Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 6, Problem 6.26AE
LO 5
(Learning Objective 5: Use the COGS model to make management decisions) McGuire Industries prepares budgets to help manage the company. McGuire is budgeting for the fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017, sales totaled $9,200 million and cost of goods sold was $6,300 million. At January 31, 2017, inventory was $1,700 million. During the upcoming 2018 year, suppose McGuire expects cost of goods sold to increase by 12%. The company budgets next year’s ending inventory at $2,000 million.
Requirement
1. One of the most important decisions a manager makes is how much inventory to buy. How much inventory should McGuire purchase during the upcoming year to reach its budget?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
(Learning Objective 2: Compare gross profit—FIFO vs. LIFO—falling prices)Suppose a Walmart store in Fillmore, Missouri, ended January 2018 with 900,000 units ofmerchandise that cost $5 each. Suppose the store then sold 50,000 units for $510,000 duringFebruary. Further, assume the store made two large purchases during February as follows:Feb 10 10,000 units @ $3.10 = $31,00021 25,000 units @ $2.20 = $55,000Requirements1. Calculate the store’s gross profit under both FIFO and LIFO at February 28.2. What caused the FIFO and LIFO gross profit figures to differ?
(J)
Citations are required for this exercise. Comments to other students must be detailed and substantive.
Alpaca Industries, located in the beauty pacific Northwest, manufactures a household electronic device. The company is fairly small with revenues and total assets of approximately $370,000 and $300,000, respectively. The company has never maintained a budget since its inception, and as a new hire, you are eager to create a budget for the company. Write a 1-page memo, explaining to the owner the advantages of budgeting. In your memo, provide exact page number citations.
Please note that any responses without citations will not be graded. Only the original responses are graded; subsequent edits are not graded.
Roberds Tech is a for-profit vocational school. The school bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting:
Fixed element per month
Variable element per student
Variable element per course
Revenue
$ 0
$ 298
$ 0
Faculty wages
$ 0
$ 0
$ 3,100
Course supplies
$ 0
$ 52
$ 40
Administrative expenses
$ 26,500
$ 27
$ 52
In March, the school budgeted for 1,910 students and 88 courses. The school's income statement showing the actual results for the month appears below:
Roberds Tech
Income Statement
For the Month Ended March 31
Actual students
1,810
Actual courses
91
Revenue
$ 411,340
Expenses:
Faculty wages
214,950
Course supplies
62,590
Administrative expenses
84,562
Total expense
362,102
Net operating income
$ 49,238
Required:
Prepare a flexible budget performance report showing both the school's activity variances and revenue and spending…
Chapter 6 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Ch. 6 - Ravenna Candles recently purchased candleholders...Ch. 6 - Which inventory system maintains a running record...Ch. 6 - How is cost of goods sold classified in the...Ch. 6 - Snyders total cost of goods available for sale...Ch. 6 - Snyders cost of goods sold using the average-cost...Ch. 6 - Snyders ending inventory using the FIFO method...Ch. 6 - Snyders cost of goods sold using the LIFO method...Ch. 6 - Which U.S. GAAP principle or rule would apply if...Ch. 6 - Corrigan Corporation had beginning inventory of...Ch. 6 - Corrigans gross profit for the period is a.79,000....
