Chapter 20: Serial Problem

To address this business solution task, let’s tackle the questions step-by-step. Santana Rey’s Budgeted Income Statement 1. Prepare a Budgeted Income Statement for Computer Furniture Sales Santana Rey wants to see how adjusted pricing and advertising expenses impact net income in the second quarter. Here’s the breakdown: • • • Desk Sales Projections: o Units: 156 desks at $1,150 each = $179,400 Chair Sales Projections: o Units: 105 chairs at $450 each = $47,250 Total Sales Revenue: $179,400 + $47,250 = $226,650 Now we assume that all other costs (cost per unit and other expenses) are the same as in the previous quarter. • • Calculate the new Gross Profit by subtracting total cost of goods sold from the new sales revenue. Deduct the additional advertising expenses ($12,000) and any other fixed or variable expenses to reach the Net Income. 2. Assess Impact on Net Income After preparing the budgeted income statement, compare the net income with that of the previous quarter to determine if these changes increased or decreased the budgeted net income. Additional Questions on Budgeting, Ethics, and Decision-Making Discussion on Budgeting Benefits Budgets are essential for planning, controlling, and coordinating business activities. The following questions touch on budgeting’s role across various aspects: 1. Benefits of Budgeting: o Helps in strategic planning, sets financial targets, and allocates resources effectively. o Aids in performance evaluation by comparing actual results to budgeted figures. o Improves financial control by managing cash flow and capital expenditures. 2. Role in Management’s Control: o Helps in monitoring expenditures, setting benchmarks, and adjusting strategies when variances occur. 3. Continuous Budgeting Benefits: o Provides updated forecasts, ensuring adaptability to changing business conditions. 4. Common Time Horizons: o Monthly, quarterly, or annual budgets are typical for short-term planning. 5. Importance of Departmental Involvement: o Ensures accurate forecasts and fosters accountability. 6. Sales Budget Significance: o Sets the foundation for other budgets, as it projects revenue and impacts other areas like production and purchasing. 7. Cash Budget: o Assesses cash inflows and outflows, which is crucial for maintaining liquidity. Beyond the Numbers For each prompt in this section, here’s a brief response outline: 1. “Use it or Lose it” Budgeting Solution: o Implement a rollover system allowing unused funds to be allocated toward valuable projects the following year, encouraging managers to avoid wasteful spending. 2. Concerns with Sales Staff Influence on Sales Budget: o Sales incentives tied to budget projections may lead to bias. Suggest using historical data and external market trends to validate forecasts. 3. Budget for College Costs: o The team budget should include tuition, books, supplies, fees, food, and transportation costs. List assumptions, like the price per credit hour or cost of housing, to ensure transparency. Entrepreneurial and Strategic Budgeting Decisions For Ellis Island Tropical Tea: 1. Budgeting Benefits: o Helps plan inventory, manage cash flow, and allocate resources efficiently. For a small business, this means minimizing waste and aligning operations with sales projections. 2. Master Budget’s Role in Expansion: o A master budget outlines future revenue, cost, and cash flow expectations. It can guide the financing needed for expansion, while assessing resource needs (e.g., labor, production). Would you like assistance with specific calculations or more detail on any section?