Question

Practice Calculations

1. Calculate monthly C.O.G.S. assuming a 30% mark-up and the following 6 month’s sales figures:

   1. $4000, $4500, $5000, $6000, $7500, $7500.

   2. Repeat calculations assuming gross contribution margin of 40%.

2. Assuming average monthly sales of $50,000 and average monthly C.O.G.S. of $30,000, calculate the expected level of

   1. Receivables if average collection period is 55 days.

   2. Inventory if you plan on average 40 days on hand.

3. Assuming annual sales of $250,000 and a 50% gross (contribution) margin, calculate the following

   1. Average collection period if ending receivables total $45,000

   2. Ending days-on-hand of inventory if ending inventory levels are $30,000

4. Assuming opening equipment of $100,000 (to be depreciated at $2000/month) plus additional equipment purchase of $50,000 (to be depreciated at $1000/month) in month 6, calculate year-end book value of equipment. Record equipment at cost, accumulated depreciation, and book-value.

5. Calculate B.V. of ending equipment assuming you started the year with $75,000 in equipment, purchased $65,000 in new equipment during the year, and deducted $15,000 in depreciation.

6. Calculate ending receivables assuming opening receivables were $150,000 and sales and collections for the year were $600,000 and $580,000 respectively.

7. Calculate amount collected if sales were $500,000, and opening and ending receivables were $120,000 and $110,000 respectively.

8. Calculate ending inventory assuming opening inventory was $40,000 and purchases and COGS were $300,000 and $280,000 respectively.

9. Calculate ending equity if opening paid in capital was $100,000 and retaining earnings were $55,000, but during the year recorded an after-tax profit of $35,000 and paid dividends of $20,000. Record ending paid-in capital, retained earnings and total equity separately.

10. Calculate year- ending loan balance if you started the year with a $120,000 loan (monthly payments $2000 principal + $500 interest) and a new loan of $20,000 in month 8 to be repaid at $500 principal + $200 interest per month starting the month after the advance).

1. For the above, calculate annual expense.

2. For the above calculate total cash-in and total cash-out. Record the break-down necessary for completion of cash flow forecasts.

Answer 1

1)
a)
Month	Sales	Markup	COGS = sales/(1+30%)
1	4000	30%	$  3,076.92
2	4500	30%	$  3,461.54
3	5000	30%	$  3,846.15
4	6000	30%	$  4,615.38
5	7500	30%	$  5,769.23
6	7500	30%	$  5,769.23
b)
Month	Sales	gross contribution margin	COGS = sales/(1+40%)
1	4000	40%	$  2,857.14
2	4500	40%	$  3,214.29
3	5000	40%	$  3,571.43
4	6000	40%	$  4,285.71
5	7500	40%	$  5,357.14
6	7500	40%	$  5,357.14
2)
Assuming average monthly sales of $50,000 and average monthly C.O.G.S. of $30,000, calculate the expected level of
Receivables if average collection period is 55 days.
Inventory if you plan on average 40 days on hand.
a)
Average collection period =Average accounts receivable ÷ (Annual sales ÷ 365 days)
55 days = Average A/R/($50,000/365 days)
Average accounts receivable = 50000/365 x 55 days	$  7,534.25
b)
Average Payment Period Ratio = Average Accounts Payable / (COGS / 365 Days)
40 days = Average Accounts Payable /($30,000/365 days)
Average Accounts Payable = 30000/365 x 40	$  3,287.67