Cash Budget: Estimated sales January February March April May Total Coffee sales (units) 15,000 16,000 17,500...

Cash Budget:

Estimated sales	January	February	March	April	May
Total Coffee sales (units)	15,000	16,000	17,500	18,000	14,500

Your friend, Chris Coffee, has been running a successful coffee shop for the last couple of years. He has asked you to put together a cash budget. His regular accountant was too busy to help, but told Chris his depreciation expense was going to be $1,800 per year, using the straight-line method. He has supplied you with the following information (above) to help you put together his cash budget.

The revenue for a coffee is $5 for a large, $4 for a medium and $3 for a small. 50% of his sales are Large coffees, 25% medium and 25% smalls. Chris has a deal with an accounting company and half of the coffees sold are on account, the other half pay cash. The accounting company pays for the coffees the month after the sale. Assume credit sales are half of the total coffee sales.

Material and Labour information Chris has provided:

	Large	Medium	Small
Labour hours	0.1	0.05	0.05
Coffee pods	3	2	1
Cost of a Coffee pod	$0.90

Labour is paid at $20/hour. The Coffee pods need to be ordered a month in advance. He requires 10% of next months total coffee pods to be on hand. The beginning coffee pod inventory, February 1, was 3,000 pods. 50% of the Coffee pods are paid in the month they are ordered, 50% are paid the following month.

Other information Chris has provided:

	February	March	April	May
Rent	2,500	2,500	2,500	2,500
Dividend	3,000			15,000
Office and Admin	3,500	3,500	3,500	3,500

NOTE: Chris requires a minimum bank balance of $5,000 at the end of the month and the ending January bank balance is $10,000. Chris has access to a line of credit of $500,000 at an interest rate of 30%. Borrowings are made at the beginning of the month and repayments are made at the end of the month.

REQUIRED:

Using the Excel file included with the exam, for the months of February, March and April prepare

Sales Budget, with a cash receipts.
- What is the A/R at the end of the month?
Materials Budget, with cash disbursements.
- What is the A/P at the end of the month?
Direct Labour Budget
Cash budget

Solutions

Expert Solution

Ans	Sales Budget
	Particulars	Feb	Mar	Apr
	Estimated Sales	16000	17500	18000
	Large (50%)	8000	8750	9000
	Medium (25%)	4000	4375	4500
	Small (25%)	4000	4375	4500
	Revenue
	Large ($5)	$ 40,000.00	$ 43,750.00	$ 45,000.00
	Medium ($4)	$ 16,000.00	$ 17,500.00	$ 18,000.00
	Small ($3)	$ 12,000.00	$ 13,125.00	$ 13,500.00
	Total Revenue	$ 68,000.00	$ 74,375.00	$ 76,500.00
	50% Credit (Next Month)	$ 34,000.00	$ 37,187.50	$ 38,250.00
	50% Cash	$ 34,000.00	$ 37,187.50	$ 38,250.00
	Cash Receipts
	50% Current Month Sales	$ 34,000.00	$ 37,187.50	$ 38,250.00
	50% of previous Month Sales	$ 31,875.00	$ 34,000.00	$ 37,187.50
	Total Receipts	$ 65,875.00	$ 71,187.50	$ 75,437.50

	Jan Month Sales	15000	Sale Price	Revenue
	Large (50%)	7500	$ 5.00	$ 37,500.00
	Medium (25%)	3750	$ 4.00	$ 15,000.00
	Small (25%)	3750	$ 3.00	$ 11,250.00
				$ 63,750.00
	Credit Sales			$ 31,875.00
		Feb	Mar	Apr
	A/R at the end of Month (50% of Sales)	$ 34,000.00	$ 37,187.50	$ 38,250.00
	Material Budgets	Jan	Feb	Mar	Apr	May
	Estimated Sales	15000	16000	17500	18000	14500
	Large (50%)	7500	8000	8750	9000	7250
	Medium (25%)	3750	4000	4375	4500	3625
	Small (25%)	3750	4000	4375	4500	3625
	Coffe Pods
	Large (3)	22500	24000	26250	27000	21750
	Medium (2)	7500	8000	8750	9000	7250
	Small (1)	3750	4000	4375	4500	3625
	Total Coffe PODs consumption	33750	36000	39375	40500	32625
	Opening Stock	3375	3000	3938	4050	3262.5
	Closing Stock Required	3000	3938	4050	3263
	No. of Coffee Pods to be procured	33375	36938	39488	39713
	Price	$ 0.90	$ 0.90	$ 0.90	$ 0.90
	Cost	$ 30,037.50	$ 33,243.75	$ 35,538.75	$ 35,741.25
	Cash Disbursements
	50% Paid in cash	$ 15,018.75	$ 16,621.88	$ 17,769.38	$ 17,870.63
	50% of Previous Month		$ 15,018.75	$ 16,621.88	$ 17,769.38
			$ 31,640.63	$ 34,391.25	$ 35,640.00
		Feb	Mar	Apr
	A/P at the end of the Month	$ 16,621.88	$ 17,769.38	$ 17,870.63
	Direct Labour Budget
	Estimated Sales	16000	17500	18000
	Large (50%)	8000	8750	9000
	Medium (25%)	4000	4375	4500
	Small (25%)	4000	4375	4500
	Labour Hour
	Large (0.1)	800	875	900
	Medium (0.05)	200	218.75	225
	Small (0.05)	200	218.75	225
	Total	1200	1312.5	1350
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Cash Budget: Estimated sales January February March April May Total Coffee sales (units) 15,000 16,000 17,500...

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