compmaster_budg_case_pu_dong_photo.docVIP

Ran Zi Yao, president of Pu Dong Photo Company, was just concluding a budget meeting with his senior staff. It was November of 2Ox4, and the group was discussing preparation of the firms master budget for 2Ox5. Ive decided to go ahead and purchase the industrial robot weve been talking about. Well make the acquisition on January 2 of next year, and I expect it will take most of the year to train the personnel and reorganize the production process to take full advantage of the new equipment. In response to a question about financing the acquisition, Ran Zi Yao replied as follows: The robot will cost ￥950,000. There will also be an additional ￥50,000 in ancillary equipment to be purchased. Well finance these purchases with a one-year ￥1,000,000 loan from Xin Sheng Bank and Trust Company. Ive negotiated a repayment schedule of four equal installments on the last day of each quarter. The interest rate will be 10 percent, and interest payments will be quarterly as well. With that the meeting broke up, and the budget process was on. Pu Dong Photo Company is a manufacturer of metal picture frames. The firms two product lines are designated as S (small frames; 5 X 7 inches) and L (large frames; 8 X 10 inches). The primary raw materials are flexible metal strips and 9-inch by 24-inch glass sheets. Each S frame requires a 2-foot metal strip; an L frame requires a 3-foot strip. Allowing for normal breakage and scrap glass, the company can get either four S frames or two L frames out of a glass sheet. Other raw materials, such as cardboard backing, are insignificant in cost and are treated as indirect materials. Jiang Ao Mu, Pu Dong Photos controller, is in charge of preparing the master budget for 2Ox5. She has gathered the following information: Sales in the fourth quarter of 20x4 are expected to be 50,000 S frames and 40,000 L frames. The sales manager predicts that over the next two years, sales in each product line will grow by 5,000 units each quarter over the