REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
16th Edition
ISBN: 9780134789705
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 6, Problem 6.34E
Cash flow analysis, sensitivity analysis. HealthMart is a retail store selling home oxygen equipment. HealthMart also services home oxygen equipment, for which the company bills customers monthly. HealthMart has budgeted for increases in service revenue of $200 each month due to a recent advertising
Sales and Service Revenues Budget March–-June 2018
Almost all of the sales revenues of the oxygen equipment are credit card sales; cash sales are negligible. The credit card company deposits 97% of the revenues recorded each day into HealthMart’s account overnight. For the servicing of home oxygen equipment, 60% of oxygen services billed each month is collected in the month of the service, and 40% is collected in the month following the service.
- 1. Calculate the cash that HealthMart expects to collect in April, May, and June 2018 from sales and service revenues. Show calculations for each month.
- 2. HealthMart has budgeted expenditures for May of $11,000 and requires a minimum cash balance of $250 at the end of each month. It has a cash balance on May 1 of $400.
- a. Given your answer to requirement 1, will HealthMart need to borrow cash to cover its payments for May and maintain a minimum cash balance of $250 at the end of May?
- b. Assume (independently for each situation) that (1) May total revenues might be 10% lower or that (2) total costs might be 5% higher. Under each of those two scenarios, show the total net cash for May and the amount HealthMart would have to borrow to cover its cash payments for May and maintain a minimum cash balance of $250 at the end of May. (Again, assume a balance of $400 on May 1.)
- 3. Why do HealthMart’s managers prepare a
cash budget in addition to the revenue, expenses, and operating income budget? Has preparing the cash budget been helpful? Explain briefly.
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Almost all of the sales revenues of the oxygen equipment are credit card sales; cash sales are negligible. The credit card company deposits 97% of the revenues recorded each day into HealthMart’s account overnight. For the servicing of home oxygen equipment, 60% of oxygen services billed each month is collected in the month of the service, and 40% is collected in the month following the service.
Q. HealthMart has budgeted expenditures for May of $11,000 and requires a minimum cash balance of $250 at the end of each month. It has a cash balance on May 1 of $400.
a. Given your answer to requirement 1, will HealthMart need to borrow cash to cover its payments for May and maintain a minimum cash balance of $250 at the end of May?
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Chapter 6 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
Ch. 6 - What are the four elements of the budgeting cycle?Ch. 6 - Define master budget.Ch. 6 - Strategy, plans, and budgets are unrelated to ore...Ch. 6 - Budgeted performance is a better criterion than...Ch. 6 - Production managers and marketing managers are...Ch. 6 - Budgets meet the cost-benefit test. They force...Ch. 6 - Define rolling budget. Give an example.Ch. 6 - Outline the steps in preparing an operating...Ch. 6 - The sales forecast is the cornerstone for...Ch. 6 - Prob. 6.10Q
Ch. 6 - Define Kaizen budgeting.Ch. 6 - Prob. 6.12QCh. 6 - Explain how the choice of the type of...Ch. 6 - What are some additional considerations that arise...Ch. 6 - Prob. 6.15QCh. 6 - Master budget. Which of the following statements...Ch. 6 - Operating and financial budgets. Which of the...Ch. 6 - Production budget. Superior Industries sales...Ch. 6 - Responsibility centers. Elmhurst Corporation is...Ch. 6 - Cash budget. Mary Jacobs, the controller of the...Ch. 6 - Sales budget, service setting. In 2017 Hart Sons,...Ch. 6 - Sales and production budget. The Coby Company...Ch. 6 - Direct material budget. Dawson Co. produces wine....Ch. 6 - Material purchases budget. The McGrath Company has...Ch. 6 - Revenues, production, and purchases budgets. The...Ch. 6 - Revenues and production budget. Saphire, Inc.,...Ch. 6 - Budgeting; direct material usage, manufacturing...Ch. 6 - Budgeting, service company. Ever Clean Company...Ch. 6 - Budgets for production and direct manufacturing...Ch. 6 - Activity-based budgeting. The Jerico store of...Ch. 6 - Kaizen approach to activity-based budgeting...Ch. 6 - Responsibility and controllability. Consider each...Ch. 6 - Responsibility, controllability, and stretch...Ch. 6 - Cash flow analysis, sensitivity analysis....Ch. 6 - Budget schedules for a manufacturer. Hale...Ch. 6 - Budgeted costs, Kaizen improvements environmental...Ch. 6 - Revenue and production budgets. (CPA, adapted) The...Ch. 6 - Budgeted income statement. (CMA, adapted) Smart...Ch. 6 - Prob. 6.39PCh. 6 - Comprehensive problem with ABC costing. Animal...Ch. 6 - Cash budget (continuation of 6-40). Refer to the...Ch. 6 - Comprehensive operating budget. Skulas, Inc.,...Ch. 6 - Cash budgeting, budgeted balance sheet....Ch. 6 - Comprehensive problem; ABC manufacturing, two...Ch. 6 - Cash budget. (Continuation of 6-44) (Appendix)...Ch. 6 - Budgeting and ethics. Jayzee Company manufactures...Ch. 6 - Kaizen budgeting for carbon emissions. Apex...Ch. 6 - Comprehensive budgeting problem; activity-based...
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