Case 6-1 Browning Manufacturing

Michellee Marie B. Chavez 2004-39460 BM 220 Management Accounting 1) BROWNING MANUFACTURING COMPANY T-Accounts swap Accounts Receivable Notes due 2,604,000. 00 144,000. 00 2,562,000. 00 49,200. 00 288,840. 00 118,440. 00 78,000. 00 311,760. 00 19,200. 00 264,000. 00 264,000. 00 492,000. 00 2,604,000. 00 552,840. 00 198,000. 00 2,873,760. 00 2,672,400. 00 49,200. 00 201,360. 00 Interest put down(p) 135,600. 00 38,400. 00 522,000. 00 Finished Goods 38,400. 00 38,400. 00 257,040. 00 1,806,624. 00 788,400. 00 1,901,952. 00 Indirect Manufacturing boil 9,000. 00 2,158,992. 00 1,806,624. 0 198,000. 00 36,000. 00 352,368. 00 198,000. 00 52,200. 00 2,986,440. 00 2,542,800. 00 Manufacturing plant and equipment estimate Manufacturing Labor 443,640. 00 2,678,400. 00 492,000. 00 144,000. 00 492,000. 00 Prepaid taxes and insurances 2,822,400. 00 66,720. 00 52,800. 00 Materials 78,000. 00 Accounts Payable 110,520. 00 811,000. 00 144,720. 00 52,800. 00 788,400. 00 825,000. 00 825,000. 00 91, 920. 00 66,000. 00 935,520. 00 811,000. 00 185,760. 00 124,520. 00 788,400. 00 1,076,760. 00 Income Taxes Payable 288,360. 00 pass away in Process 9,000. 00 9,000. 00 172,200. 00 1,901,952. 00 5,800. 0 Selling and Administrative Expense 811,000. 00 9,000. 00 14,800. 00 522,000. 00 1,129,200. 00 5,800. 00 522,000. 00 2,112,400. 00 1,901,952. 00 210,448. 00 Supplies Depreciation 17,280. 00 61,200. 00 140,400. 00 492,000. 00 66,000. 00 907,200. 00 198,000. 00 83,280. 00 61,200. 00 1,047,600. 00 49,200. 00 22,080. 00 135,600. 00 52,800. 00 Capital Stock Income Tax Expense 61,200. 00 1,512,000. 00 58,000. 00 140,400. 00 1,512,000. 00 58,000. 00 1,129,200. 00 sales apostrophize of Goods interchange Power, Heat and Light 2,562,000. 00 1,806,624. 00 135,600. 00 2,562,000. 00 1,806,624. 00 135,600. 00 sales Returns and Allowances Sales Discounts Social credential Taxes 19,200. 00 49,200. 00 49,200. 00 19,200. 00 49,200. 00 49,200. 00 Retained Earnings 829,560. 00 36,000. 00 68,576. 00 36,000. 00 898,136. 00 862,136. 00 Statement of Retained Earnings Retained gelt, 12/31/09 $829,560. 00 Add net income 68,576. 00 898,136. 00 little dividends 36,000. 00 Retained earnings, 12/31/10 $862,136. 00 BROWNING MANUFACTURING COMPANY Projected 2010 Statement of Cost of Goods Sold Finished Goods inscription, 1/1/10 $257,040. 00 Work in serve well stock list, 1/1/10 $172,200. 00 Materials used 811,000. 00 Plus Factory expenses read manufacturing labor 492,000. 00 Factory Overhead Indirect manufacturing labor $198,000. 00 Power, heat and out of work 135,600. 00 Depreciation of plant 140,400. 00 Social security taxes 49,200. 00 Taxes and insurance, milling machinery 52,800. 00 Supplies 61,200. 00 637,200. 00 2,112,400. 00 less(prenominal) Work in process stock-taking, 12/31/10 210,448. 00 Cost of goods fabricate 1,901,952. 00 2,158,992. 00 Less Finished goods inventory, 12/31/10 352,368. 00 Cost of goods change $1,806,624. 00 2) BROWNING MANUFACTURING COMPANY Projected 2010 Income Statement Sales 2,562,000. 00 Less Sales returns and allowances 19,200. 00Sales discounts allowed 49,200. 00 68,400. 00 assoil Sales 2,493,600. 00 Less Cost of Goods Sold 1,806,624. 00 realise margin 686,976. 00 Less Selling and administrative expense 522,000. 00 Operating Income 164,976. 00 Less Interest Expense 38,400. 00 Income before federal and state income tax 126,576. 00 Less Estimated income tax expense 58,000. 00 Net Income 68,576. 00 BROWNING MANUFACTURING COMPANY Projected 2010 correspondence Sheet Assets Current Assets money and sellable securities $443,640. 00 Accounts receivable (net of allowance for indistinct accounts) 201,360. 00 Inventories Materials $124,520. 00Work in process 210,448. 00 Finished goods 352,368. 00 Supplies 22,080. 00 709,416. 00 Prepaid taxes and insurance 91,920. 00 enumerate current assets 1,446,336. 00 Other Assets Manufacturing plant at cost 2,822,400. 00 Less roll up depreciation 1,047,600. 00 1,774,800. 00 Total Assets $ 3,221,136. 00 Liabilities and Shareholders Equity Current liabilities Accounts Payable $288,360. 00 Notes Payable 552,840. 00 Income Taxes collectable 5,800. 00 Total current liabilities $847,000. 00 Shareholders equity Capital stock 1,512,000. 00 Retained earnings 862,136. 00 Total Liabilities and Shareholders Equity $3,221,136. 00comparative degree Statement of Cost of Goods Sold, Projected 2010 vs. 2009 20092010% change Finished Goods Inventory, 1/1/10 218,820. 00 257,040. 00 17. 47% Work in process inventory, 1/1/10 137,760. 00 172,200. 00 25. 00% Materials used 663,120. 00 811,000. 00 22. 30% Direct manufacturing labor 419,040. 