Jose Vicente Clet

ABM-12

Exercises:
Please answer each item in worksheet and send it on time as instructed.

1. Determine the number of units to be produces in 2021 given the following information :
a. Inventories at the Beginning of the Year P 250,000
b. Projected Sales in 2020 5,750,000
c. Target Level of Ending Inventories 400,000

Required Production of Units = Projected Sales + Target Level of Ending

Inventories – Inventories at the Beginning of the Year
P 5,750,000 + 400,000 – 250,000 = P 5,900,000

2. Given the following information, estimate the quarterly production in 2021.

a. Inventories, December 31,2020 450,000 units
b. Projected Quarterly Sales and Target Level of Ending Inventories in 2021

Quarter Projected Sales Target Level of Ending Inventories

Quarter 1 3,500,000 500,000

Quarter 2 4,500,000 500,000

Quarter 3 5,000,000 1,000,000

Quarter 4 8,000,000 550,000

Requirements:
a. Determine the production for each quarter in 2021.
b. How many units are expected to be produced in 2021?3
c. How many units are expected to be sold in 2021?
 A. Solution.
Required Production of Units = Projected Sales + Target Level of Ending Inventories –
Inventories at the Beginning of the Year =
Quarter 1
P 3,500,000 + 500,000 – 450,000 = 3,550,000
Quarter 2
P 4,500,000 + 500,000 – 450,000 = 4,550,000
Quarter 3
P 5,000,000 + 1,000,000 – 450,000= 5,550,000
Quarter 4
P 8,000,000 +550,000 – 450,000 = 8,100,000
B
Total units to be expected to produce for the year 2021 =
P 3,550,000 + 4,550,000 +5,550,000 + 8,100,000 = 21, 750,000.
C.
Total units to be expected to sell for the year 2021 =
P 3,500,000 + P 4,500,000 + P 5,000,000 + P 8,000,000 = P 21,000,000

3. Given the following information, estimate the quarterly production in 2021.

a. Inventories, December 31,2020 2,500 units
b. Projected Quarterly Sales and Target Level of Ending Inventories in 2021.

Projected
Quarter Sales Target Level of Ending Inventories

Quarter 1,5
1 8,000 00
Quarter 3,0
2 6,000 00
Quarter 5,0
3 8,500 00
Prepare the
Quarter 3,0
production
4 12,500 00 budget schedule
for 2021 showing
the quarterly data.
Solution.
Required Production of Units = Projected Sales + Target Level of Ending Inventories –
Inventories at the Beginning of the Year =

Quarter 1
P 8,000 + 1,500 – 2,500 = 7,000
Quarter 2
P 6,000 + 3,000 – 2,500 = 6,500
Quarter 3
P 8,500 + 5,500 – 2500 = 11,500
Quarter 4
P 12,500 + 3,000 – 2500 = 13,000

4. Two merchandising companies of relatively the same asset size have the following
current assets and current liabilities.

Name of Company Current Assets Current Liabilities

10,000,000.0
J &J Co 15,000,000.00 0
14,000,000.0
0
ASC Merchandising Co 16,000,000.00 Assuming
all current assets are all working capital accounts, which of the two companies has a
more conservative working capital financial policy? Explain.

The company J & J Co. has a total conservative working capital of (P

5,000,000.00), because of the computed working capital which is (P 15,000,000.00)
subtracted by the current liabilities of (P 10,000,000.00) and it’s equal to (P
5,000,000.00). While the ASC Merchandising Co. has a total conservative working
capital of (P 2,000,000.00), also it is because of the computed data of working capital
which is (P 16,000,000.00) subtracted/minus by current liabilities of (P 14,000,000.00).
This shows that the company J & J Co. has a more conservative working capital.
 5. An analyst wants to project the financial statements of a company in 2021. He has
gathered the following information for 2020:

Current Assets 70,000,000.00

Property , Plant and Equipment 110,000,000.00

Current Liabilities 50,000,000.00

Bank Debt 30,000,000.00

Common Stock, P1 par 60,000,000.00

Retained Earnings 40,000,000.00

Sales 200,000,000.00

Notes: Net Income 10,000,000.00

a. Current assets and current
liabilities are expected to vary with sales
b. The net profit margin in 2020 is expected to hold in 2021.
c. Projected Sales in 2021 is P210Million
d. The company plans to pay P1.15 cash dividends per share in 2021.

Compute the ff in 2021.

a. Net income
b. Current Assets
c. Current Liabilities
d. Cash Dividends
e. Retained Earnings

Solution.
a. Net Income Percentage in 2020 = (P10,000,000.00 ÷ 70,000,000.00) x 100%
Net Income Percentage in 2020 = 14.29%
Projected sales in 2021 = 14.29% x 210,000,000.00
Projected sales in 2021 = P 30,009,000

b. Current Assets Percentage in 2020 = (P 70,000,000.00 ÷ 200,000,000.00) x 100%

Current Assets Percentage in 2020 = 35%
Projected Current Assets Percentage in 2021 = 35% x 210,000,000.00
Projected Current Assets Percentage in 2021= P 73,500,000.00
c. Current Liabilities Percentage in 2020 = (P 50,000,000.00 ÷ 70,000,000.00) x 100%
Current Liabilities Percentage in 2020 = 71.43%
Projected Current Liabilities Percentage in 2021 = 71.43% x 210,000,000.00
Projected Current Liabilities Percentage in 2021 = P 150,003,000.00

d. Cash Dividends Percentage in 2020 = (P140,000,000.00 ÷ 70,000,000.00) x 100%

Cash Dividends Percentage in 2020 = 2%
Projected Cash Dividends in 2021 = 2% x 210,000,000.00
Projected Cash Dividends in 2021 = P 4,200,000.00

e. Retained Earnings percentage in 2020 = ( P40,000,000 ÷ 70,000,000) x 100%

Retained Earnings percentage in 2020 = 57.14%
Projected Retained Earnings percentage in = 57.14% x 210,000,000.00
Projected Retained Earnings percentage in = P119,994,000.00