final

1st Part done..need help with 2nd part!

Sales were 20,000 units in June 2014. Forecasted sales in units are as follows: July, 19,000; August, 21,000; September, 20,000; October, 24,000. The product’s selling price is $17.50 per unit and its total product cost is $14.35 per unit. 2. The June 30 finished goods inventory is 14,700 units. 3. Going forward, company policy calls for a given month’s ending finished goods inventory to equal 70% of the next month’s expected unit sales. 4. The June 30 raw materials inventory is 4,375 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $8 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month’s ending raw materials inventory to equal 20% of the next month’s materials requirements. 5. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour. 6. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead. 7. Monthly general and administrative expenses include $12,000 administrative salaries and 0.9% monthly interest on the long-term note payable. 8. Sales representatives’ commissions are 10% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,750 per month. 9. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale). 10. All raw materials purchases are on credit, and no payables arise from any other transactions. One month’s raw materials purchases are fully paid in the next month. 11. Dividends of $20,000 are to be declared and paid in August. 12. Income taxes payable at June 30 will be paid in July. Income tax expense will be assessed at 35% in the quarter and paid in October. 13. Equipment purchases of $100,000 are budgeted for the last day of September.

Teachers comments

2ND PART..NEED HELP!!

a) Discuss the initial budget process, the variances, and potential reasons for the variances.

b) Determine changes you think the company should make based on the variance analysis. What will the changes accomplish?

c) What are the ethical considerations of the changes you have selected? Why are you recommending these particular changes?

d) Decide whether you continue buying a particular component of one of your products or making the product in-house. Develop a recommendation on the “make” or “buy” decision for the given component. What factors did you consider?

e) What are the ethical considerations of your decision? What implications could this decision have?

f) Describe how your decision was reached. How will this impact the efficiencies of your operation?

g) What suggestions would you make for nonfinancial performance measures that the company should adopt? What are the pros and cons of each?

h) What are the ethical considerations of your suggestions? Explain the significance of each.