Ch. 6 - What is Corrigans gross profit percentage (rounded...Ch. 6 - Prob. 12QCCh. 6 - A companys beginning inventory is 150,000, its net...Ch. 6 - An understatement of ending inventory by 2 million...Ch. 6 - Prob. 6.1ECCh. 6 - LO 1 (Learning Objective 1: Show how to account...Ch. 6 - LO 1 (Learning Objective 1: Show how to account...Ch. 6 - LO 1 (Learning Objective 1: Show how to account...Ch. 6 - (Learning Objective 2: Apply the average-cost,...Ch. 6 - (Learning Objective 2: Compare income tax effects...Ch. 6 - LO 2 (Learning Objective 2: Apply the average-cost...Ch. 6 - (Learning Objective 2: Apply the FIFO method)...Ch. 6 - (Learning Objective 2: Apply the LIFO method)...Ch. 6 - (Learning Objective 2: Compare income, tax, and...Ch. 6 - LO 3 (Learning Objective 3: Apply the...Ch. 6 - (Learning Objective 4: Compute ratio data to...Ch. 6 - (Learning Objective 5: Estimate ending inventory...Ch. 6 - (Learning Objective 6: Analyze the effect of an...Ch. 6 - Prob. 6.14SCh. 6 - LO 1,2 (Learning Objectives 1, 2: Show how to...Ch. 6 - LO 1,2 (Learning Objectives 1, 2: Show how to...Ch. 6 - LO 2 (Learning Objective 2: Compare ending...Ch. 6 - (Learning Objective 2: Compare the tax advantage...Ch. 6 - Prob. 6.19AECh. 6 - LO 2 (Learning Objective 2: Compare ending...Ch. 6 - LO 2 (Learning Objective 2: Compare gross...Ch. 6 - Prob. 6.22AECh. 6 - LO 5 (Learning Objective 5: Compute cost of goods...Ch. 6 - Prob. 6.24AECh. 6 - LO 4 (Learning Objective 4: Compute and evaluate...Ch. 6 - LO 5 (Learning Objective 5: Use the COGS model to...Ch. 6 - LO 5 (Learning Objective 5: Use the COGS model to...Ch. 6 - LO 6 (Learning Objective 6: Analyze the effect of...Ch. 6 - LO 1, 2 (Learning Objectives 1, 2: Show how to...Ch. 6 - LO 1, 2 (Learning Objectives 1, 2: Show how to...Ch. 6 - LO1, 2 (Learning Objectives 1, 2: Show how to...Ch. 6 - Prob. 6.32BECh. 6 - LO 2 (Learning Objective 2: Apply the average,...Ch. 6 - Prob. 6.34BECh. 6 - Prob. 6.35BECh. 6 - Prob. 6.36BECh. 6 - Prob. 6.37BECh. 6 - Prob. 6.38BECh. 6 - Prob. 6.39BECh. 6 - Prob. 6.40BECh. 6 - Prob. 6.41BECh. 6 - Prob. 6.42BECh. 6 - Prob. 6.43QCh. 6 - Prob. 6.44QCh. 6 - Prob. 6.45QCh. 6 - The word market as used in the lower of cost or...Ch. 6 - Prob. 6.47QCh. 6 - Prob. 6.48QCh. 6 - Prob. 6.49QCh. 6 - In a period of rising prices, a.cost of goods sold...Ch. 6 - Prob. 6.51QCh. 6 - The following data come from the inventory records...Ch. 6 - Prob. 6.53QCh. 6 - Prob. 6.54QCh. 6 - Prob. 6.55QCh. 6 - Prob. 6.56QCh. 6 - Prob. 6.57QCh. 6 - Prob. 6.58QCh. 6 - Prob. 6.59QCh. 6 - LO 1, 2 (Learning Objectives 1, 2: Show how to...Ch. 6 - Prob. 6.61APCh. 6 - LO 2 (Learning Objective 2: Compare inventory by...Ch. 6 - LO 2 (Learning Objective 2: Compare various...Ch. 6 - Prob. 6.64APCh. 6 - (Learning Objective 4: Compute and evaluate gross...Ch. 6 - LO 4, 5 (Learning Objectives 4, 5: Compute gross...Ch. 6 - Prob. 6.67APCh. 6 - Prob. 6.68APCh. 6 - Prob. 6.69BPCh. 6 - LO 2 (Learning Objective 2: Apply various...Ch. 6 - Prob. 6.71BPCh. 6 - LO 2 (Learning Objective 2: Compare various...Ch. 6 - LO 3 (Learning Objective 3: Explain GAAP and apply...Ch. 6 - Prob. 6.74BPCh. 6 - Prob. 6.75BPCh. 6 - LO 5 (Learning Objective 5: Use the COGS model to...Ch. 6 - Prob. 6.77BPCh. 6 - Prob. 6.78CEPCh. 6 - Prob. 6.79CEPCh. 6 - Prob. 6.80CEPCh. 6 - Prob. 6.81CEPCh. 6 - Prob. 6.82SCCh. 6 - Prob. 6.83DCCh. 6 - Prob. 6.85EICCh. 6 - Prob. 1FFCh. 6 - Prob. 1FA
