Fury’s Furniture Factory actual sales and purchases for April and May are shown
ID: 2416892 • Letter: F
Question
Fury’s Furniture Factory actual sales and purchases for April and May are shown here along with forecasted sales and purchases for June through September.
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Sales Purchases
April (Actual) ……………………. $860,000 $350,000
May (Actual) …………………….. 840,000 340,000
June (forecast) ………………….. 815,000 340,000
July (forecast) ………………….. 815,000 400,000
August (forecast) ……………… 830,000 420,000
September (forecast) ………….. 880,000 420,000
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The company makes 22% of its sales for cash and 78% on credit. Of the credit sales, 45% are collected in the month after the sale and 55% are collected two months later. Fury’s Furniture Factory pays for 18 % of its purchases in the month after purchase and 82% two months after.
Labor expense equals 16% of the current month’s sales. Overhead expense equals $24,000 per month. Interest payments of $62,500 are due in June and September. A cash dividend of $102,500 is scheduled to be paid in June. Tax payments of $55,500 are due to be paid in June and September. There is a scheduled capital outlay of $1,275,000 in September.
Fury’s Furniture Factory ending cash balance in May is $42,500 and there are no marketable securities at the end of May. The minimum desired cash balance is $20,000 and the maximum desired cash balance is $75,000. Excess cash at month end (any amount above $75,000) is used to buy marketable securities. Marketable securities are sold before borrowing funds in case of a cash shortfall (cash falling below $20,000). (For this problem, the value of Marketable securities is constant. That is, there is no interest earned.)
Prepare a Cash Receipts Schedule, a Cash Payments Schedule , and a Cash Budget for Fury’s Furniture Factory for June through September. Use the tables in the text as a template for completing this problem.
Discuss Fury’s Furniture Factory forecasting. What did you learn? What seems to be the most important consideration in preparing the forecast ?
Explanation / Answer
Solution.
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Cash Payments Schedule
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Cash Receipts Shedule Particular's Total June July Aug Sep Oct Nov SalesCredit April 368,940 368,940 SalesCredit May 294,840 294,840 360,360 sales Cash june 189,200 189,200 SalesCredit june 670,800 301,860 368,940 sales Cash july 189,300 SalesCredit july 286,065 349,635 sales Cash Aug 182,600 SalesCredit Aug 291,330 sales Cash Sep 193,600 SalesCredit Sep 308,880 377,520 Total 852,980 851,520 837,605 834,565 308,880 377,520Related Questions
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