 Words Apr 23rd, 2014 4 Pages
The board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about $50,000 of new equipment each year and wants to begin a fund to purchase a $600,000 piece of property for club expansion.
The club manager is concerned about the club’s capability to purchase equipment and expand its facilities. One club member has agreed to help prepare the following financial statements and help the manager ascertain whether the plans are realistic. Additional information follows the financial statements.

Additional Information
1. Other financial information as of October 31, Year 9:
a. Cash in checking account,
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8. Lesson and class employees’ wages and benefits will increase to $604,650. The wages and benefits of regular employees and the manager will increase 15 percent. Equipment depreciation and supplies, utilities, and miscellaneous expenses are expected to increase 25 percent.
a. Construct a cash budget for year 10 for Cortez Beach Yacht Club.
b. Identify any operating problem(s) that this budget discloses for CBYC. Explain your answer.
c. Is the manager’s concern that the board’s goals are unrealistic justified? Explain your answer.


The income statement is on a cash basis, hence we start with a budgeted income statement.
a. Cortez Beach Yacht Club Budgeted Statement of Income (Cash Basis) For the Year 10 Cash revenue

Annual membership fees
$710,000 x 1.1 x 1.03 $804,430 Lesson and class fees
(468,000 ÷ 360,000) x $468,000)

(4,000 ÷ 3,000) x $4,000)
613,733 Total cash received $1,418,163
Cash costs

Manager’s salary and benefits ($72,000 x 1.15)
$ 82,800 Regular employees’ wages and benefits ($380,000 x 1.15)
Lesson and class employee wages and benefits (given)
Supplies ($32,000 x 1.25)
Utilities (heat and light) ($44,000 x 1.25)
Mortgage interest ($720,000 x .06)a
Miscellaneous ($4,000 x 1.25) 5,000 Total cash expenses

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