BM 220 MANAGEMENT ACCOUNTING AND CONTROL Case 6-1: Browning Manufacturing Company ALLON, ROWENA T. 1997-65710 1.

Browning Manufacturing Company Projected 2010 Statement of Cost of Goods Sold

Finished goods inventory, 1/1/10 Work in process inventory, 1/1/10 Materials used Plus: Factory expenses Direct manufacturing labor Factory overhead: Indirect manufacturing labor Power, heat and light Depreciation of plant Social Security taxes Taxes and insurance, factory Supplies Less: Work in process inventory, 12/31/10 Cost of goods manufactured (i.e. Completed) Less: Finished goods inventory, 12/31/10 Cost of goods sold

257,040.0 0 172,200.0 0 811,000.0 0 492,000.0 0 198,000.0 0 135,600.0 0 140,400.0 0 49,200.0 0 52,800.0 0 61,200.0 0 0 2,112,400.00 210,448.0 0 1,901,952.0 0 2,158,992.0 0 352,368.0 0 1,806,624. 00 637,200.0

BM 220 MANAGEMENT ACCOUNTING AND CONTROL Case 6-1: Browning Manufacturing Company ALLON, ROWENA T. 1997-65710

Browning Manufacturing Company Projected 2010 Income Statement

Sales Less: Sales returns and allowances Sales discounts allowed Cost of goods sold (per schedule 1) 19,200.00 49,200.00

2,562,000.00

Net Sales Less: Gross margin Less:

68,400.00 2,493,600.00 1,806,624.00 686,976.00 522,000.00 164,976.00 38,400.00 126,576.00 58,000.00 68,576.00

Selling and administrative expense Operating income Interest Less: expense Income before federal and state income tax Less: Estimated income tax expense Net income

BM 220 MANAGEMENT ACCOUNTING AND CONTROL Case 6-1: Browning Manufacturing Company ALLON, ROWENA T. 1997-65710

Browning Manufacturing Company Projected 2010 Balance Sheet

Asse ts Current Assets: Cash and marketable securities Accounts receivable (net of allowance for DA) Inventories: 124,520.0 Materials Work in process Finished goods Supplies Prepaid taxes and insurance Total current assets Other assets: Manufacturing plant at cost Less: Accumulated depreciation Total Assets Liabilities and Shareholders' Equity Current liabilities: 288,360.0 Accounts payable Notes payable Income taxes payable Total current liabilities Shareholders' equity: Capital stock Retained earnings 0 552,840.0 0 5,800.0 0 0 210,448.0 0 352,368.0 0 22,080.0 0

443,640.00 201,360.00

709,416.00 91,920.00 1,446,336.00 2,822,400.00 1,047,600.00

1,774,800.00 3,221,136.00

847,000.00 1,512,000.0 0 862,136.0 0 2,374,136.00

BM 220 MANAGEMENT ACCOUNTING AND CONTROL Case 6-1: Browning Manufacturing Company ALLON, ROWENA T. 1997-65710 Total Liabilites and Shareholders' Equity

3,221,136.00

BM 220 MANAGEMENT ACCOUNTING AND CONTROL Case 6-1: Browning Manufacturing Company ALLON, ROWENA T. 1997-65710

2.

Accounts Sales Sales returns and allowances Sales discounts allowed Cost of goods sold (per schedule) Selling and administrative expense Interest expense Estimated income tax expense Cash and marketable securities Accounts receivable (net) Materials Work in process Finished goods Supplies Prepaid taxes and insurance Manufacturing plant at cost 00

2009 2,295,600. 00 17,640 .00 43,920 .00 1,568,280. 00 437,160 .00 34,080 .00 89,520 .00 118,440 .00 311,760 .00 110,520 .00 172,200 .00 257,040 .00 17,280 .00 66,720 .00 2,678,400. 00 185,760

2010 2,562,000. 19,200 .00 49,200 .00 1,806,624. 00 522,000 .00 38,400 .00 58,000 .00 443,640 .00 201,360 .00 124,520 .00 210,448 .00 352,368 .00 22,080 .00 91,920 .00 2,822,400. 00 288,360 .00

% 12% 9% 12% 15% 19% 13% -35%

Inc/Dec Increas e Increas e Increas e Increas e Increas e Increas e Decreas e Increas e Decreas e Increas e Increas e Increas e Increas e Increas e Increas e Increas e Increas e Decreas e

275% -35% 13% 22% 37% 28% 38% 5%

Accounts payable Notes payable Income taxes payable

.00 288,840 .00 9,00 0.00

55% 552,840 91% 5,80 -36%

.00 0.00

BM 220 MANAGEMENT ACCOUNTING AND CONTROL Case 6-1: Browning Manufacturing Company ALLON, ROWENA T. 1997-65710

1,512,000. Capital stock Retained earnings 00 829,560 .00 00

1,512,000. 0% 862,136 .00 4% Increas e

From the table above, it is noted that, for 2010, there is a remarkable increase in the Cash and marketable securities account by 319%. Further, there is also a decrease in the Accounts receivable account, which is good because there is increase in cash due to the collections forecasted.

On the other hand, the accounts and notes payable accounts also increased by 55% and 91%, respectively. This means that, aside from the collections of accounts receivable in 2010, the other reason for increase in cash inflow is due to the accounts and notes payables acquired.

Another notable difference is that the gross profit in 2010 is 2% higher than that of 2009 (30% vs 28%). However, the income in 2010 decreases by 35% as compared in 2009. One factor that may attributable to this decrease is the increase in the selling and administrative expense account, which increased by 19% in 2010.

3. The management will not achieve its notes payable repayment goal of a year-end cash balance of approximately $150,000 after paying off at least $350,000 and possibly as much as $400,000 of the notes payable to the bank. This is because at the end of 2010, cash and marketable securities account will have 443,640.00. If the company will pay off the minimum of $350,000, cash and marketable securities account will have and ending balance of $93,640.00, which is $4,160 less than its $150,000 goal.

In order to achieve its year-end cash balance goal, the company may reduce its payable accounts, particularly its notes payable account. Also it may reduce some of its expenses in order to increase the cash and net income accounts.

BM 220 MANAGEMENT ACCOUNTING AND CONTROL Case 6-1: Browning Manufacturing Company ALLON, ROWENA T. 1997-65710

4. The inventory turnover of 2010 is lower than 2009 (a difference by 1). A low turnover implies poor sales and, therefore, excess inventory. Thus, managements inventory turnover goal will not be achieved. To improve, the companys inventory turnover, the company should maximize its relationship with its suppliers and customers. With this, your supplier is enabled to produce and deliver materials in a timely, lower cost fashion that allows you to minimize your inventory. On the other hand, when you establish relationships with your customers, you can enable them to make their demand for products more predictable thereby allowing you to minimize finished product inventory without failing to meet their needs for volume and timeliness. 5. In terms of the companys trade credit standing, the budget may indicate that the company may not be able to pay its obligation when they become due. This may eventually mean poor creditor relationship that may affect the companys production and sales in the future.