EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI
8th Edition
ISBN: 9780176914943
Author: Mayes
Publisher: VST
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Chapter 4, Problem 2P
a.
Summary Introduction
To calculate: Cash budget for June 2017 to October 2017.
Introduction: Cash budgets are prepared to plan cash availability for smooth maintenance of company’s operations, they shall account for all cash in-flows and cash out-flows.
a.
Expert Solution
Explanation of Solution
Loan outstanding shall be repaid by cash available over and above the minimum requirement of $25,000 which are required to be maintained.
b.
Summary Introduction
To create:A scenario summary with total interest cost for differing the payment to suppliers at different rateswith comment on B’s view.
Introduction: When payment to suppliers is differed to next month, it results in savings in form of interest costs, as the working capital requirement falls.
b.
Expert Solution
Answer to Problem 2P
B’s view regarding the rising interest cost when the payment is made to supplier in the same month is correct, however, it is not feasible because the discount forgone is greater than rise in interest rate.
Explanation of Solution
Calculation of total interest cost under different scenarios.
It can be observed from above calculations that the cost of interest rises when payment is made in the same month, interest cost is lowest in the month when all the payments for procurement are made in the next month.
B’s view correct, however, it is not feasible to implement the same because in order to gain benefit of lower interest rate, discount of 2 % offered by the suppliers is forgone.
Total discount forgone under different option is :
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Students have asked these similar questions
Maraa Company's budget includes the following credit sales for the current year: August, $25,000; September, $36,000; October, $30,000; November, $32,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Marra expect to collect in October as a result of current and past credit sales?
Group of answer choices
1)$19,700.
2)$30,000.
3)$31,100.
4)$28,500.
5)$33,900.
Striker Corporation is preparing its cash payments budget for next month. The following information pertains to the cash payments: How much cash will be paid out next month?
a.
Striker
Corporation pays for
55%
of its direct materials purchases in the month of purchase and the remainder the following month. Last month's direct material purchases were
$73,000,
while the company anticipates
$85,000
of direct material purchases next month.
b.
Direct labor for the upcoming month is budgeted to be
$37,000
and will be paid at the end of the upcoming month.
c.
Manufacturing overhead is estimated to be
150%
of direct labor cost each month and is paid in the month in which it is incurred. This monthly estimate includes
$18,000
of depreciation on the plant and equipment.
d.
Monthly operating expenses for next month are expected to be
$45,000,
which includes
$2,800
of depreciation on office equipment and
$1,200
of bad debt expense. These monthly operating…
Given the following information, construct the firm’s cash budget for the given months and answer the questions.
All sales are for credit and collections occur after 30 days.
A $100,000 Treasury bill matures in March.
Monthly fixed disbursements are $20,000.
Variable disbursements are 35 percent of sales and occur one month prior to sales. (Variable cash disbursements are given for April.)
A tax payment of $40,000 is due in April.
A payment of $50,000 is to be received in February.
The initial cash is $20,000.
The minimum required cash balance is $9,000.
Enter the disbursements values and required level of cash as positive values. Use a minus sign to enter cash outflows, shortage of cash values, negative beginning and ending cash positions, if any. Do not leave any cells blank. If the answer is zero, enter "0".
January
February
March
April
Sales
$
$
180,000
$
200,000
$
180,000
Cash sales
$
$
$
$
Collections
$
$…
Chapter 4 Solutions
EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI
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