00 492,000. 00 17. 41% Indirect manufacturing labor 170,640. 00 198,000. 00 16. 03% Power, heat and light 116,760. 00 135,600. 00 16. 14% Depreciation of plant 126,600. 00 140,400. 00 10. 90% Social security taxes 42,120. 00 49,200. 00 16. 81% Taxes and insurance, factory 46,320. 00 52,800. 00 13. 99% Supplies 56,880. 00 61,200. 00 7. 9% Work in process inventory, 12/31/10 172,200. 00 210,448. 00 22. 21% Finished goods inventory, 12/31/10 257,040. 00 352,368. 00 37. 09% Comparative Income Statement, Projected 2010 vs. 2009 2009 2010 % change Sales 2,295,600. 00 2,562,000. 00 11. 60% Sales returns and allowances 17,640. 00 19,200. 00 8. 84% Sales discounts allowed 43,920. 00 49,200. 00 12. 02% Cost of Goods Sold 1,568,280. 00 1,806,624. 00 15. 20% Selling and administrative expense 437,160. 00 522,000. 00 19. 41% Interest Expense 34,080. 00 38,400. 00 12. 68% Estimated income tax expense 89,520. 00 58,000. 00 -35. 21% Net Income 105,000. 00 68,576. 0 -34. 69% Comparative Balance Sheet, Projected 2010 vs. 2009 2009 2010 % change Cash and marketable securities 118,440. 00 443,640. 00 274. 57% Accounts receivable 311,760. 00 201,360. 00 -35. 41% Materials 110,520. 00 124,520. 00 12. 67% Work in process 172,200. 00 210,448. 00 22. 21% Finished goods 257,040. 00 352,368. 00 37. 09% Supplies 17,280. 00 22,080. 00 27. 78% Prepaid taxes an d insurance 66,720. 00 91,920. 00 37. 77% Manufacturing plant at cost 2,678,400. 00 2,822,400. 00 5. 38% Accumulated depreciation 907,200. 00 1,047,600. 00 15. 48% Accounts Payable 185,760. 00 288,360. 00 55. 23% Notes Payable 288,840. 0 552,840. 00 91. 40% Income Taxes behaveable 9,000. 00 5,800. 00 -35. 56% Capital stock 1,512,000. 00 1,512,000. 00 0. 00% Retained earnings 829,560. 00 862,136. 00 3. 93% The comparison shows that in 2010, it is projected that there allow for be a significant change magnitude by 274. 57% in the ships follows interchange and marketable securities. It can withal be noned that accounts receivables for 2010 is expect to go down by 35. 41%, meaning the company will have more and faster collections of receivables, thus, join on in cash can be expected. On the other hand, notes account payable and accounts payable is projected to increase by 91. 40% and 55. 3% respectively, which indicates that the company will not be able to pay its financial ob ligations in due time. Their credit standing as a company will worsen, because the companys expenses will be higher(prenominal) in 2010. They may have faster collections of receivables, however, payables and expenses increases, resulting to the inability of the company to turn over liquid. Aside from this, inventory turnover is expected to be low, meaning the company will not be able to utilize its resources efficiently. It can also be attributed to the slight increase in sales which shows that the company is having a hard time disposing / using its resources.Due to these projections, net income is also expected to decrease in 2010. 3) The company will fail to achieve its notes payable repayment mark of a year-end cash balance of $150,000. 00 later on paying off at least $350,000. 00 of the notes payable, because after repaying $350,000, year-end cash balance will decrease to $93,640, which is short of its $150,000 year-end cash balance. In order to achieve its minimum objective , the company should be able to increase its sales, and lessen the expenses as well as the payables. ) Managements inventory turnover goal will not be achieved in 2010. Inventory turnover can be computed as Cost of Goods Sold / norm Inventory 20091,568,280. 00/ (218,820. 00+257,040. 00)/2 = 6. 59 20101,806,624. 00/ (257,040. 00+352,368. 00)/2 = 5. 93 As shown in the above computation, inventory turnover in 2010 is lower than that of 2009. In the budget, inventory turnover goal is not indicated to be achieved. The company should analyze its market and demand of the spate in order to evaluate how many of the goods should be prepared and order by them.They should be aware of the average number of products that they should have and it will be determined based on the demand. They should also strategize by having trenchant marketing and selling techniques. 5) The budget shows that the company will have a poor credit trade standing due to its higher payables. This shows that the compan y is not able to pay its obligations in time, primarily because of its inability to superintend and control their expenses. Eventually, the company will have a hard time borrowing if there will have continuous past dues, thus, trading operations might soon be affected and eventually will not be sustained.