Cash Budget
Wilson's Retail Company is planning a cash budget for the next
three months. Estimated sales revenue is as follows:
| Month | Sales Revenue | Month | Sales Revenue |
|---|---|---|---|
| January | $300,000 | March | $200,000 |
| February | 205,000 | April | 190,000 |
All sales are on credit; 60 percent is collected during the
month of sale, and 40 percent is collected during the next month.
Cost of goods sold is 70 percent of sales. Payments for merchandise
sold are made in the month following the month of sale. Operating
expenses total $44,000 per month and are paid during the month
incurred. The cash balance on February 1 is estimated to be
$40,000.
Prepare monthly cash budgets for February, March, and April.
Use negative signs only with beginning and ending cash balances, when appropriate. Do not use negative signs with disbursement answers.
| Wilson's Retail
Company Cash Budgets February, March, and April |
|||
|---|---|---|---|
| February | March | April | |
| Cash balance, beginning | $Answer | $Answer | $Answer |
| Total Cash receipts | Answer | Answer | Answer |
| Cash available | Answer | Answer | Answer |
| Total disbursements | Answer | Answer | Answer |
| Cash balance, ending | $Answer | $Answer | $Answer |
In: Accounting
Cash Budget
Wilson's Retail Company is planning a cash budget for the next
three months. Estimated sales revenue is as follows:
| Month | Sales Revenue | Month | Sales Revenue |
|---|---|---|---|
| January | $300,000 | March | $200,000 |
| February | 245,000 | April | 155,000 |
All sales are on credit; 60 percent is collected during the
month of sale, and 40 percent is collected during the next month.
Cost of goods sold is 70 percent of sales. Payments for merchandise
sold are made in the month following the month of sale. Operating
expenses total $40,000 per month and are paid during the month
incurred. The cash balance on February 1 is estimated to be
$30,000.
Prepare monthly cash budgets for February, March, and April.
Use negative signs only with beginning and ending cash balances, when appropriate. Do not use negative signs with disbursement answers.
| Wilson's Retail
Company Cash Budgets February, March, and April |
|||
|---|---|---|---|
| February | March | April | |
| Cash balance, beginning | $Answer | $Answer | $Answer |
| Total Cash receipts | Answer | Answer | Answer |
| Cash available | Answer | Answer | Answer |
| Total disbursements | Answer | Answer | Answer |
| Cash balance, ending | $Answer | $Answer | $Answer |
In: Accounting
Cash Budget
Wilson's Retail Company is planning a cash budget for the next
three months. Estimated sales revenue is as follows:
| Month | Sales Revenue | Month | Sales Revenue |
|---|---|---|---|
| January | $300,000 | March | $200,000 |
| February | 210,000 | April | 190,000 |
All sales are on credit; 60 percent is collected during the
month of sale, and 40 percent is collected during the next month.
Cost of goods sold is 70 percent of sales. Payments for merchandise
sold are made in the month following the month of sale. Operating
expenses total $41,000 per month and are paid during the month
incurred. The cash balance on February 1 is estimated to be
$20,000.
Prepare monthly cash budgets for February, March, and April.
Use negative signs only with beginning and ending cash balances, when appropriate. Do not use negative signs with disbursement answers.
| Wilson's Retail Company Cash Budgets February, March, and April |
|||
|---|---|---|---|
| February | March | April | |
| Cash balance, beginning | $Answer | $Answer | $Answer |
| Total Cash receipts | Answer | Answer | Answer |
| Cash available | Answer | Answer | Answer |
| Total disbursements | Answer | Answer | Answer |
| Cash balance, ending | $Answer | $Answer | $Answer |
In: Accounting
AP2-5
Larry has been the chief financial officer (CFO) of Maxima Auto Service for the past 10 years. The company has reported profits each year it's been in business. However, this year has been a tough one. Increased competition and the rising costs of labor have reduced the company's profits. On December 30, Larry informs Robert, the company's president and Larry's closest friend for the past 10 years, that it looks like the company will report a net loss (total expenses will be greater than total revenues) of about $50,000 this year.
