Cost Accounting (14th Edition)

ASSIGNMENT MATERIAL 215
to the best customers, it still averages about 2% for uncollectible accounts; 90% of store accounts are paid
in the month following the purchase, and 8% are paid two months after purchase.
1. Calculate the cash that Game Guys expects to collect in May and in June of 2012. Show calculations
for each month.
2. Game Guys has budgeted expenditures for May of $4,350 for the purchase of games and game systems,
$1,400 for rent and utilities and other costs, and $1,000 in wages for the two part time employees.
a. Given your answer to requirement 1, will Game Guys be able to cover its payments for May?
b. The projections for May are a budget. Assume (independently for each situation) that May revenues
might also be 5% less and 10% less, and that costs might be 8% higher. Under each of those three
scenarios show the total net cash for May and the amount Game Guys would have to borrow if cash
receipts are less than cash payments. Assume the beginning cash balance for May is $100.
3. Suppose the costs for May are as described in requirement 2, but the expected cash receipts for May are
$6,200 and beginning cash balance is $100. Game Guys has the opportunity to purchase the games and
game systems on account in May, but the supplier offers the company credit terms of 2/10 net 30, which
means if Game Guys pays within 10 days (in May) it will get a 2% discount on the price of the merchandise.
Game Guys can borrow money at a rate of 24%. Should Game Guys take the purchase discount?
Required
Problems
6-28 Budget schedules for a manufacturer. Logo Specialties manufactures, among other things, woolen
blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric
and sews on a logo patch purchased from the licensed logo store site. The teams are as follows:
Knights, with red blankets and the Knights logo
Raiders, with black blankets and the Raider logo
Also, the black blankets are slightly larger than the red blankets.
The budgeted direct-cost inputs for each product in 2012 are as follows:
Knights Blanket Raiders Blanket
Red wool fabric 3 yards 0
Black wool fabric 0 3.3 yards
Knight logo patches 1 0
Raider logo patches 0 1
Direct manufacturing labor 1.5 hours 2 hours
Unit data pertaining to the direct materials for March 2012 are as follows:
Actual Beginning Direct Materials Inventory (3/1/2012)
Knights Blanket Raiders Blanket
Red wool fabric 30 yards 0
Black wool fabric 0 10 yards
Knight logo patches 40 0
Raider logo patches 0 55
Target Ending Direct Materials Inventory (3/31/2012)
Knights Blanket Raiders Blanket
Red wool fabric 20 yards 0
Black wool fabric 0 20 yards
Knight logo patches 20 0
Raider logo patches 0 20
Unit cost data for direct-cost inputs pertaining to February 2012 and March 2012 are as follows:
February 2012 (actual) March 2012 (budgeted)
Red wool fabric (per yard) $8 $9
Black wool fabric (per yard) 10 9
Knight logo patches (per patch) 6 6
Raider logo patches (per patch) 5 7
Manufacturing labor cost per hour 25 26