Assignment
NOTE: Be sure to show all calculations to receive credit and follow the Assignment Instructions.
1. BubbaBraggard is very excited because sales for his nursery and plant company are expected to double from $650,000 to $1,300,000 next year. He notes that net assets (Assets - Liabilities) will remain at 50 percent of sales. His firm will enjoy a9 percent return on total sales. He will start the year with $120,000 in the bank and is bragging about the Jaguar and luxury townhouse he will buy. Does his optimistic outlook for his cash position appear to be correct? Compute his likely cash balance or deficit for the end of the year. Start with beginning cash and subtract the asset buildup (equal to 50 percent of the sales increase) and add in profit.
2. Bill Planner expects the sales for his clothing company to be $1,550,000 next year. He notes that net assets (Assets - Liabilities) will remain unchanged. His clothing firm will enjoy a 13 percent return on total sales. He will start the year with $350,000 in the bank. What would the ending cash balance be?
3. Barrow Life Jackets Company had sales of 150,000 units at $35 per unit last year. The marketing manager projects a 20 percent increase in unit volume sales this year with a 25 percent price decrease. Returned merchandise will represent 4 percent of total sales. What is the net dollar sales projection for this year?
4. Belinda's Plumbing Company has beginning inventory of 18,500 units, projects sales of 55,000 units for the month, and desires to maintain ending inventory at 30 percent of projected sales. How many units should be produced?
5. On December 31 of last year, Blaster Technology Corporation had an inventory of 450 units of its product, which cost $220 per unit to produce. During January, the company produced 850 units at a cost of $250per unit. Assuming that the Corporation sold 1,000 units in January, what was the cost of goods sold? (Assume LIFO inventory accounting.)
6. BBB Supplies produces a product with the following costs as of July 1, 2015:
Material $ 6
Labor 4
Overhead 3
$13
Beginning inventory at these costs on July 1 was 5,000 units. From July 1 to December 1, the company produced 15,000 units. These units had a material cost of $10 per unit. The costs for labor and overhead were the same. The company uses FIFO inventory accounting.
Assuming that the company sold 17,000 units during the last six months of the year at $20 each, what would gross profit be? What is the value of ending inventory?
7.Booth Electronics Company's actual sales and purchases for April and May are shown here, along with forecasted sales and purchases for June through September.
|
Sales
|
Purchases
|
|
April (actual)
|
$370,000
|
$155,000
|
|
May (actual)
|
350,000
|
145,000
|
|
June (forecast)
|
325,000
|
145,000
|
|
July (forecast)
|
325,000
|
205,000
|
|
August (forecast)
|
340,000
|
225,000
|
|
September (forecast)
|
380,000
|
220,000
|
The company makes 24 percent of its sales for cash and 76 percent on credit. Of the credit sales, 60 percent are collected in the month after the sale, and 40 percent are collected two months later. The company pays for 20 percent of its purchases in the month after purchase and 80 percent two months after.
Labor expense equals 17 percent of the current month's sales. Overhead expense equals $12,500 per month. Bond interest payments of $27,500 are due in June and September. A cash dividend of $52,500 is scheduled to be paid in June. Tax payments of $25,500 are due in June and September. There is a scheduled capital outlay of $350,000 in September.
The company's ending cash balance in May is $22,500. The minimum desired cash balance is $10,000. The maximum desired cash balance is $50,000. Excess cash (above $50,000) is used to buy marketable securities. Marketable securities typically earn a small return, but for this case no return is to be calculated and the Marketable Securities are to be sold before borrowing funds on the company's established Line Of Credit (LOC) in case of a cash shortfall (less than $10,000).
Prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budgetwith LOC borrowing and repayments for June through September. Use the tables in thetext as a template for completing this problem (be sure to consider the cash sales in the receipts schedule). Round all numbers to the nearest dollar.
Discuss Booth's forecasting. What did you learn? What seems to be the most important consideration in preparing the forecast?