# Problem Set 2

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Running head: PROBLEM SET I Problem Set I Problem Set I 4-20 Juan’s Taco Company has restaurants in five college towns. Juan wants to expand into Austin and College Station and needs a bank loan to do this. Mr. Bryan, the banker, will finance construction if Juan can present an acceptable three-month financial plan for January through March. The following are actual and forecasted sales figures: Table 1 Actual November \$120,000 December 140,000 Forecast January \$190,000 February 210,000 March 230,000 April \$230,000 Of Juan’s sales, 30 percent are for cash and the remaining 70 percent are on credit. Of credit sales, 40 percent are paid in the month after sale and 60 percent are paid in the second month after the sale.…show more content…
Table 4 Cash Budget Total Cash Receipts Total Cash Payments Net Cash Flow Beginning Cash Balance Cumulative Cash Balance Monthly Loan or (repayment) Cumulative Loan Balance Ending Cash Balance January \$146,600 154,500 (7,900) 70,000 62,100 2,900 2,900 \$ 65,000 February \$175,000 169,500 5,500 65,000 70,500 (2,900) -0- \$ 67,600 March \$207,600 220,500 (12,900) 67,600 54,700 10,300 10,300 \$ 65,000 5-2. Hazardous Toys Company produces boomerangs that sell for \$8 each and have a variable cost of \$7.50. Fixed costs are \$15,000.a. Compute the break-even point in units. b. Find the sales (in units) needed to earn a profit of \$25,000. Table 5 Total Fixed Costs ÷ (Selling Price - Variable Cost) = Break-even sales \$15,000 Break-even ÷ (\$8 Per Unit - .. 50 \$7.50) Variable Cost = 30,000 Units (\$25,000 Profit + \$40,000 \$15,000) Break-even ÷ (\$8 Per Unit - .. 50 \$7.50) Variable Cost = 80,000 Units 7-3. City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers so checks written by City Farm take longer to clear the bank. Collection time has been reduced by two and disbursement time increased by one day because of