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 7-23A Compute breakeven and project income (Learning Objectives 1 & 2)Grover’s Steel Parts produces parts for the automobile industry. The company hasmonthly fixed expenses of $630,000 and a contribution margin of 70% of revenues.Requirements1. Compute Grover’s Steel Parts’ monthly breakeven sales in dollars.2. Use the contribution margin ratio to project operating income (or loss) if revenues are$520,000 and if they are $1,010,000.3. Do the results in Requirement 2 make sense given the breakeven sales you computedin Requirement 1? Explain.arrow_forwardThe management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month cash sales sales on account purchasesAugust $85,000 $640,000 $420,000September $70,000 $550,000 $550,000October $ 88,550 $ 600,000 $500,000November $77,160 $800,000 $600,000December $174,870 $500,000 $450,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:50% in the month of sale30% in the first month following the sale20% in the second month following the sale Required The business needs to have a sense of its future cashflows and therefore requires the preparation of the following: 1. A schedule of budgeted cash collections for trade receivables (sales on account) for…arrow_forwardThe management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month cash sales sales on account purchasesAugust $85,000 $640,000 $420,000September $70,000 $550,000 $550,000October $ 88,550 $600,000 $500,000November $77,160 $800,000 $600,000December $174,870 $500,000 $450,000 Expected purchases include monthly cash purchases of 5%. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit terms –2/30, n60: Expected purchases include monthly cash purchases of 5%. All…arrow_forward
- The management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month cash sales sales on account purchasesAugust $85,000 $640,000 $420,000September $70,000 $550,000 $550,000October $88,550 $600,000 $500,000November $77,160 $800,000 $600,000December $174,870 $500,000 $450,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:50% in the month of sale30% in the first month following the sale20% in the second month following…arrow_forwardThe management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month cash sales sales on account purchasesAugust $85,000 $640,000 $420,000September $70,000 $550,000 $550,000October $ 88,550 $600,000 $500,000November $77,160 $800,000 $600,000December $174,870 $500,000 $450,000 Expected purchases include monthly cash purchases of 5%. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit terms –2/30, n60: 60% in the month in which the inventory is purchased40% in the…arrow_forwardThe management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month cash sales sales on account purchasesAugust $85,000 $640,000 $420,000September $70,000 $550,000 $550,000October $88,550 $600,000 $500,000November $77,160 $800,000 $600,000December $174,870 $500,000 $450,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:50% in the month of sale30% in the first month following the sale20% in the second month following the saleii) Expected purchases include…arrow_forward
- The management accountant at Miller Merchandising & More, Odail Russell is in the process ofpreparing the cash budget for the business for the fourth quarter of 2021. It is customary for thebusiness to borrow money during this quarter. Extracts from the sales and purchases budgets areas follows:Month cash sales sales on account purchasesAugust $85,000 $640,000 $420,000September $70,000 $550,000 $550,000October $88,550 $ 600,000 $500,000November $77,160 $800,000 $600,000December $174,870 $500,000 $450,000 i) An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:50% in the month of sale30% in the first month following the sale20% in the…arrow_forwardWeek 6 South Hampton University is preparing its budget for the upcoming academic year. This is a specialised private university that charges fees for all degree courses. Currently, 30,000 students are enrolled on campus. However, the university is forecasting a 5 per cent growth in student numbers in the coming year, despite an increase in fees to $3,000 per subject. The following additional information has been gathered from an examination of university records and conversations with university managers: South Hampton is planning to award scholarships to 200 students, which will cover their fees. The average class has 80 students, and the typical student takes 4 subjects per semester. South Hampton operates 2 semesters per year. The average