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# Calculating a manuf. budget and statement of free cash flow

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Thome Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead cost per direct labor hour are as follows.

Indirect labor \$1.00
Indirect materials \$0.60
Utlilities \$0.40

Fixed overhead cost per month are supervision \$4,000, depreciation \$1,200, and property taxes \$800. The company believes it will normally operate in a range of 7,000-10,000 direct labor hours per month.

Pepare a monthly manufacturing overhead flexible budget for 2014 for the expected range of activity, using increments of 1,000 direct labor hours.

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.

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 flow, and discuss whether an increase in the dividend appears warranted. What other factors should be considered?