Directions: Each team will be responsible for completing the case detailed at th
ID: 2533034 • Letter: D
Question
Directions: Each team will be responsible for completing the case detailed at the end of these instructions. The project needs to be done in Excel. Each team will submit the finished product via e-mail as an attachment by midnight on the due date. There is an Excel template on my website that you can use to complete the project. It will save you loads of time. The project due date is noted on your class timeline. Note: You need to use formulas and cell references whenever possible. If you do not use formulas or cell references, I will deduct points. Part 1a. This part requires you to create a sales budget by month and the total for the 2nd quarter. Use formulas wherever possible. Part 1b. This part requires you to create a schedule for budgeted cash collections from sales and accounts receivable. Use formulas wherever possible and link information from Part 1a. Part 1c. This part requires you to create a purchases budget in units and dollars. Note: this company is a merchandiser, so no production budget is needed. Instead, a purchases budget will be used (since the company will be buying inventory instead of manufacturing it). Obviously, you will not need any direct materials, direct labor etc. budgets. Use formulas wherever possible. Link information wherever possible. Part 1d. This part requires you to create a cash disbursements budget for purchases by month and the total for the quarter. Use formulas wherever possible and link information. Part 2. This part requires you to create a cash budget by month and the total for the quarter. Use formulas wherever possible and link information. Also use formulas when you calculate numbers that aren’t given, like interest expense. Use formulas whenever you calculate numbers (i.e. interest expense). Part 3. This part requires you to create a budgeted income statement from the previous parts and additional information given in the case. Use formulas wherever possible, including any derived numbers (i.e. COGS, commissions). Use formulas whenever you calculate numbers. Part 4. This part requires you to create a budgeted balance sheet from the previous parts and additional information given in the case. Use formulas wherever possible, including any derived numbers (i.e. unexpired insurance, fixed assets, net of depreciation, retained earnings, dividends payable, inventory). Use formulas whenever you calculate numbers. Master Budget with Supporting Schedules You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributor of a designer’s silk ties. The company has an exclusive franchise on the distribution of the ties, and sales have grown so rapidly over the last few years that it has become necessary to add new members to the management team. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are anxious to make a favorable impression on the president and have assembled the information below. The company desires a minimum ending cash balance each month of $12,000. The ties are sold to retailers for $8.10 each. Recent and forecasted sales in units are as follows: January (actual) 20,000 June 65,000 February (actual) 24,000 July 40,000 March (actual) 28,000 August 36,000 April 33,000 September 32,000 May 41,000 ________________________________________ The large buildup in sales before and during June is due to Father’s Day. Ending inventories are supposed to equal 75% of the next month’s sales in units. The ties cost the company $4.85 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 30% of a month’s sales are collected by month-end. An additional 60% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. The company’s monthly selling and administrative expenses are given below: Variable: Sales commissions $ 1 per tie Fixed: Wages and salaries $ 22,000 Utilities $ 14,000 Insurance $ 1,200 Depreciation $ 1,500 Miscellaneous $ 3,000 ________________________________________ All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Land will be purchased during May for $30,000 cash. The company declares dividends of $12,000 each quarter, payable in the first month of the following quarter. The company’s balance sheet at March 31 is given below: Assets Cash $ 14,000 Accounts receivable ($19,440 February sales; $158,760 March sales) 178,200 Inventory (24,750 units) 120,037.50 Prepaid insurance 14,400 Fixed assets, net of depreciation 172,700 ________________________________________ ________________________________________ Total assets $ 499,337.50 ________________________________________________________________________________ ________________________________________________________________________________ Liabilities and Stockholders’ Equity Accounts payable $ 76,993.75 Dividends payable 12,000 Capital stock 300,000 Retained earnings 110,343.75 ________________________________________ ________________________________________ Total liabilities and stockholders’ equity $ 499,337.50 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ The company has an agreement with a bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $300,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $12,000 in cash.
