Computer PROJECTFall 2012

8/12/2019 Computer PROJECTFall 2012

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Dr. M.S. BazazINDIVIDUAL COMPUTER PROJECT

ACCT 347/Bazaz/ Fall 2012 !"#a"l$%#& N'(#)*#r 27 2012+

Shaw, Inc. is a small producer and distributor of a product called Alpha. Shaw Company has becomeinterested in the preparation of operating and financial budgets. The budgets are vitally needed for

operational planning and cost control purposes. You have been asked to assist Sara, the accountant of thecompany, in the preparation of budgets for the first three months of year !" .

Sal#, F'r#-a, $% &Sara knows that the first step for the preparation of budgets is to forecast sales. Sara has been able toidentify two possible variables that drive#influence the sales of the company. They are$ the level ofdistribution of Alpha %number of dealers& and the amount of money spent on advertising %advertisinge'penditures&. Sara wants to use the (egression method for the development of a regressione)uation#model for forecasting the sales of the company. She has accumulated " months of recent dataon sales units, advertising e'penditures, and the number of dealers as shown in Table I.

TABLE I

2011 Sal#, A"(#r $,$% N )*#r ' M'% U%$ , E #%"$ r#, D#al#r,*anuary 248,000 19080 300+ebruary 256,000 19440 337

arch 264,000 19800 375April 304,000 27000 312

ay 320,000 30600 318*une 272,000 21600 303*uly 296,000 28800 315August 216,000 19800 225September 232,000 19440 247-ctober 240,000 19620 270

ovember 268,000 23400 306/ecember 280,000 25200 309

Shaw e'pects the following for the first five months of year !" $

*anuary +ebruary arch April ayAdvertising 0'penditures 1 2,!!! 1 3,!!! 1 4,!!! 1 2,3!! 1 3,5!!

o. -f /ealers 6! 7!! !5 53 23

B " # $% &anagement of Shaw Company is interested in a number of budgets. The preferred formats for budgets

are displayed in 0'hibit I. As shown in 0'hibit I, Sara8s 0'cel file has two sections. Section -ne containsthe re)uired data for the preparation of budgets. Section Two contains the budgets. Since management ofShaw wants to simulate the budgets for various possible conditions, the content of budgets will be statedall in formulas. The only area where data should be entered manually is in the data section, under the*anuary column only9 (Hint: this will require the use of excel functions including: IF, AN ,!"#, $%"N "&, $%"N %'N, $%"N etc. . Sara has prepared the following data forthe preparation of budgets$


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1. Sal#, Selling price per unit of Alpha is e'pected to be 1" in *anuary through +ebruary. +ive percent

increase in selling price is e'pected in arch. Aril and ay are e'pected to have the sameselling price as in arch.

Seventy:five %43& percent of each month8s sales are collected in the month of sale. The remainingis collected in the following month.

2. Ma% a- r$% E #%,#,;roduction of each Alpha re)uires$ /irect materials$ 3 pounds of direct material < 1!.5! per pound %e'pected to increase by "=

each month& /irect >abor$ ? hour of direct labor < 1"! per hour @ariable manufacturing overhead %each unit&$ 1!.3! per unit +i'ed manufacturing overhead$ Total of 1 3,!!! per month of which 17,!!! is depreciation

e'pense

3. O #ra $% !S#ll$% 5 A")$%$, ra $(#+ E #%,#, Sales Commission$ 1!.5! per unit

Shipping and andling$ 1!.3! per unit +i'ed -perating 0'penses$ Total 1" ,!!! per month of which 1",3!! is depreciation e'pense.

4. Pa6)#% ' E #%,#, -ther than purchase of materials, all ex)enses are e'pected to be paid in the month incurred.

Si'ty %2!& percent of purchases are paid in the month of purchase and the remaining is paid in thefollowing month

. Ca $ al E #%"$ r#, Shaw is in the process of e'pansion of its operations by adding new e)uipment. The e'pansion

re)uires 1 !!,!!! cash outflow in the month of *anuary and another 1"!!,!!! in the month of+ebruary.

8. L'a% R# a6)#% , 5 I% #r#, E #%,# The Company can borrow from its bank as needed to bolster the Cash account. Borrowings and

repayments of principle must be in multiples of 1",!!!, unless you are paying off the entire balance. All borrowings and repayments take place at the end of a month. The annual interestrate is " =. Interest is compounded every month and added to the principle. Compute interest onwhole month %"#" , #" , and so on&.

