The following information is background information only to be used for question
ID: 2406946 • Letter: T
Question
The following information is background information only to be used for questions O saur. Carl's Cupcakes bakes and sells gourmet cupcakes from their retail bakery located in a busy shopping centre in suburban Brisbane. Carl's Cupcakes has been operating successfully since January 2010 and has built up a small but growing base of customers consisting o local householders and some corporate catering clients. Carl Bonner, the owner-manager of Carl's Cupcakes, is an old friend of yours from high school. Carl knows that you are studying accounting at university and contacts you for some advice about four business decisions he is currently considering. Please consider each of the next questions one to four independentlyExplanation / Answer
Question 1 (A)
Carl's Cupcakes
Cash flow Statement for the year ended 31st dec 2013
Cash flows from Operating Activities
Cash receipts from Customers
$ 654,900.00
Cash payments:
Cash paid to accounts payables/suppliers
$ (217,900.00)
For operating expenses
$ (226,000.00)
For Interest
$ (8,000.00)
For Income tax
$ (55,000.00)
$ (506,900.00)
Net Cash provided by operating activities
$ 148,000.00
Cash flows from Investing activities
Purchase of Equipment
$ (50,000.00)
Net cash used by investing activities
$ (50,000.00)
cash flows from Financing activities
Drawings by Owner
$ (25,000.00)
Proceeds from Bank loan
$ 30,000.00
Net cash Generated by financing activities
$ 5,000.00
Net increase in cash
$ 103,000.00
Cash January 1st 2013
$ 77,000.00
Cash Dec 31st 2013
$ 180,000.00
Working 1) Cash paid to Suppliers
Cost of goods sold
$ 196,900.00
Add -Increase in Inventory
$ 26,000.00
Purchases
$ 222,900.00
Less - Increase in accounts Payable
$ 5,000.00
Amount paid to supplier
$ 217,900.00
Working 2) Cash paid for Operating Activities
Total Operating Activities
$ 261,000.00
Less Depreciation
$ (25,000.00)
Less -Increase in wages payable
$ (2,000.00)
Less - Interest Paid
$ (8,000.00)
Cash paid for Operating Activities
$ 226,000.00
Working 3) Cash Received from Customers
sales Revenue
$ 670,000.00
Add:Decrease in Accounts Receivable
$ 2,000.00
Cash Received from Customers
$ 672,000.00
B)
Cash Flow from Operating Activities (indirect Method)
Cash Flows from Operating Activities
Net Income
$ 140,000.00
Adjustments to reconcile Net Income to:
Decrease in receivables
$ 2,000.00
Increase in Inventory
$ (26,000.00)
Depreciation expense
$ 25,000.00
Increase in accounts payable
$ 5,000.00
Increase in accrued liabilities
$ 2,000.00
$ 8,000.00
Net Cash Flows from operating activities
$ 148,000.00
C)
Calculation of Operating cash flow Margin
Operating cash flow
(A)
$ 148,000.00
Sales
(B)
$ 670,000.00
Operating cash flow Margin
(C=A/B)
22.09%
Comment
Carl's Cupcakes has a 22% (approx) cash flow margin from operating activities that means 22% of sales is converted in cash every year or cash generated from sales id 22% .
Carl's Cupcakes can expand his business by taking this 22% for further investment.
Question 2 (1)
Relevant cost if offer is Accepted
Direct material
$ 850.00
Direct Labor
$ 920.00
Overhead Cost
Variable
$ 65.00
Transportation cost
$ 300.00
Relevant Cost
$ 2,135.00
Question 2 (2)
Cost at regular order
Direct material
$ 750.00
Direct Labor
$ 900.00
Overhead Cost
Variable
$ 65.00
Relevant Cost
$ 1,715.00
Revenue in Spetial order
$ 3,000.00
Revenue in Regular sale
$ 2,500.00
Incremental Revenue
$ 500.00
Cost due to acceptance of Offer
$ 2,135.00
Cost in Regular sales
$ 1,715.00
Incremental cost
$ 420.00
Question 2 (3)
Yes. Since Incremental Revenue is more than Incremental cost the offer should be accepted.
Question 1 (A)
Carl's Cupcakes
Cash flow Statement for the year ended 31st dec 2013
Cash flows from Operating Activities
Cash receipts from Customers
$ 654,900.00
Cash payments:
Cash paid to accounts payables/suppliers
$ (217,900.00)
For operating expenses
$ (226,000.00)
For Interest
$ (8,000.00)
For Income tax
$ (55,000.00)
$ (506,900.00)
Net Cash provided by operating activities
$ 148,000.00
Cash flows from Investing activities
Purchase of Equipment
$ (50,000.00)
Net cash used by investing activities
$ (50,000.00)
cash flows from Financing activities
Drawings by Owner
$ (25,000.00)
Proceeds from Bank loan
$ 30,000.00
Net cash Generated by financing activities
$ 5,000.00
Net increase in cash
$ 103,000.00
Cash January 1st 2013
$ 77,000.00
Cash Dec 31st 2013
$ 180,000.00
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