The following information is available for Fairmount Industries from year 1 operations: Sales revenue (45,000 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits (losses) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $22,000 will be fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent. Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or administrative depreciation. Fairmount Industries Cash Basis Budgeted Income Statement For Year 2 Problem 13-59 (Static) Estimate Cash from Operations (LO 13-4) Required: Estimate the cash from operations expected in year 2. Manufacturing costs: Total manufacturing costs Marketing and administrative costs: Total cash marketing and administrative costs Total cash costs $ 1,575,000 $ 240,000 545,000 327,000 160,000 $ 171,000 41,000 162,000 15,000 $ 1,661,000 $ (86,000) $ $ 0 0 0
The following information is available for Fairmount Industries from year 1 operations: Sales revenue (45,000 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits (losses) All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $22,000 will be fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent. Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or administrative depreciation. Fairmount Industries Cash Basis Budgeted Income Statement For Year 2 Problem 13-59 (Static) Estimate Cash from Operations (LO 13-4) Required: Estimate the cash from operations expected in year 2. Manufacturing costs: Total manufacturing costs Marketing and administrative costs: Total cash marketing and administrative costs Total cash costs $ 1,575,000 $ 240,000 545,000 327,000 160,000 $ 171,000 41,000 162,000 15,000 $ 1,661,000 $ (86,000) $ $ 0 0 0
Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 4EB: Roper Furniture manufactures office furniture and tracks cost data across their process. The...
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Transcribed Image Text:The following information is available for Fairmount Industries from year 1 operations:
Sales revenue (45,000 units)
Manufacturing costs
Materials
Variable cash costs
Fixed cash costs
Depreciation (fixed)
Marketing and administrative costs
Marketing (variable, cash)
Marketing depreciation
Administrative (fixed, cash)
Administrative depreciation
Total costs
Operating profits (losses)
All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $22,000 will be
fully depreciated by the end of year 1 and will not be replaced with new equipment because it is still operating to
specification. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a
per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will
increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent.
Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or
administrative depreciation.
Required:
Estimate the cash from operations expected in year 2.
Problem 13-59 (Static) Estimate Cash from Operations (LO 13-4)
Fairmount Industries
Cash Basis Budgeted Income Statement
For Year 2
Manufacturing costs:
Total manufacturing costs
Marketing and administrative costs:
$ 1,575,000
$ 240,000
545,000
327,000
160,000
Total cash marketing and administrative costs
Total cash costs
171,000
41,000
162,000
15,000
$ 1,661,000
$ (86,000)
$
$
$
0
0
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