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    Planning a Budget for Orlo Company

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    See excel attached:

    Orlo Company is planning their budget for the first half of 2012. Their budgeted sales for the last part of 2011 and the first 6 months of 2012 are as follows:

    Month Sales
    Nov-11 $200,000
    Dec-11 $150,000
    Jan-12 $100,000
    Feb-12 $75,000
    Mar-12 $125,000
    Apr-12 $150,000
    May-12 $200,000
    Jun-12 $250,000

    Based on past collection history, Orlo expects to collect 50% of sales on account in the month of the sale, 35% in the month following the sale, and
    10% in the second month following the sale. All sales are on account.

    Required: Prepare a cash receipts budget for Orlo for January through June of 2012. You may fill in the blue area with the projected sales if it will help you.

    January February March April May June
    Collections in month of sale

    Collections in month following sale

    Collections in second month following sale



    Orlo Company has the following production planned for the first six months of 2012:

    Jan-12 50000
    Feb-12 37500
    Mar-12 62500
    Apr-12 75000
    May-12 100000
    Jun-12 125000

    Orlo's variable manufacturing overhead costs are $2 per unit produced. All other costs are fixed,
    and include depreciation: $10,000; Indirect Labor, $37,000; Taxes and Insurance, $17,500.

    Required: Prepare the overhead budget for the first six months of 2012. You may use
    the blue area to fill in the production in units, if you like.

    January February March April May June
    Indirect labor
    Taxes and insurance
    Total expenses


    Orlo Company has the following material standard for the manufacture of its Icee Kupps:

    5 oz of plastic at $.10 per oz.

    In a recent month, Orlo purchased 16,000 oz. of plastic for a total cost of $1,560.. It used
    12,000 oz. to make 2,200 cups.

    Required: Calculate the price and quantity variances for Orlo. Be sure to indicate if variance is
    favorable or unfavorable by putting an F or a U right after the number. For instance, 95F.
    Price variance:

    Quantity variance:


    Orlo's income information for the month of December, 2011, is shown below. Orlo has 2 divisions: the Icee Kupp Division and the KeepitHot Plate Division.

    REQUIRED: Prepare a income statement segmented by division for the company. Prepare statements for company as a whole and each division.

    Icee Kupp KeepitHot Plate
    Sales $125,000 $300,000
    Variable costs 50,000 175,000
    Fixed costs, traceable $25,000 50,000
    Fixed costs, common 25,000 50,000

    Icee Kupp KeepitHot Plate Total
    Variable Costs
    Contribution Margin
    Fixed costs, traceable
    Segment Margin
    Fixed costs, common
    Net income


    Orlo's 2 divisions, the Icee Kupp Division and the KeepiHot Plate Division, have the following amounts in their accounts below:

    Icee Kupp KeepitHot Plate
    Average operating assets 200,000 350,000

    Sales $125,000 $300,000

    Net income $25,000 $75,000

    Required rate of return 15% 18%

    1 Calculate each divisions return on investment. Then calculate each division;s residual income.
    Round to 2 decimal places. Put a minus in front of negative numbers.

    Icee Kupp KeepitHot Plate

    Return on investment

    Residual income

    2 If the manager is evaluated based on Return on Investment, which company or companies would
    turn down an investment opportunity of $100,000 that yielded $19,000 in net income?

    Icee Kupp
    KeepitHot Plate

    3 If the manager is evaluated based on residual income, which company or companies would turn down
    an investment opportunity of $100,000 that yielded a $17,000 net income? (NOTE; THE NUMBERS



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    Solution Preview

    Please see the attachment
    1. Cash budget - based on the collection percentages given
    2. Overhead budget - variable based on units and fixed based on costs ...

    Solution Summary

    The expert examines planning a budget for Orlo Company.