att Choy Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow: - Sales are budgeted at $360,000 for November, $330,000 for December, and $320,000 for January. - Cash collections from sales are expected to be 60% in the month of sale and 36% in the month following the sale. 4% of the sales is uncollectible. - The cost of goods sold is 45% of sales. - The company purchases 40% of its merchandise in the month prior to the month of sale and 60% in the month of sale. Payment for merchandise is made in the month following the purchase. - The company’s operating expenses are estimated to be 40% of sales and are paid as incurred. - The company has to pay a dividend of $100,000 in Nov. - The November beginning balance in the net accounts receivable account is $250,000, after deduction of uncollectible sales. - The November beginning balance in the accounts payable account is $271,000. Fatt Choy has a beginning cash balance of 88,000 at November and needs to maintain a minimal cash balance of $30,000. Questions 1. Prepare a Cash Budget for November and December. 2. Fatt Choy is planning a capital expenditure of $40,000, the timing of which is dependent on the cash status. State whether Fatt Choy is able to maintain the minimal cash balance for the months of November and December, then recommend and propose which month capital expenditure should be paid.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Fatt Choy Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:
- Sales are budgeted at $360,000 for November, $330,000 for December, and $320,000 for January.
- Cash collections from sales are expected to be 60% in the month of sale and 36% in the month following the sale. 4% of the sales is uncollectible.
- The cost of goods sold is 45% of sales.
- The company purchases 40% of its merchandise in the month prior to the month of sale and 60% in the month of sale. Payment for merchandise is made in the month following the purchase.
- The company’s operating expenses are estimated to be 40% of sales and are paid as incurred.
- The company has to pay a dividend of $100,000 in Nov.
- The November beginning balance in the net
- The November beginning balance in the accounts payable account is $271,000.
Fatt Choy has a beginning cash balance of 88,000 at November and needs to maintain a minimal cash balance of $30,000.
Questions
1. Prepare a
2. Fatt Choy is planning a capital expenditure of $40,000, the timing of which is dependent on the cash status. State whether Fatt Choy is able to maintain the minimal cash balance for the months of November and December, then recommend and propose which month capital expenditure should be paid.
Step by step
Solved in 3 steps with 2 images
