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Calculating a manuf. budget and statement of free cash flow

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?

Solution Preview

Items included in manufacturing overhead are "Fixed Costs" and "Variable Costs" which are added together to get the total Manufacturing Overhead. Fixed Costs are items which have to be paid by the company each month regardless of # of units produced. Some examples of Fixed Costs are Mortgage Payments, Lease Payments and Insurance. Variable Costs are items that only have to be paid when an item is produced. Examples of Variable Costs include the materials used to produce an item, the labor used to produce an item and the ...

Solution Summary

Calculating a manufacturing budget and statement of free cash flow. Complete with MS Word and Excel files including charts and formulas.