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BA225 BE9-2 BE9-3 BE9-4 BE10-3 BE13-1 BE13-11

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BE9-2 Palermo Company estimates that unit sales will be 10,000 in quarter 1; 12,000 in
quarter 2; 15,000 in quarter 3; and 18,000 in quarter 4. Using a sales price of $70 per unit,
prepare the sales budget by quarters for the year ending December 31, 2014.

BE9-3 Sales budget data for Palermo Company are given in BE9-2. Management desires
to have an ending finished goods inventory equal to 25% of the next quarter’s expected unit
sales. Prepare a production budget by quarters for the first 6 months of 2014

BE9-4 Perine Company has 2,000 pounds of raw materials in its December 31, 2013, ending
inventory. Required production for January and February of 2014 are 4,000 and 5,000
units, respectively. Two pounds of raw materials are needed for each unit, and the estimated
cost per pound is $6. Management desires an ending inventory equal to 25% of next
month’s materials requirements. Prepare the direct materials budget for January.

BE10-3 In Paige Company, direct labor is $20 per hour. The company expects to operate
at 10,000 direct labor hours each month. In January 2014, direct labor totaling $204,000
is incurred in working 10,400 hours. Prepare (a) a static budget report and (b) a flexible
budget report. Evaluate the usefulness of each report.

BE13-1 Each of the items below must be considered in preparing a statement of cash
flows for Alpha-Omega Co. for the year ended December 31, 2014. For each item, state
how it should be shown in the statement of cash flows for 2014.
(a) Issued bonds for $150,000 cash.
(b) Purchased equipment for $200,000 cash.
(c) Sold land costing $50,000 for $50,000 cash.
(d) Declared and paid a $20,000 cash dividend.

BE13-11 The management of Russel Inc. is trying to decide whether it can increase its
dividend. During the current year, it reported net income of $875,000. It had cash provided
by operating activities of $643,000, paid cash dividends of $80,000, and had capital
expenditures of $280,000. Compute the company’s free cash fl ow, and discuss whether an
increase in the dividend appears warranted. What other factors should be considered?

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