Question

The following information is available for year 1 for Pepper Products:

    

Sales revenue (210,000 units)	$	3,150,000
Manufacturing costs
Materials	$	168,000
Variable cash costs		142,400
Fixed cash costs		337,600
Depreciation (fixed)		1,009,000
Marketing and administrative costs
Marketing (variable, cash)		412,400
Marketing depreciation		159,600
Administrative (fixed, cash)		509,200
Administrative depreciation		84,800
Total costs	$	2,823,000
Operating profits	$	327,000

    
All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 6 percent, but prices are expected to rise by 18 percent. Material costs per unit are expected to increase by 10 percent. Other unit variable manufacturing costs are expected to decrease by 11 percent per unit. Fixed cash costs are expected to increase by 5 percent.

  

Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 5 percent. Inventories are kept at zero. Pepper Products operates on a cash basis.    

Required:

Estimate the cash from operations expected in year 2. (Do not round intermediate calculations.)

   PEPPER PRODUCTS
CASH BASIS BUDGETED INCOME STATEMENT
?    For Year 2

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Manufacturing costs (cash):
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Total cash manufacturing costs	$
Marketing and administrative costs:
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Total cash marketing and administrative costs	$
Total Cash costs	$
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Answer 1

Pepper Products Cash Basis Budgeted Income Statement For Year 2 Year 1 Units 210,000 Per unit Revised for year 2 Year 2 Units 197,400 15.00 17.70 3,493,980 |($ 15*11896) & ( 197,400 units * $ 17.70 Sales revenue Manufacturing costs (cash Materials Variable cash costs Fixed cash costs Depreciation (fixed Total cash manufacturing costs Marketing and administrative costs: Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash Administrative depreciation Total cash marketing and administrative costs Total Cash costs Operatin 3.150,000 |S 168,000 S 142,400 S 337,600 0.80 $ 0.68 $ 0.88 $ 0.62 S 173,712 (197,400 units S0.88 121,809 (197,400 units*$0.62) 354,480 |( $ 337,600 *105%) 1,009,000 1,657,000 1,009,000 1,659,001 412,400 S 1.96 $ 1.96 S 387,656 (197,400 units $1.96 159,600 534,660 | ( $ 509,200 * 105% 159,600 509,200 84,800 1,166,000 2,823,000 327,000 84,800 1,166,716 2,825,717 668,263 its