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Assets Liabilities + Owner's Equity

Cash Accounts Payable


+ - - +
$ 118,440 $ 144,000 $ 788,400 $ 185,760
$ 264,000 $ 78,000 $ 825,000
$ 2,604,000 $ 492,000 $ 66,000
$ 198,000
$ 49,200 $ 788,400 $ 1,076,760
$ 135,600 Notes Payable
$ 522,000 - +
$ 38,400 $ 288,840
$ 788,400 $ 264,000
$ 9,000
$ 36,000 $ - $ 552,840
Interest on Loans
- +
$ 38,400

$ 2,986,440 $ 2,490,600 $ 495,840


Sales
Accounts Receivables - +
+ - $ 2,562,000
$ 311,760 $ 19,200
$ 2,562,000 $ 49,200
$ 2,604,000
$ 2,873,760 $ 2,672,400 $ 201,360 COGS
Sales Returns & Allowances - +
+ - $ 1,806,624
$ 19,200
$ 49,200

Discounts Income Taxes Payable


+ - - +
$ 9,000 $ 9,000
$ 58,000

Selling & Admin Expense $ 9,000 $ 67,000


+ -
$ 522,000
Depreciation Expense
- +
Finished Goods Inventory
+ -
$ 257,040 $ 1,806,624
$ 1,901,952
Retained Earnings
- +
$ 2,158,992 $ 1,806,624 $ 352,368 $ 36,000 $ 829,560
Work in Process Inventory $ 68,576
+ -
$ 172,200 $ 1,901,952 $ 36,000 $ 898,136
$ 811,000 Capital Stock
$ 1,129,200 - +
$ 1,512,000

$ 2,112,400 $ 1,901,952 $ (210,448)


Materials
+ - - +
$ 110,520 $ 811,000
$ 825,000
$ 935,520 $ 811,000 $ 124,520

Direct Manufacturing Labor


+ - - +
$ 492,000

Factory Overhead
Indirect Manufacturing Labor
+ - - +
$ 198,000

Power, heat & light


+ - - +
$ 135,600

Social Security Taxes


+ - - +
$ 49,200

Prepaid Taxes & Insurance, factory


+ -
$ 66,720 $ 52,800
$ 78,000

$ 144,720 $ 52,800 $ 91,920


Supplies
+ -
$ 17,280 $ 61,200
$ 66,000

$ 83,280 $ 61,200 $ 22,080


Plant & Equipment
+ -
$ 2,678,400 $ 907,200
$ 144,000 $ 140,400

$ 2,822,400 $ 1,047,600 $ 1,774,800


$ 288,360

$ 552,840

$ 58,000
$ 862,136

$ 58,000
Browning Manufacturing Company
Statement of Cost of Goods Sold (Schedule 1)
For the Year ended December 31, 1998

Finished goods inventory 1/1/98 $ 257,040


Work in process inventory 1/1/98 $ 172,200
Materials used $ 811,000
Plus: Factory expenses
Direct Manufacturing Labor $ 492,000
Factory overhead
Indirect manufacturing labor $ 198,000
Power, heat and light $ 135,600
Depreciation of plant $ 140,400
Social Security Taxes $ 49,200
Taxes and insurance, factory $ 52,800
Supplies $ 61,200 $ 637,200
$ 2,112,400
Less: Work in process inventory 12/31/98 $ 210,448
Cost of goods manufactured (completed) $ 1,901,952
$ 2,158,992
Less: Finished goods inventory 12/31/98 $ 352,368
Cost of goods sold $ 1,806,624

GROUP 1: JENICE JOY SUMAWAY AND MIKE AGENCIA


COST OF SALES AND INVENTORIES BM 220 --- PROF. TRINIDAD
Browning Manufacturing Company
Projected Income Statement
For the Period Ended 12/31/1998

Sales $ 2,562,000
Less: Sales returns and allowances $ 19,200
Sales discounts allowed $ 49,200 $ 68,400
Net Sales $ 2,493,600
Less: Cost of goods sold (Schedule 1) $ 1,806,624
Gross Margin $ 686,976
Less: Selling and administrative expense $ 522,000
Operating Income $ 164,976
Less: Interest Expense $ 38,400
Income before federal and state income tax $ 126,576
Less: Estimated income tax expense $ 58,000
Net Income $ 68,576