Explanation / Answer
All the working is from start till the end for the question Schedule of Cash collection April May June Total February March July August Sales in units A 33000 41000 65000 139000 24000 28000 40000 36000 Sale Price 8.1 8.1 8.1 8.1 8.1 8.1 8.1 8.1 Sales in value 267300 332100 526500 1125900 194400 226800 324000 291600 Feb sales 19440 19440 Marc sales (60%,10% of $527800) 136080 22680 158760 April sales (30%,60%,10%) 80190 160380 26730 267300 May Sales 99630 199260 298890 June sales 157950 157950 Total A 235710 282690 383940 902340 Accounts Receivable May 332100*.1+June 526500*.7= 401760 Note 2 Purcahse Budget April May June Total July Units to be sold 33000 41000 65000 139000 40000 Closing Inventory 75% of next month sales S*.75 30750 48750 30000 30000 Total Finised Googd 63750 89750 95000 169000 Less: Beginning Inventory 24750 30750 48750 24750 Units to be produced 39000 59000 46250 144250 Purchase Price 4.85 4.85 4.85 4.85 Total Purchase price A 189150.00 286150.00 224312.50 699612.50 COGS= Units sold*4.85 160050 198850 315250 674150 Cash Disbursement Schedule From march purchases 76993.75 76993.75 From April Purchases 94575.00 94575.00 189150.00 From May Purchases 143075.00 143075.00 286150.00 From June purchases 112156.25 112156.25 Total B 171568.75 237650.00 255231.25 664450.00 Accounts payable as on 30 June 112156.25 working Cash payments payment of Inventory 171568.75 237650 255231.25 664450 Sales Commissions $1 per tie sold 33000 41000 65000 139000 Wages & salaries 22000 22000 22000 66000 Utilities 14000 14000 14000 42000 Miscelleneous 3000 3000 3000 9000 Dividend Paid 12000 12000 April May J June Total Beginning Cash balance 14000.00 12141.25 12181.25 14000.00 Cash receipt 235710.00 282690.00 383940.00 902340.00 Total cash available 249710.00 294831.25 396121.25 916340.00 Less: Cash Disbursements payment of Inventory 171568.75 237650.00 255231.25 664450.00 Sales Commissions $1 per tie sold 33000.00 41000.00 65000.00 139000.00 Wages & salaries 22000.00 22000.00 22000.00 66000.00 Utilities 14000.00 14000.00 14000.00 42000.00 Miscelleneous 3000.00 3000.00 3000.00 9000.00 Dividend Paid 12000.00 0.00 0.00 12000.00 Total cash Disbursements 255568.75 317650.00 359231.25 932450.00 Excess /(deficiency) of cash receipts over cash disbursements -5858.75 -22818.75 36890.00 -16110.00 Minimum Cash balance (working) 12000.00 12000.00 12000.00 12000.00 Financing Borrowed 18000.00 35000.00 53000.00 Repaid -23000.00 -23000.00 Interest Repaid -1240.00 -1240.00 Total financing 18000.00 35000.00 -24240.00 28760.00 Ending Cash balance 12141.25 12181.25 12650.00 12650.00 Dear student the month wise income staement is for your understanding Income Statement as on 3o June 2016 April May June Total Sales 267300 332100 526500 1125900 1125900 Less: variable Cost Cost of Good Sold 160050 198850 315250 674150 Sales Commissions 33000 41000 65000 139000 Contribution 74250 92250 146250 312750 Fixed Expenses Wages & salaries 22000 22000 22000 66000 Rent Utilities 14000 14000 14000 42000 Wages & salaries Miscelleneous 3000 3000 3000 9000 Utilities Insurance 1200 1200 1200 3600 Depreciation 1500 1500 1500 4500 total fixed expenses 41700 41700 41700 125100 Operating Income 32550 50550 104550 187650 Interest On Short Term Loan 180 530 530 1240 Net Income 32370 50020 104020 186410 ans 3 Income statement For the three months period Sales 1125900.00 Less: variable Cost Cost of Good Sold 674150.00 Sales Commissions @ 4% 139000.00 Total variable expenses 813150.00 Contribution 312750.00 Fixed Expenses Wages & salaries 66000.00 Utilities 42000.00 Miscelleneous 9000.00 Insurance 3600.00 Depreciation 4500.00 total fixed expenses 125100.00 Operating Income 187650.00 Interest On Short Term Loan -1240.00 Net Income 186410.00 Net Income Statement of Retained earnings Opening balance 110343.75 Add: Net Income for the year 186410.00 Less: Dividend payable -12000 Balance June 30 284753.75 BalANCE Sheet as on 30 June Assets Cash 12650.00 Accounts Receivable 401760.00 Inventory 145500.00 Prepaid Insurance=(14400-3600) 10800.00 Property & Equipment 172700.00 Less: Accumulated Depreciation -4500.00 738910.00 Liabilities & Stockholder equity Accounts payable 112156.25 Dividend Payable 12000.00 Bank loan payable 30000.00 Total Laibilities 154156.25 Stockholder Equity Capital stock 300000.00 Retained earnings 284753.75 Total Stockholder Equity 584753.75 TotalLiabilities & Stockholder Equity 738910.00
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