It's worry time at Black heath Manufacturing. Revenues have been diminishing, so the proprietor's son steps in to save the company and takes control over the administration. He requests a consultant to identify what was wrong. The consultant has precise replies: The Company's pricing strategies are all messed up, to reverse the decreasing profit trend a budgetary design is required, and a previous employee needs to be hired again. This case equips students with the information required for designing a manufacturing and raw materials budget, adaptable-expense budgets, income statement, balance sheet, and cash budget. Also, look at "Black heath Manufacturing Company" (UV1728).
Balance sheet April 2001
Breakeven Analysis (Production costs)
Breakeven Analysis (All costs)
Cost per unit
Net profit after tax
1. Prepare a production schedule, schedule of raw material use, and a schedual of raw materials purchases for january, febuary and march
2. Prepare a felxible expense budget using the format shown in the variable budget table in the case
3. prepare a projected income statement for january, feburary, and march
4. Prepare a cash budget for the quarter
5. prepare a projected balance sheet as of april 1st (which includes jan feb march)
6. Adeliade Ladwell, Crofton Brockley and Trafalgar blackheath will be meeting to duscuss the material developed in questions 1 through 5. What points would be likely to dominate such a meeting Why?
7. Using the information presented in the case of regarding actual activity in january, prepare an analysis of the results.
8. How would net profit on the income statement change if Adelaide were to prepare the income statement under an assumption of variable costing?