GROUP 1: JENICE JOY SUMAWAY AND MIKE AGENCIA


COST OF SALES AND INVENTORIES BM 220 --- PROF. TRINIDAD
Browning Manufacturing Company
Projected Balance Sheet
For the Period Ended December 31, 1998

Assets
Current assets:
Cash and marketable securities $ 495,840
Account receivable (net of allowance for doubtful accounts) $ 201,360
Inventories:
Materials $ 124,520
Less: Cost of goods sold (schedule 1) $ 210,448
Finished Goods $ 352,368
Supplies $ 22,080 $ 709,416
Prepaid taxes and insurance $ 91,920
Total current assets $ 1,498,536

Other assets:
Manufacturing plant at cost $ 2,822,400
Less: Accumulated depreciation $ 1,047,600 $ 1,774,800
Total Assets $ 3,273,336

Liabilities and Shareholders' Equity


Current liabilities:
Accounts payable $ 288,360
Notes payable $ 552,840
Income taxes payable $ 58,000
Total current liabilities $ 899,200

Shareholders' equity:
Capital stock $ 1,512,000
Retained earnings $ 862,136 $ 2,374,136
Total Liabilities and Shareholders' Equity $ 3,273,336

GROUP 1: JENICE JOY SUMAWAY AND MIKE AGENCIA


COST OF SALES AND INVENTORIES BM 220 --- PROF. TRINIDAD
Browning Manufacturing Company
Projected Income Statement
For the Period Ending December 31, 1988
(Schedule 1)

NET SALES $2,493,600.00


COST OF GOODS SOLD
MATERIALS COST:
Materials Inventory, January 1 $ 110,520.00
Purchases 825,000.00
Plus: Freight-in -
Total Purchases 825,000.00
Materials Available 935,520.00
Less: Materials Inventory, Dec. 31 (124,520.00)
COST OF MATERIALS USED 811,000.00
DIRECT LABOR COST 492,000.00
MANUFACTURING OVERHEAD COST:
Indirect Labor 198,000.00
Factory Heat, Light and Power 135,600.00
Factory Supplies Used 61,200.00
Insurance & Taxes, Factory 52,800.00
Social Security Taxes 49,200.00
Depreciation - Plant & Equipment 140,400.00
TOTAL MANUFACTURING OVERHEAD COST 637,200.00
TOTAL MANUFACTURING COST 1,940,200.00
ADD: Work in Process Inventory, Jan 1 172,200.00
TOTAL: 2,112,400.00
LESS: Work in Process Inventory, Dec. 31 (210,448.00)
COST OF GOODS MANUFACTURED 1,901,952.00
ADD: Finished Goods Inventory, Jan. 1 257,040.00
COST OF GOODS AVAILABLE FOR SALE 2,158,992.00
LESS: Finished Goods Inventory, Dec. 31 (352,368.00)
LESS: COST OF GOODS SOLD (1,806,624.00)
Gross Margin 686,976.00
Less: Selling & Administrative Expense (522,000.00)
Operating Profit 164,976.00
Interest Expense (38,400.00)
Income before Income Taxes 126,576.00
Provision for Income Tax (58,000.00)
NET INCOME $ 68,576.00

GROUP1: JENICE JOY SUMAWAY and MIKE AGENCIA


COST OF SALES AND INVENTORIES BM 220 --- PROF. TRINIDAD
Less: Sales returns and allowances 19,200.00
Sales discounts allowed 49,200.00 68,400.00
Net Sales 2,425,200.00
Less: Cost of goods sold (per schedule) 1,806,624.00
Gross Margin 618,576.00
Less: Selling and administrative expense 522,000.00
Operating Income 96,576.00
Less: Interest Expense 38,400.00
Income before federal and state income tax 58,176.00
Less: Estimated income tax expense 58,000.00
Net Income 176.00

