Question 14 The following credit sales are budgeted by Tara Plumlee Co.: January $212,000 February 332,000 March 425,000 April 333,546 The company's past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated total cash inflow for the month of March is
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- CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2014 and 2015: May 2014 180,000 June 180,000 July 360,000 August 540,000 September 720,000 October 360.000 November 360,000 December 90,000 January 2015 180.000 Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: May 2014 90,000 June 90,000 July 126,000 August 882.000 September 306,000 October 234,000 November 162,000 December 90,000 General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depreciation charges are 36,000 a month. Miscellaneous expenses arc S2,700 a month. Income tax payments of 63,000 arc due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2014. b. Prepare monthly estimates of the required financing or excess funds that is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 130 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal; and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2016 and 2017. May 2016 180,000 June 180,000 July 360,000 August 540,000 September 720,000 October 360,000 November 360,000 December 90,000 January 2017 180,000 Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale. 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: May 2016 90,000 June 90,000 July 126,000 August 882,000 September 306,000 October 234,000 November 162,000 December 90,000 General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depredation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2016. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal; and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if ail financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2015 and 2016: May 2015 180,000 June 180,000 July 360,000 August 540,000 September 720,000 October 360,000 November 360,000 December 90,000 January 2016 180,000 Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: May 2015 90,000 June 90,000 July 126,000 August 882,000 September 306,000 October 234,000 November 162,000 December 90,000 General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depreciation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2015. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1 30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal; and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.
- Forecast sales volume and sales budget Sentinel systems Inc. prepared the following sales budget for 20Y8: At the end of December 20Y8, the following unit sales data were reported for the year: Unit Sales Home Alert System Business Alert System United States 1,734 1,078 Europe 609 329 Asia 432 252 For the year ending December 31, 20Y9, unit sales are expected to follow the patterns established during the year ending October 31, 20Y8. The unit selling price for the Home: Alert System is expected to increase to 250, and the unit selling price for the Business Alert System is expected to be increased 820, effective January 1, 20Y9. Instructions 1. Compute the increase or decrease.ase of actual unit sales for the year ended October 31, 20Y8, over budget. Place your answers in a columnar table with the following format: 2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 20Y9, compute the unit sales volume to be used for preparing the sales budget for the year ending December 31, 20Y9. Place your answers in a columnar table similar to that in part (1) but with the following column heads. Round budgeted units to the nearest unit. 20Y8 Percentage 20Y9 Actual Increase Budgeted Units (Decrease) Units (rounded) 3. Prepare a sales budget for the year ending December 31, 201Y9Forecast sales volume and sales budget For 20Y6, Raphael Frame Company prepared the sales budget that follows. At the end of December 20Y6, the following unit sales data were reported for the year: Unit Sales 8" 10" Frame 12" 16" Frame East 8,755 3,686 Central 6,510 3,090 West 12,348 5,616 Raphael Frame Company Sales Budget For the Year Ending December 31, 20Y6 Unit Sales Unit Selling Total Product and Area Volume Price Sales 8"10" Frame: East 8,500 16 136,000 Central 6,200 16 99,200 West 12,600 16 201,600 Total 27,300 436,800 12" x 16" Frame: East 3,800 30 5114,000 Central 3,000 30 90,000 West 5,400 30 162,000 Total 12,200 366,000 Total revenue from sales 802,800 For the year ending December 31, 20Y7, unit sales are expected to follow the patterns established during the year ending December 31, 20Y6. The unit selling price for the 8" 10"frame is expected to increase to 17, and the unit selling price for the 12" 16" frame is expected to increase to 32, effective January 1, 20Y7. Instructions 1. Compute the increase or decrease of actual unit sales for the year ended December 31, 20Y6, over budget. Place your answers in a columnar table with the following format: Unit Sales, Year Ended 20Y6 Increase (Decrease) Actual Over Budget Budget Actual Sales Amount Percent 8" 10" Frame: East Central West 12"16" Frame: East Central West 2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 20Y7, compute the unit sales volume to be used for preparing the sales budget for the year ending December 31, 20Y7. Place your answers in a columnar table similar to that in part (1) but with the following column heads. Round budgeted units to the nearest unit. 20Y6 Percentage 20Y7 Actual Increase Budgeted Units (Decrease! Units (rounded) 3. Prepare a sales budget for the year ending December 31, 20Y7.Forecast sates volume and sales budget For 20Y8, Raphael Frame Company prepared the sales budget that follows. At the end of December 20Y8, the following unit sales data were reported for the year: Unit Sales 8" 10" Frame 12" 16" Frame East 8,755 3,686 Central 6,510 3,090 West 12,348 5,616 For the year ending December 31, 20Y9, unit sales are expected to Follow the patterns established during the year ending December 31, 20Y8. The unit selling price for the 8" 10" the frame is expected to Increase to 17 and the unit selling price for the 12" 16" frame is expected to increase to 32, effective January 1, 20Y9. Instructions 1. Compute the increase or decrease of actual unit sales for the year ended December 31,. 20Y8, Over budget. Place your answers in a columnar table with the following format: 2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 20Y9, compute the unit sales volume to lie used for preparing the sales budget for the year ending December 31, 20Y9. Place your answers in a columnar table similar to that in part (1) but with the following column heads. Round budgeted units to the nearest. 20Y8 Percentage 20Y9 Actual Increase Budgeted Units (Decrease) Units (rounded) 3. Prepare a sales budget for the year ending December 51. 20Y9.