The next day, December 31, while Larry is preparing the year-end reports, Robert stops by Larry's office to tell him that an additional $75,000 of revenues needs to be reported and that the company can now report a profit. When Larry asks about the source of the $75,000, Robert tells lam, "Earlier in the month some customers paid for auto services with cash, and with this cash I bought additional assets for the company. That's why the $75,000 never showed up in the bank statement. I just forgot to tell you about this earlier." When Larry asks for more specifics about these transactions, Robert mumbles, "I can't recall where I placed the customer sales invoices or the purchase receipts for the assets, but don't worry; I know they're here somewhere. We've been friends for a lot of years and you can trust me. Now, let's hurry and finish those reports and I'll treat you to dinner tonight at the restaurant of your choice."
Required
1. Understand the reporting effect: What effect does reporting additional revenue have on reported profit?
2. Specify the options: If the additional revenue is not reported, do both Robert and Larry potentially lose benefits?
3. Identify the impact: Does reporting the additional revenue strengthen the company's financial appearance to those outside the company?
4. Make a decision: Should Larry report the additional revenue without source documents?
In: Accounting
Fundamentals of cost and management accounting
Classwork on breakeven analysis
Question 1
GPZ sells cupcakes for $2. Material per unit costs $0.10. Variable labour cost is $0.25. Variable other manufacturing costs is $0.35. Monthly fixed costs are $12,000.
Required
Question 2
A road construction company generates on average $500,000 of revenue for each kilometre of road built. The variable costs per kilometre built are made up of fuel ($10,000), direct labour ($40,000), vehicle maintenance ($20,000), other variable vehicle costs ($55,000), and materials ($225,000). The monthly fixed costs of the company are $1.5 million.
Required
1) Calculate the breakeven point in kilometres of road built per month.
2) Calculate the breakeven point in dollar revenue per month.
3) Calculate the contribution margin percentage.
Question 3
APP operates a beauty salon. Average revenue per customer is $200. Monthly fixed costs are $45,000. Variable costs in last month were in total $78,000. During that month APP had 1,000 customers.
Required
Question 4
Aisha operates a children’s nursery. Her monthly fixed costs are AED60,000. Her revenue per month per child is AED1,600. Variable costs per month are AED200 per child.
Required
In: Accounting
King Kanuta, the ruler of Nutting Atoll, does not particular care for OSPs. However, he and his subjects love coconuts. The Nutters’ demand for coconuts is ? ? = 1200 − 100 × ?, while the supply of coconuts in Nutting Atoll is ? ? = 100 × ?.
a. What is the equilibrium price and quantity in this competitive market? What is the consumer and the producer surplus?
b. One day, King Kanuta decides to tax his subjects in order to collect coconuts for the Royal Larder. The King requires that for each coconut that every subject consumes, the subject must first buy a voucher from the palace at price £2. Write down the wedge that this tax introduces between consumer and producer prices. What is the effective price that consumers pay per coconut that they consume, and how many coconuts do they consume? What is the consumer and producer surplus under the coconut tax? How much revenue does this tax raise and how is the tax burden distributed?
c. King Kanuta’s subjects resent paying the taxes to the King and there are alarming signs of revolution among the Nutters. As a reaction, the King changes the tax. Now, the shopkeepers who sell the coconuts are responsible for paying the tax. That is, for each coconut they sell they must buy a license at a price of £2. Write down the new wedge that this tax introduces between consumer and producer prices. How many coconuts are consumed by the Nutters after this change in tax structure, what is the new price they pay? How much revenue does this tax raise and how is the tax burden now distributed?
d. There has been a rat invasion in the Royal Larder and all of King Kanuta’s reserves are now lost. In desperation, he decides to increase taxes in order to replenish his beloved Larder. In particular, he now wants to require each transaction of coconuts to be taxed at a price of £4. What would be the new quantity of coconuts transacted? What would be the new tax revenue? Calculate the deadweight loss of this tax.
e. King Kanuta’s Grand-Vizier thinks that a tax of £4 will not be enough. He is instead advocating a tax of £8. What would be the tax revenue at a tax of £8? Calculate the deadweight loss of this tax. Compare your answers to part d. Is there anything surprising here?
f. Finally, Lafferiku (King Kanuta’s Royal cook), is pushing for an even bigger tax of £10 per coconut. In terms of revenue collected and deadweight loss, how would you argue against such a tax?
In: Economics
Please write in BOLD Thanks :)
In Lesson Eight you've learned how to construct confidence intervals for population parameters and proportions, based on data from samples.
In: Statistics and Probability
Please write in BOLD Thanks :)
In Lesson Eight you've learned how to construct confidence intervals for population parameters and proportions, based on data from samples.
