Managerial Accounting Focuses Heavily On Finding 662954

Descriptionmanagerial Accounting Focuses Heavily On Finding Solutions

Managerial Accounting focuses heavily on finding solutions to numerical problems. With that in mind, most units will include a number of problems. For each problem, you will need to provide more than a simple numerical response. Your solutions should thoroughly address the issue and present the findings in a meaningful format similar to those developed within the chapters and as part of the review exercises solutions. Part value may be assigned for incorrect responses.

Question 1: For the second quarter of the following year, Cloaks Company has projected sales and production in units as follows: January, February, March Sales 49,000 units; Production 53,000 units. Budgeted cash-related production costs are $7 per unit produced. Of these costs, 35% are paid in the month incurred, and the rest in the following month. Monthly selling and administrative expenses are $95,000. On January 31, accounts payable totals $185,000, payable in February. All units are sold on account at $13 each. Cash collections are projected as 55% in the month of sale, 25% in the following month, and 20% in the second month after sale. On January 1, accounts receivable totaled $500,000—$90,000 from November’s sales and the rest from January's sales.

Required:

1. Prepare a schedule showing budgeted cash disbursements for each month.
2. Prepare a schedule showing budgeted cash receipts for each month.

Question 2: A merchandising firm, Star Wars Enterprises, has an inventory of 42,000 units on March 31 and accounts receivable of $83,500. Budgeted sales in units for the next four months are April 55,000; May 65,000; June 81,000; July 79,000. The company’s policy requires ending inventory at the end of each month to be 35% of the next month’s sales units. The selling price per unit is $2.50. One quarter of sales are paid for in the month of sale; the remaining are paid in the following month.

Required:

1. Prepare a merchandise purchases budget for April, May, and June.
2. Prepare a schedule of expected cash collections for April, May, and June.

Question 3: Fonsey Corporation, a merchandising company, has budget data showing purchases of $39,500 in January, $47,900 in February, $37,200 in March, and $55,850 in April. Sales are projected as $69,000 in January, $59,100 in April, and other figures elsewhere. Collections from customers are normally 65% in the month of sale, 22% in the following month, and 11% in the second month following sale. Purchases are paid in the month following the purchase. Expenses other than merchandise purchases are $13,300 for May. The cash balance on May 1 was $21,500.

Required:

1. Compute the expected cash collections during May.
2. Compute the expected cash balance on May 31.

Question 4: Phil Coulson founded Coulson Spy Solutions Co. (CSS), which grew from a small startup to a complex organization. Coulson and the accountant, Maria Hill, developed the initial master budget after several meetings, then distributed it to department managers with a cover letter asking for cooperation. Some managers viewed the projections as overly optimistic and not attainable.

Required:

1. Describe how the budgeting process used at CSS differs from recommended practice.
2. Discuss the behavioral implications of Coulson and Hill’s approach to preparing the master budget.

Paper For Above instruction

Managing a company's financial planning and control processes effectively is vital for organizational success. The budgeting process is an essential component of managerial accounting, serving as a tool for resource allocation, performance evaluation, and strategic planning. The approach and manner in which budgets are formulated can profoundly influence managerial behavior, employee motivation, and overall organizational culture. This paper explores various aspects of budgeting practices based on the given scenarios, emphasizing the importance of participative approaches, realistic projections, and behavioral considerations.

Question 1: Budgeting for Cloaks Company

Cloaks Company's budgeting involves estimating cash disbursements and receipts based on projected sales, production, and expense schedules. The preparation of a cash disbursement schedule necessitates analyzing expenses such as production costs, paying a portion in the current month and deferring the rest to the next. For instance, with a projected production cost of $7 per unit and 53,000 units produced in February, the payment scheduled for February includes 35% of February's costs and a share of January's costs, reflecting the payment lag. Similarly, the cash receipts are determined based on collections from sales at different intervals, such as 55% in the month of sale, 25% in the following month, and 20% two months after sale.

The schedules provide a detailed view of expected cash flows, allowing management to plan for potential shortages or surpluses. From a managerial perspective, this detailed forecasting aids in ensuring liquidity and operational stability. It also highlights the importance of accurate sales and expense projections to prevent cash flow crises. The process, however, requires diligent data collection and assumptions about collection patterns and expense payments. The method exemplifies a top-down approach, focusing on projected totals derived from sales forecasts and expense estimates.

Question 2: Merchandise Purchases and Cash Collections for Star Wars Enterprises

The merchandise purchase budget involves determining the number of units to purchase each month to meet sales and inventory requirements. Based on the policy of maintaining 35% of the next month’s sales units as ending inventory, the company calculates beginning and ending inventory levels to ascertain purchase needs. For April, May, and June, the purchases are adjusted to ensure that inventory levels at the end of each month align with policy, taking into account beginning inventory and desired ending inventory.

Cash collections are calculated by applying the collection pattern of sales, with one-quarter of sales paid immediately and the rest collected in subsequent months. This schedule facilitates cash flow planning, ensuring sufficient liquidity to meet purchase obligations and operational expenses. Such detailed planning helps prevent stockouts or excess inventory, aligning operational needs with cash flow forecasts.

Question 3: Cash Budget and Collections for Fonsey Corporation

For Fonsey Corporation, projecting cash collections involves applying the collection percentages to sales figures for each month, while considering the lag in collecting from previous months' sales. The calculation for May’s collections includes 65% of May sales, 22% of April sales, and 11% of March sales. The cash disbursements for purchases are made in the month following the purchase, and other expenses such as $13,300 for May are also considered.

The expected cash balance at the end of May results from the beginning balance, add collections, and subtract disbursements. Managing these cash flows enables the company to maintain liquidity, plan for potential shortfalls, and ensure operational stability. Regular updating of cash forecasts based on sales trends and receivables collection patterns is critical for effective cash management.

Question 4: Budgeting at Coulson Spy Solutions

Unlike recommended participative budgeting practices, Coulson and Hill’s approach was more centralized, with a limited involvement of department managers. They developed the master budget after several internal meetings and then distributed it with an expectation of cooperation, but with limited input from department managers. Some managers doubted the realism of projections, reflecting a top-down approach that may lack buy-in from all levels.

This approach differs from best practices, which advocate for participative budgeting, involving managers at various levels to foster commitment, accuracy, and motivation. By excluding managers from the initial planning stages, Coulson and Hill risked creating a sense of mistrust or disengagement. Furthermore, setting overly optimistic projections without thorough validation can lead to unrealistic expectations, employee frustration, and potential failure to meet organizational objectives.

The behavioral implications include decreased motivation, internal resistance, and a possible decline in morale among managers who feel their insights or realities are overlooked. Conversely, participative approaches can enhance ownership, commitment, and the accuracy of budgets, which ultimately support better organizational performance.

Conclusion

Budgeting practices significantly influence organizational performance and behavior. Effective budgeting should involve realistic, well-communicated projections that incorporate input from responsible managers. Participative processes foster motivation and commitment, whereas top-down approaches can breed skepticism and resistance. Recognizing the behavioral implications of budgeting strategies is essential for developing effective control systems that support both organizational goals and employee engagement.

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