Case Scenario:
Victoria Kite Company, a small Melbourne firm that sells kites on the web wants a master budget for the next three months, beginning January 1, 2005. It deserves an ending minimum cash balance of $5,000 each month. Sales are forecasted at an average wholesale selling price of $8 per kite. In January, Victoria Kite is beginning just-in-time (JIT) deliveries from suppliers, which means that purchases equal expected sales.
On January 1, purchases will cease until inventory reaches $6,000, after which time purchases will equal sales. Merchandise costs average $4 per kite. Purchases during any given month are paid in full during the following month. All sales are on credit, payable within 30 day, but experience has shown that 60% of current sales are collected in the current month, 30% in the next month, and 10% in the month thereafter. Bad debts are negligible.
Monthly operating expenses are as follows:
Wages and salaries $15,000
Insurance expired 125
Depreciation 250
Miscellaneous 2,500
Rent $250/month + 10% of quarterly sales over $10,000
Cash dividends of $1,500 are to be paid quarterly, beginning January 15, and re disbursed on the fifteenth of the previous month. All operating expenses are paid as incurred, except insurance, depreciation, and rent. Rent of $250 is paid at the beginning of teach month, and the additional 10% of sales is paid quarterly on the tenth of the month following the end of the quarter. The next settlement is due January 1.
The company plans to buy some new fixtures in March.
Money can be borrowed and repaid in multiples of $500 at an interest rate of 10% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing occurs at the beginning and repaid at the end of the same month. Compute interest to the nearest dollar.
Assets as of December 31, 2004 Liabilities as of December 31, 2004
Cash $5,000 Accounts Payable (merchandise) $35,000
Accounts receivable 12,500 Dividends payable 1,500
Inventory* 39,050 Rent payable 7,800
Unexpired insurance 1,500 Total = $44,850
Fixed assets, net 12,500
Total = $70,550 *November 30 inventory balance = $16,000.
Recent and forecasted sales:
October - $38,000 December- $25,000 February - $75,000 April - $45000
November - $25,000 January -$62,000 March - $38,000
I need schedule C and D as followed from the above information:
Schedule c: Purchases Budget for: January February March April
Desired ending inventory
Plus costs of goods sold
Total needed
Less beginning inventory
Total purchases
Schedule d: Cash Disbursements for Purchases for: January February March April
50% of last month's purchases
Plus 50% of this months purchases
Disbursements for purchases