Case 7 Armstrong Helmet Company

case 7

O STR NG

HELME

T

COMPA

Armstrong Helmet Company

Developed by Dick Wasson, Southwestern College

THE BUSINESS SITUATION Armstrong Helmet Company manufactures a unique model of bicycle helmet. The company began operations December 1, 2011. Its accountant quit the second week of operations, and the company is searching for a replacement. The company has decided to test the knowledge and ability of all candidates interviewing for the position. Each candidate will be provided with the information below and then asked to prepare a series of reports, schedules, budgets, and recommendations based on that information. The information provided to each candidate is as follows.

Cost Items and Account Balances Administrative salaries Advertising for helmets Cash, December 1 Depreciation on factory building Depreciation on office equipment Insurance on factory building Miscellaneous expenses—factory Office supplies expense Professional fees Property taxes on factory building Raw materials used Rent on production equipment Research and development Sales commissions Utility costs—factory Wages—factory Work in process, December 1 Work in process, December 31 Raw materials inventory, December 1 Raw materials inventory, December 31 Raw material purchases Finished goods inventory, December 1 $15,500 11,000 –0– 1,500 800 1,500 1,000 300 500 400 70,000 6,000 10,000 40,000 900 70,000 –0– –0– –0– –0– 70,000 –0–

NY

AR M

CA-27

CA-28

ARMSTRONG HELMET COMPANY

case 7 Cases for Management Decision Making

Production and Sales Data Number of helmets produced Expected sales in units for December ($40 unit sales price) Expected sales in units for January Desired ending inventory Direct materials per finished unit Direct materials cost Direct labor hours per unit Direct labor hourly rate Cash Flow Data Cash collections from customers: 75% in month of sale and 25% the following month. Cash payments to suppliers: 75% in month of purchase and 25% the...