Question

Directions: Each team will be responsible for completing the case detailed at the end of these instructions. The project needs to be done in Excel. Each team will submit the finished product via e-mail as an attachment by midnight on the due date. There is an Excel template on my website that you can use to complete the project. It will save you loads of time. The project due date is noted on your class timeline. Note: You need to use formulas and cell references whenever possible. If you do not use formulas or cell references, I will deduct points. Part 1a. This part requires you to create a sales budget by month and the total for the 2nd quarter. Use formulas wherever possible. Part 1b. This part requires you to create a schedule for budgeted cash collections from sales and accounts receivable. Use formulas wherever possible and link information from Part 1a. Part 1c. This part requires you to create a purchases budget in units and dollars. Note: this company is a merchandiser, so no production budget is needed. Instead, a purchases budget will be used (since the company will be buying inventory instead of manufacturing it). Obviously, you will not need any direct materials, direct labor etc. budgets. Use formulas wherever possible. Link information wherever possible. Part 1d. This part requires you to create a cash disbursements budget for purchases by month and the total for the quarter. Use formulas wherever possible and link information. Part 2. This part requires you to create a cash budget by month and the total for the quarter. Use formulas wherever possible and link information. Also use formulas when you calculate numbers that aren’t given, like interest expense. Use formulas whenever you calculate numbers (i.e. interest expense). Part 3. This part requires you to create a budgeted income statement from the previous parts and additional information given in the case. Use formulas wherever possible, including any derived numbers (i.e. COGS, commissions). Use formulas whenever you calculate numbers. Part 4. This part requires you to create a budgeted balance sheet from the previous parts and additional information given in the case. Use formulas wherever possible, including any derived numbers (i.e. unexpired insurance, fixed assets, net of depreciation, retained earnings, dividends payable, inventory). Use formulas whenever you calculate numbers. Master Budget with Supporting Schedules You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributor of a designer’s silk ties. The company has an exclusive franchise on the distribution of the ties, and sales have grown so rapidly over the last few years that it has become necessary to add new members to the management team. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are anxious to make a favorable impression on the president and have assembled the information below. The company desires a minimum ending cash balance each month of $12,000. The ties are sold to retailers for $8.10 each. Recent and forecasted sales in units are as follows: January (actual) 20,000 June 65,000 February (actual) 24,000 July 40,000 March (actual) 28,000 August 36,000 April 33,000 September 32,000 May 41,000 ________________________________________ The large buildup in sales before and during June is due to Father’s Day. Ending inventories are supposed to equal 75% of the next month’s sales in units. The ties cost the company $4.85 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 30% of a month’s sales are collected by month-end. An additional 60% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. The company’s monthly selling and administrative expenses are given below: Variable: Sales commissions $ 1 per tie Fixed: Wages and salaries $ 22,000 Utilities $ 14,000 Insurance $ 1,200 Depreciation $ 1,500 Miscellaneous $ 3,000 ________________________________________ All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Land will be purchased during May for $30,000 cash. The company declares dividends of $12,000 each quarter, payable in the first month of the following quarter. The company’s balance sheet at March 31 is given below: Assets Cash $ 14,000 Accounts receivable ($19,440 February sales; $158,760 March sales) 178,200 Inventory (24,750 units) 120,037.50 Prepaid insurance 14,400 Fixed assets, net of depreciation 172,700 ________________________________________ ________________________________________ Total assets $ 499,337.50 ________________________________________________________________________________ ________________________________________________________________________________ Liabilities and Stockholders’ Equity Accounts payable $ 76,993.75 Dividends payable 12,000 Capital stock 300,000 Retained earnings 110,343.75 ________________________________________ ________________________________________ Total liabilities and stockholders’ equity $ 499,337.50 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ The company has an agreement with a bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $300,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $12,000 in cash.

