Question: Refer to the information in Problem 6-
Refer to the information in Problem 6-44. All purchases made in a given month are paid for in the following month, and direct material purchases make up all of the accounts payable balance and are reflected in the accounts payable balances at the beginning and the end of the year. Sales are made to customers with terms net 45 days. Fifty percent of a month’s sales are collected in the month of the sale, 25% are collected in the month following the sale, and 25% are collected two months after the sale and are reflected in the accounts receivables balances at the beginning and the end of the year. Direct manufacturing labor, variable manufacturing overhead and variable marketing costs are paid as they are incurred. Fifty percent of fixed manufacturing overhead costs, 60% of fixed marketing costs, and 100% of fixed distribution costs are depreciation expenses. The remaining fixed manufacturing overhead and marketing costs are paid as they are incurred. Selected balances for December 31, 2017, follow: Cash………………………..$29,200 Accounts payable………. 21,450 accounts receivable…. 40,000 Selected budget information for December 2018 follows: Accounts payable……..$27,770 Accounts receivable…..48,500 Hazlett has budgeted to purchase equipment costing $145,000 for cash during 2018. Hazlett desires a minimum cash balance of $25,000. The company has a line of credit from which it may borrow in increments of $1,000 at an interest rate of 12% per year. By special arrangement, with the bank, Hazlett pays interest when repaying the principal, which only needs to be repaid in 2019. 1. Prepare a cash budget for 2018. If Hazlett must borrow cash to meet its desired ending cash balance, show the amount that must be borrowed. 2. Does the cash budget for 2018 give Hazlett’s managers all of the information necessary to manage cash in 2018? How might that be improved? 3. What insight does the cash budget give to Hazlett’s managers that the budgeted income statement does not? From problem 44: Hazlett, Inc., operates at capacity and makes plastic combs and hairbrushes. Although the combs and brushes are a matching set, they are sold individually and so the sales mix is not 1:1. Hazlett’s management is planning its annual budget for fiscal year 2018. Here is information for 2018: Input Prices Direct materials Plastic…………………………………………………$ 0.30 per ounce Bristles………………………………………………………………………..$ 0.75 per bunch Direct manufacturing labor……$ 18 per direct manufacturing labor-hour 
Hazlett accounts for direct materials using a FIFO cost flow. 
Hazlett uses a FIFO cost-flow assumption for finished-goods inventory. Combs are manufactured in batches of 200, and brushes are manufactured in batches of 100. It takes 20 minutes to set up for a batch of combs and 1 hour to set up for a batch of brushes. Hazlett uses activity-based costing and has classified all overhead costs as shown in the following table. Budgeted fixed overhead costs vary with capacity. Hazlett operates at capacity so budgeted fixed overhead cost per unit equals the budgeted fixed overhead costs divided by the budgeted quantities of the cost allocation base. 
Delivery trucks transport units sold in delivery sizes of 1,000 combs or 1,000 brushes. Do the following for the year 2018: 1. Prepare the revenues budget. 2. Use the revenues budget to: a. Find the budgeted allocation rate for marketing costs. b. Find the budgeted number of deliveries and allocation rate for distribution costs. 3. Prepare the production budget in units. 4. Use the production budget to: a. Find the budgeted number of setups and setup-hours and the allocation rate for setup costs. b. Find the budgeted total machine-hours and the allocation rate for processing costs. c. Find the budgeted total units produced and the allocation rate for inspection costs. 5. Prepare the direct material usage budget and the direct material purchases budget in both units and dollars; round to whole dollars. 6. Use the direct material usage budget to find the budgeted allocation rate for materials-handling costs. 7. Prepare the direct manufacturing labor cost budget. 8. Prepare the manufacturing overhead cost budget for materials handling, setup, processing, and inspection costs. 9. Prepare the budgeted unit cost of ending finished-goods inventory and ending inventories budget. 10. Prepare the cost of goods sold budget. 11. Prepare the nonmanufacturing overhead costs budget for marketing and distribution. 12. Prepare a budgeted income statement (ignore income taxes). 13. How does preparing the budget help Hazlett’s management team better manage the company?
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Input Quantities per Unit of Output Combs Brushes Direct materials Plastic 5 ounces 8 ounces Bristles 16 bunches Direct manufacturing labor Machine-hours (MH) 0.05 hours 0.2 hours 0.025 MH 0.1 MH Inventory Information, Direct Materials Plastic Bristles 1,820 bunches 2,272 bunches Beginning inventory 1,600 ounces Target ending inventory Cost of beginning inventory 1,766 ounces $456 $1,419 Sales and Inventory Information, Finished Goods Combs Brushes Expected sales in units Selling price Target ending inventory in units 12,000 14,000 $ 9 $ 30 1,200 1,400 Beginning inventory in units 600 1,200 Beginning inventory in dollars $ 2,700 $27,180 Cost Type Budgeted Variable Budgeted Fixed Cost Driver/Allocation Base Manufacturing Materials handling $17,235 $22,500 Number of ounces of plastic used Setup-hours Machine-hours Setup 10,245 16,650 Processing Inspection 11,640 30,000 10,500 1,560 Number of units produced Nonmanufacturing Marketing $21,150 $90,000 Sales revenue Distribution 1,170 Number of deliveries
> Describe the distinctive characteristic of FIFO computations in assigning costs to units completed and to units in ending work in process.
> Name the five steps in process costing when equivalent units are computed.
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> Explain equivalent units. Why are equivalent-unit calculations necessary in process costing?
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> “There’s no reason for me to get excited about the choice between the weighted-average and FIFO methods in my process-costing system. I have long-term contracts with my materials suppliers at fixed prices.” Do you agree with this statement made by a plan
> Why should the accountant distinguish between transferred-in costs and additional direct materials costs for each subsequent department in a process-costing system?
> “The standard-costing method is particularly applicable to process-costing situations.” Do you agree? Why?
> Give two limitations of the physical-measure method of joint-cost allocation.
> Distinguish between the sales value at splitoff method and the NRV method.
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> Provide three reasons for allocating joint costs to individual products or services.
> Why might the number of products in a joint-cost situation differ from the number of outputs? Give an example.
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> Why is the constant gross-margin percentage NRV method sometimes called a “joint-cost-allocation and a profit-allocation” method?
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> Identify and discuss arguments that individual product managers may put forward to support their preferred revenue-allocation method.
> Distinguish between the stand-alone and the incremental revenue-allocation methods.
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> What are the challenges of using the incremental cost allocation method when allocating common costs and how might they be overcome?
> Distinguish between the single-rate and the dual-rate methods.
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