7. I%(#% 'r6 P'l$-6 It is the company s policy to maintain an inventory of Alpha at the end of each month e)ual to

!= of ne't month s anticipated sales. Company also maintains an inventory of raw materials e)ual to 3= of ne't month8s production

needs.

9. O #r I% 'r)a $'% Sales on /ecember of previous year were 17,72!,!!!. /irect material purchases for /ecember of the previous year were 1",5!!,!!!. The balance of cash on /ecember 7" of the previous year was 1 ",!!!. The Company desires to maintain a minimum balance of 1 !,!!! cash on hand at all times. Applicable income ta' rate is 7!=.


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R#: $r#)#% ,&Drite a one to two page single:spaced memo to the management of Shaw Company and include#attachyour findings %use "E margin along with Arial +ont with font siFe of "! for your report&. Specifically$

1. Gsing the data provided by Sara in Table I calculate all possible regression e)uations that could be usedfor forecasting sales of Shaw Company. In your memo, discuss these various e)uations and state whichof the e)uations you would recommend to be used and why. ;rovide a complete and detailed Hustificationfor your choice. Also, discuss the meaning of the regression coefficients of the e)uation that you choose.Attach your 0'cel work for this section to your memo. In your regression e)uation, carry two decimal

points for coefficient of variables and none for the intercept. (Hint: what are the r * and t+ alues- 'hatdo the re)resent-

2. Gsing the chosen e)uation in Item ", forecast sales of Shaw Company for *anuary to ay and state theresults in a Table similar to the following in the memo.

onth *anuary +ebruary arch April aySales Gnits

3. Gsing the format in 0'hibit I, summariFe the re)uisite data for the preparation of budgets in the*anuary column of Section -ne of your 0'cel file. Then, write the necessary formulas for all other cells tocalculate the budgets. +ormat nicely the content of budgets %allow two decimal points for Jper unitE itemsand JroundE to whole numbers for total items&. Attach a print copy of %a& the budgets containing numbers,and %b& the budgets displaying the formulas in the cells %don8t worry about displaying the whole formulain order to save paper9&

S#%,$ $($ 6 A%al6,$,&4. There are rumors that the price of direct materials and direct labor for Alpha to be increased by "3=and 3=, respectively effective *anuary ", !" . anagement of Shaw wants to know the impact of thisincrease on its financial position. (ecalculate the budgets by incorporating the e'pected increases in the

price of direct materials and direct labor. Compute and discuss the )ercentages of change in the )rofit and cash /alance of the company due to the increase in the price.

int$ To save time in typing, you could copy the necessary data from this Dord file to your 0'cel file.

P'$% , A,,$ %)#% &K points Clearness, completeness, and understandability of your memo3 points ;art "7 points ;art 2 points ;art 74 ;oints ;art K2 P'$% , T' al


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E $*$ ISECTION ONE& DATA FOR BUD;ETSSal#, Da a& Ja% ar6 F#*r ar6 Mar- A r$l Ma6

Sales Gnits

Selling price per unit

;ercentage of sales collected in the month of sales

;ercentage of sales collected in the following month

Var$a*l# E #%,#,&

;ounds of material needed per unit of Alpha

;rice of material per pound

/irect labor hours needed per unit of Alpha

/irect labor rate per hour

@ariable manufacturing overhead per unit of Alpha

@ariable operating e'penses per unit of Alpha

F$ #" E #%,#,&

+i'ed manufacturing overhead

/epreciation portion of fi'ed overhead

+i'ed operating e'penses

/epreciation portion of fi'ed operating e'pensesI%(#% 'r6 P'l$-6&

/esired ending inventory of Alpha %= of ne't month sales&

/esired ending inventory of / %= of ne't month s production needs&

O #r I% 'r)a $'%&

Capital 0'penditures

>oan (epayments L Interest 0'pense

Income ta' rate

inimum cash retained at the end of month

/ecember !!" Sales dollarsCash balance as of *anuary ", !!


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SECTION T


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Ca, B " # Ja% ar6 F#*r ar6 Mar- A r$l Ma6

Beginning Cash Balance

Add$ (eceipts

Current onth Sales

;rior ;eriod onth Sales

Total (eceipts

Total Cash Available

>ess$ /isbursements

/irect aterials ;urchases

/irect >abor

+i'ed anufacturing -verhead

@ariable anufacturing -verhead

+i'ed -perating 0'penses

@ariable -perating 0'penses

Income Ta'es

Capital 0'penditures

>oan (epayment L Interest 0'pense

Total /isbursements

0'cess %deficiency& of available cash over disbursements+inancing#Borrowing

0nding Cash Balance

Computer PROJECTFall 2012

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