GROUP1: JENICE JOY SUMAWAY and MIKE AGENCIA


COST OF SALES AND INVENTORIES BM 220 --- PROF. TRINIDAD
Browning Manufacturing Company
Case Analysis

2. Exhibit 1 - Projected Balance Sheet, December 31, 1997 vs December 31, 1998

1997 1998 INC/DEC


Assets
Cash & marketable securities $ 118,440 $ 495,480 318%
Account receivable $ 311,760 $ 201,360 55%
Inventories:
Materials $ 110,520 $ 124,520 13%
Work in process $ 172,200 $ 210,448 22%
Finished goods $ 257,040 $ 352,368 37%
Supplies $ 17,280 $ 22,080 28%
Prepaid taxes and insurance $ 66,720 $ 91,920 38%

1997 1998 POS/NEG


Liabilities
Account Payable $ 185,760 $ 288,360 55%
Notes Payable $ 288,840 $ 552,840 91%
Income Taxes Payable $ 9,000 $ 58,000 544%
Shareholders' equity $ 2,341,560 $ 2,374,136 1%
Capital Stock $ 1,512,000 $ 1,512,000 0%
Retained earnings $ 829,560 $ 862,136 4%

2. Exhibit 2 - Statement of Cost of Goods Sold, Projected 1997 vs Projected 1998

1997 1998 % INC/DEC


Finished goods inventory $ 257,040 $ 352,368 37%
Work in process inventory $ 172,200 $ 210,448 22%
Materials used $ 663,120 $ 811,000 22%
Direct Manufacturing Labor $ 419,040 $ 492,000 17%
Factory Overhead
Indirect manufacturing labor $ 170,640 $ 198,000 16%
Power, heat and light $ 116,760 $ 135,600 16%
Depreciation of plant $ 126,600 $ 140,400 11%
Social Security Taxes $ 42,120 $ 49,200 17%
Taxes and insurance, factory $ 46,320 $ 52,800 14%
Supplies $ 56,880 $ 61,200 8%
Cost of Goods Sold $ 1,568,280 $ 1,806,624 15%

2. Exhibit 3 - Projected Income Statement, Projected 1997 vs Projected 1998

1997 1998 % POS/NEG


Sales $ 2,295,600 $ 2,562,000 12%
Sales returns and allowances $ 17,640 $ 19,200 -8%
Sales discounts allowed $ 43,920 $ 49,200 -11%
Net sales $ 2,234,040 $ 2,493,600 12%
Cost of Goods Sold $ 1,568,280 $ 1,806,624 15%
Gross Margin $ 665,760 $ 686,976 3%
Selling and administrative expenses $ 437,160 $ 522,000 -16%
Operating income $ 228,600 $ 164,976 -28%
Interest expense $ 34,080 $ 38,400 -11%
Income before federal and state income$tax 194,520 $ 126,576 -35%
Estimated income tax expense $ 89,520 $ 58,000 54%
Net Income $ 105,000 $ 68,576 -35%

COST OF SALES AND INVENTORIES GROUP1: JENICE JOY SUMAWAY and MIKE AGENCIA
BM 220 --- PROF. TRINIDAD
Days receiveable in 1998 improved from 49 days to 29 days

3. The budget indicate that Browning Manufacturing Company fail to achieve its goal of at least
$350,000 repayment for notes payable and have a year-end cash balance of $150,000.
The budget shows that after repaying $350,000, year-end cash balance will fall at $145,840, short of $4,160.
To be able to achieve this goal, Browning Manufacturing company must work more in their collection,
convert at least 3%-5% ($6,000 - $10,068)of accounts receivables to cash. Doing this, year-end cash balance
will be at $151,480 - $155,548.

4. Inventory turnover ratio decrease from 2.8 to 2.5 or 146 days


Align production based on the avergae cost of good sales.

5. Accounts payable increased by 55% which is negative impact to suppliers.


Increasing Brownings the hanging balance in suppliers, less credit limit, which is risky on the supplier part.

COST OF SALES AND INVENTORIES GROUP1: JENICE JOY SUMAWAY and MIKE AGENCIA
BM 220 --- PROF. TRINIDAD