PART B. Extended calculation and analysisFit for the Future LimitedEmma Richards is a qualified personal trainer, who prior to the pandemic ran 1-2-1 fitnesssessions with clients in their homes and a timetable of classes in the local community centre.Such included cardio-dance, 'High Intensity Interval Training' (HIIT) and 'Fitness Pilates'. Herbusiness is called 'Fit for the Future Limited'. During the pandemic, she had to diversify herproduct offering in response to the national lockdowns and restrictions imposed. As such shebegan to offer her classes and 1-2-1 sessions via conferencing tools such as Zoom.She managed to retain approximately 65% of her clients, but the remainder she lost to thecompetition from alternatives such as freely accessible YouTube channels. Emma is preparingher cash budget for July, August, September, and October 2021.Emma has provided you with the following information:Monthly membership packages are offered at 3 levels:PackageDetailsCostBronzeAccess to all group classes Monday - Friday£15 per monthAccess to all classes Monday – Sunday and to an £22 per monthindividualised fitness and nutritional plannerSilverAll of the above, plus two x 1-2-1 sessions with £30 per monthEmma per weekGoldBudgeted client numbers for the next four months:July65August67September October69JuneBronze6580Silver3638444849Gold889.10111. Emma offers all her silver and gold customers credit terms of 1 month, which they alltake advantage of. The payment from bronze customers is paid in the month in whichit is incurred.2. Emma currently works using her old laptop and speakers. She is planning to buy anew laptop and sound system to enhance the quality of her classes. She intends tobuy this in August 2021. At that point she will pay cash deposit of £500 with the balancedue in October of £2,000.3. Emma also intends to purchase new fitness equipment in July, including dumbells,exercise mats and resistance bands. Total cost is estimated at £250 which will be paidfor in cash at the time of purchase. 4. Emma pays for fibre optic broadband to ensure a reliable internet connection for all ofher classes. This is charged at a monthly rate of £40pcm, payable in the month it isincurred. However, she has been recently notified that this is likely to see a 5%increase from September onwards.5. Earlier in the year, Emma engaged with a marketing agency to update her companywebpage. The fee for this was £850. 20% was paid in May 2021. The balance is duein August.6. Emma employs an administrative assistant to manage her membership records andperform her bookkeeping for her. She pays her assistant a wage of £1,000 per month.Emma takes a wage of £2,000 per month. Wages are paid in the month in which theyare incurred. From October 2021, Emma intends to award her assistant a 5% pay rise.7. Depreciation of all equipment is charged at £50 per month.8. Opening cash balance on 1 July 2021 is expected to be £5,500.9. Emma continues to pay Personal Trainer Insurance of £10 per month, payableannually in advance on 1 October 2021.10. Other expenses, including utility bills relating to the business amount to £100 permonth, paid for in the month in which they are incurred.11. In February 2021, the company took on a £10,000 business loan at an annual interestrate of 6%. The annual interest payment is due in July 2021.Requirements:(i) Prepare a cash budget for July, August, September and October 2021 for Fit forthe Future Limited.(ii) Analyse the budgeted figures and changes in the cash balance. In doing so,make any recommendations to Emma.(iii) Emma has stated that profits for the period should be more or less equal the netcash inflow for the period. Do you agree? Explain your reasoning.

Cash Budget - A cash budget is an estimation of cashflows of the company over a particular period of…

4. Emma pays for fibre optic broadband to ensure a reliable internet connection for all of her classes. This is charged at a monthly rate of £40pcm, payable in the month it is incurred. However, she has been recently notified that this is likely to see a 5% increase from September onwards. 5. Earlier in the year, Emma engaged with a marketing agency to update her company webpage. The fee for this was £850. 20% was paid in May 2021. The balance is due in August. 6. Emma employs an administrative assistant to manage her membership records and perform her bookkeeping for her. She pays her assistant a wage of £1,000 per month. Emma takes a wage of £2,000 per month. Wages are paid in the month in which they are incurred. From October 2021, Emma intends to award her assistant a 5% pay rise. 7. Depreciation of all equipment is charged at £50 per month. 8. Opening cash balance on 1 July 2021 is expected to be £5,500. 9. Emma continues to pay Personal Trainer Insurance of £10 per month, payable annually in advance on 1 October 2021. 10. Other expenses, including utility bills relating to the business amount to £100 per month, paid for in the month in which they are incurred. 11. In February 2021, the company took on a £10,000 business loan at an annual interest rate of 6%. The annual interest payment is due in July 2021. Requirements: (i) Prepare a cash budget for July, August, September and October 2021 for Fit for the Future Limited. (ii) Analyse the budgeted figures and changes in the cash balance. In doing so, make any recommendations to Emma. (iii) Emma has stated that profits for the period should be more or less equal the net cash inflow for the period. Do you agree? Explain your reasoning.

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter5: Product And Service Costing: Job-order System

Section: Chapter Questions

Problem 8E: Refer to the data in Exercise 5.7. Vince Melders, owner of EcoScape, noticed that the watering...