Minden Company is a wholesale distributor of premium European chocolates. It buys and sells the chocolate per box. The company’s balance sheet as of April 30 is given below:

Minden Company
Balance Sheet
March 31

(in Bhd)
Assets
Cash     9,000
Accounts receivable 54,000
Inventory 0
Buildings and equipment, net of depreciation    207,000
Total assets 270,000
Liabilities and Stockholders’ Equity
Accounts payable   63,000
Note payable 14,500
Common stock 180,000
Retained earnings     12,500
Total liabilities and stockholders’ equity 270,000

 

The company is in the process of preparing a budget for April to June  and has assembled the following data.

 

  1. Based on historical data, selling price per box is Bhd110. The premium European chocolates cost per box is Bhd100 and monthly fixed expenses of Bhd5,000.00. Using the break-even in units, the management intends to sell 50% more from the break-even in units in the month of April and there will an 20% increase every month thereafter. The increase will be based on the previous month.
  2. The collection pattern is as follows:
    • 50% collected on the month of sale
    • 30% collected on the following month of sales
    • And the remaining will be on the second month of sale.
    • All of the March 31 accounts receivable will be collected in April.
  3. The desired ending inventory is 10% of the next month sales. These purchases will all be on account. Forty percent (40%) of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the March 31 accounts payable to suppliers will be paid during April. There is no beginning inventory as of March 31.
  4. Selling and administrative expenses is estimated to be 5% of the gross sales and these expenses will be paid in cash.
  5. The note payable on the March 31 balance sheet will be paid during April, with Bhd100 in interest. (All of the interest relates to April.)
  6. New refrigerating equipment costing Bhd6,500 will be purchased for cash during May.
  7. The company will borrow in April 30,000 and in June, 20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
  8. Depreciation expense for the month is 1,000.
  9. There is no dividend paid for the month

 

Required:      

Part I.Determine the break-even in boxes

 

Part II. Prepare the following schedules:

 

  1. Schedule 1. Projected Sales Budget
  2. Schedule 2. Collection Schedule
  3. Schedule 3. Purchases Schedule of Premium European Chocolates in boxes and amount
  4. Schedule 4. Payment Schedule for the Purchases of Premium European Chocolates
  5. Schedule 5. Cash Budget Schedule

 

Part III. Determine the following:

 

  1. Note 1. Accounts Receivable, end
  2. Note 2. Inventory, end
  3. Note 3. Buildings and Equipment, end
  4. Note 4. Accounts Payable, end
  5. Note 5. Notes Payable, end

 

Part IV. Prepare the following:

  1. Budgeted Income Statement for the period ending June 30.
  2. Projected Statement of Retained Earnings, end
  3. Projected Balance Sheet as of June 30.

 

 

Additional Information:

Assuming that on June 30, the following financial informations were given to you for the analysis of the variances incurred.

 

Sales Information
Actual Number of Boxes Sold 2,700
Selling Price per box 100

 

For sales budgeted information, refer to Schedule 1. Projected Sales Budget.

 

Purchases Information
Actual Number of Boxes Sold 2,800
Selling Price per box 95

 

For purchases budgeted information, refer to Schedule 3. Purchases Schedule of Premium European Chocolates in boxes and amount

 

Part V. Determine the following variances and evaluate the variances

 

  1. Quantity Sold Variance
  2. Selling Price Variance
  3. Sales Variance
  4. Quantity Purchase Variance
  5. Purchase Price Variance
  6. Purchase Variance
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