Answer 1

All the working is from start till the end for the question
Schedule of Cash collection
	April	May	June	Total	February	March	July	August
Sales in units A	33000	41000	65000	139000	24000	28000	40000	36000
Sale Price	8.1	8.1	8.1	8.1	8.1	8.1	8.1	8.1
Sales in value	267300	332100	526500	1125900	194400	226800	324000	291600
Feb sales	19440			19440
Marc sales (60%,10% of $527800)	136080	22680		158760
April sales (30%,60%,10%)	80190	160380	26730	267300
May Sales		99630	199260	298890
June sales			157950	157950
Total A	235710	282690	383940	902340
Accounts Receivable May 332100*.1+June 526500*.7=			401760
Note 2
Purcahse Budget	April	May	June	Total			July
Units to be sold	33000	41000	65000	139000			40000
Closing Inventory 75% of next month sales S*.75	30750	48750	30000	30000
Total Finised Googd	63750	89750	95000	169000
Less: Beginning Inventory	24750	30750	48750	24750
Units to be produced	39000	59000	46250	144250
Purchase Price	4.85	4.85	4.85	4.85
Total Purchase price A	189150.00	286150.00	224312.50	699612.50
COGS= Units sold*4.85	160050	198850	315250	674150
Cash Disbursement Schedule
From march purchases	76993.75			76993.75
From April Purchases	94575.00	94575.00		189150.00
From May Purchases		143075.00	143075.00	286150.00
From June purchases			112156.25	112156.25
Total B	171568.75	237650.00	255231.25	664450.00
Accounts payable as on 30 June		112156.25
working
Cash payments
payment of Inventory	171568.75	237650	255231.25	664450
Sales Commissions $1 per tie sold	33000	41000	65000	139000
Wages & salaries	22000	22000	22000	66000
Utilities	14000	14000	14000	42000
Miscelleneous	3000	3000	3000	9000
Dividend Paid	12000			12000
	April	May J	June	Total
Beginning Cash balance	14000.00	12141.25	12181.25	14000.00
Cash receipt	235710.00	282690.00	383940.00	902340.00
Total cash available	249710.00	294831.25	396121.25	916340.00
Less: Cash Disbursements
payment of Inventory	171568.75	237650.00	255231.25	664450.00
Sales Commissions $1 per tie sold	33000.00	41000.00	65000.00	139000.00
Wages & salaries	22000.00	22000.00	22000.00	66000.00
Utilities	14000.00	14000.00	14000.00	42000.00
Miscelleneous	3000.00	3000.00	3000.00	9000.00
Dividend Paid	12000.00	0.00	0.00	12000.00
Total cash Disbursements	255568.75	317650.00	359231.25	932450.00
Excess /(deficiency) of cash receipts over cash disbursements	-5858.75	-22818.75	36890.00	-16110.00
Minimum Cash balance (working)	12000.00	12000.00	12000.00	12000.00
Financing
Borrowed	18000.00	35000.00		53000.00
Repaid			-23000.00	-23000.00
Interest Repaid			-1240.00	-1240.00
Total financing	18000.00	35000.00	-24240.00	28760.00
Ending Cash balance	12141.25	12181.25	12650.00	12650.00
Dear student the month wise income staement is for your understanding
Income Statement as on 3o June 2016
	April	May	June	Total
Sales	267300	332100	526500	1125900	1125900
Less: variable Cost
Cost of Good Sold	160050	198850	315250	674150
Sales Commissions	33000	41000	65000	139000
Contribution	74250	92250	146250	312750
Fixed Expenses
Wages & salaries	22000	22000	22000	66000		Rent
Utilities	14000	14000	14000	42000		Wages & salaries
Miscelleneous	3000	3000	3000	9000		Utilities
Insurance	1200	1200	1200	3600
Depreciation	1500	1500	1500	4500
total fixed expenses	41700	41700	41700	125100
Operating Income	32550	50550	104550	187650
Interest On Short Term Loan	180	530	530	1240
Net Income	32370	50020	104020	186410
ans 3
Income statement
For the three months period
Sales		1125900.00
Less: variable Cost
Cost of Good Sold	674150.00
Sales Commissions @ 4%	139000.00
Total variable expenses		813150.00
Contribution		312750.00
Fixed Expenses
Wages & salaries	66000.00
Utilities	42000.00
Miscelleneous	9000.00
Insurance	3600.00
Depreciation	4500.00
total fixed expenses		125100.00
Operating Income		187650.00
Interest On Short Term Loan		-1240.00
Net Income		186410.00
Net Income
Statement of Retained earnings
Opening balance	110343.75
Add: Net Income for the year	186410.00
Less: Dividend payable	-12000
Balance June 30	284753.75
BalANCE Sheet as on 30 June
Assets
Cash	12650.00
Accounts Receivable	401760.00
Inventory	145500.00
Prepaid Insurance=(14400-3600)	10800.00
Property & Equipment	172700.00
Less: Accumulated Depreciation	-4500.00
	738910.00
Liabilities & Stockholder equity
Accounts payable	112156.25
Dividend Payable	12000.00
Bank loan payable	30000.00
Total Laibilities	154156.25
Stockholder Equity
Capital stock	300000.00
Retained earnings	284753.75
Total Stockholder Equity	584753.75
TotalLiabilities & Stockholder Equity	738910.00