academic staff salary is $120,000 per annum including on-costs. South Hampton’s academic staff are evaluated on the basis of teaching, research, administration and professional/community service. Each of the academic staff…arrow_forwardICE TASK 4 – Budgeting Techniques The University of Africa requires all second-year engineering students to have their own laptop computers to do practical work and tasks. During the last quarter of 2022, a private company, Laptops for Students Proprietary Limited (“LFS”) was established to supply laptops according to the specifications set by the university, at affordable prices. At that time, a loan of R800 000 was granted to LFS and the funds were deposited into the bank account. Prior to the receipt of the loan amount no cash transactions occurred. The following additional information is available for LFS: According to estimates, 200 of the 400 second year engineering students will buy their laptops from LFS. There are two types of laptops which will be supplied, namely Exceptional at a selling price of R10 000 and Superior at a selling price of R8 000. Since the Exceptional laptop has a more powerful hard drive, it is expected that 60% of the 200 students will prefer to…arrow_forward
- McGuire prepares budgets to help manage the company. McGuire is budgeting forthe fiscal year ended January 31, 2016. During the preceding year ended January 31, 2015, salestotaled $9,500 million and cost of goods sold was $6,300 million. At January 31, 2015, inventorywas $1,800 million. During the upcoming 2016 year, suppose McGuire expects cost of goodssold to increase by 10%. The company budgets next year’s ending inventory at $2,100 million.Requirement1. One of the most important decisions a manager makes is how much inventory to buy. Howmuch inventory should McGuire purchase during the upcoming year to reach its budget?arrow_forwardMANAGEMENT ACCOUNTING Gxsport is a small business manufactures sportswear focusing on tracksuits. Gxsportperform very well in 2021 with yearly sales amounting to RM630,000, equivalent to 12,600pieces sold. For the 1st quarter of 2022, the sales are predicted to increase by 7% ascompared to 2021’s sales due to the raised of awareness for a healthy lifestyle.The price of the tracksuit is RM50 per piece. The labour rate is RM7 per hour and eachpiece of tracksuit requires 0.4 hours to make. Manufacturing overheads are charges atRM1.50 per piece. The inventory is expected to have a balance of 500 pieces of tracksuitsas at 1st January 2022 and increase by 10% as at 31st March 2022.Calculate the production budget (in unit) for the 1st quarter 2022 (1st January to 31st March2022).arrow_forwardQUESTION 3: Based on the following assumptions and policies ; a) Prepare the budget for Collectables from Sales! b) Prepare the budget for Purchases! c) Prepare the budget of Cash Payment for Purchases! d) Set the company’s Cash Budget for 2021 BOARD Policies & Assumptions - Company’s projected sales for the three months as followings: Sales Forecast for 2021 January 2021 200.000 USD February 2021 220.000 USD March 2021 240.000 USD - All Sales are credited: %40 of sales are collected as in form of cash. %30 of sales are credited for 1 month and %30 of it for the next month. Rule: 40;30;30 - Accounts Receivables by quarter ending 31/12/2020 amounted to 120.000 USD a) 30.000 USD of Account Receivables belong to November Sales ( 11/2020) b) 90.000 USD of Account Receivables belong to December Sales ( 12/2020) - All purchases are credited: %50 of purchases are paid in advance and %50 of purchases are debited - Projected Inventories by the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Responsibility Accounting| Responsibility Centers and Segments| US CMA Part 1| US CMA course; Master Budget and Responsibility Accounting-Intro to Managerial Accounting- Su. 2013-Prof. Gershberg; Author: Mera Skill; Rutgers Accounting Web;https://www.youtube.com/watch?v=SYQ4u1BP24g;License: Standard YouTube License, CC-BY