In: Statistics and Probability
In this simple insurance model, a company has a
monopoly over a small market. There are 100K potential customers
with a low risk profile, 60K potential customers with a medium risk
profile, and 10K potential customers with a high risk
profile. A person’s risk profile is important as it
determines how much insurance is worth to the customer and how much
money the customer will cost on average to the insurance company.
The following table summarizes the estimates put together by the
company:
Low risk profile
Medium risk profile
High risk profile
Number of potential customers
100,000
60,000
10,000
Expected expense per customer
$2K
$6K
$14K
Maximal price the customer is
ready to pay for insurance
$3K
$7K
$15K
Remark: Explaining where these numbers come from would
require a subtler model that describes the risk covered by the
insurance policy. While there is no need to do this for the purpose
of this exercise, notice though how the maximal price a customer is
ready to pay is always larger than the expected expense the
insurance company would incur for that customer. This is the case,
for instance, if potential customers are risk averse while the
insurance company is risk neutral.
QUESTIONS:
(a) What is the average cost per customer
if the insurance company insures all 170K potential
customers?
(b) The number computed in (a) is thus the
minimal price the company would need to charge to make it
profitable to serve everyone. Assume here that customers know their
risk profile. Would all potential customers want to buy insurance
at that price?
(c) Suppose the insurance company chooses the price at
which it sells its policy. Consider a classic case of asymmetric
information: customers know their risk profile, but the insurance
company cannot identify the risk profile of its potential
customers. By deciding to sell at a price $p, all customers with a
maximal price larger or equal to $p will buy the policy (and the
firm must incur the expected expense associated to its customers,
that is, it cannot renege on the terms of its policy). At which
price will the insurance company sell its policies (assuming it
aims to maximize profit)? What is the profit it realizes?
Hint: The company will always charge the maximal price
customers of some risk profile are ready to pay. So it will charge
either $3K (in which case customers of all risk profiles will buy
the policy), or $7K (in which case only customers with medium to
high risk will buy the policy), or $15K (in which case only high
risk customers will buy the policy). What scenario gives the best
profit?
Remark: This question illustrates well the concept of
adverse selection. Notice how customers who are ready to pay more
for the policy are also more costly to the insurance
company.
(d) Suppose now the company can identify
each potential customer’s risk profile (e.g. by doing a thorough
physical exam in case of some medical insurance). To maximize
profit, at what price will it sell its policy to low risk
customers, at what price will it sell its policy to medium risk
customers, and at what price will it sell its policy to high risk
customers? What is the total profit in this case, and how does it
compare to profit in (c)? This should illustrate the substantial
loss in profit that asymmetric information can generate.
In: Economics
Edward Sayers has collected information showing that the average Amazon Prime customer spent $2,486 over the last twelve months compared to $544 for non-Prime Amazon customers. It is known that the amount spent by Amazon Prime customers is normally distributed, with a standard deviation of $125.
What is the probability that an Amazon Prime customer spent more than $2,771 over the last twelve months? Use only the appropriate formula and/or statistical table in your textbook to answer this question. Report your answer to 4 decimal places, using conventional rounding rules.
ANSWER:
What is the probability that an Amazon Prime customer spent less than $2,301 over the last twelve months? Use only the appropriate formula and/or statistical table in your textbook to answer this question. Report your answer to 4 decimal places, using conventional rounding rules.
ANSWER:
What is the probability that an Amazon Prime customer spent more than $2,206 over the last twelve months? Use only the appropriate formula and/or statistical table in your textbook to answer this question. Report your answer to 4 decimal places, using conventional rounding rules.
ANSWER:
What percent of the Amazon Prime customers spent between $2,366 and $2,846 over the last twelve months? Use only the appropriate formula and/or statistical table in your textbook to answer this question. Report your answer to 2 decimal places, using conventional rounding rules.
ANSWER: %
What percent of the Amazon Prime customers spent less than $2,806 over the last twelve months? Use only the appropriate formula and/or statistical table in your textbook to answer this question. Report your answer to 2 decimal places, using conventional rounding rules.
ANSWER: %
Four percent of the Amazon Prime customers spent less than what amount over the last twelve months? Use only the appropriate formula and/or statistical table in your textbook to answer this question. Report your answer to 2 decimal places, using conventional rounding rules.
ANSWER: $
In: Statistics and Probability