Harry's Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecast sales figures: Actual Forecast Additional Information November $260,000 January $400,000 April forecast $400,000 440,000 410,000 December 340,000 February March Of the firm's sales, 60 percent are for cash and the remaining 40 percent are on credit. Of credit sales, 20 percent are paid in the month after sale and 80 percent are paid in the second month after the sale. Materials cost 20 percent of sales and are purchased and received each month in an amount sufficient to cover the following month's expected sales. Materials are paid for in the month after they are received. Labor expense is 50 percent of sales and is paid for in the month of sales. Selling and administrative expense is 15 percent of sales and is paid in the month of sales. Overhead expense is $31,000 in cash per month. Depreciation expense is $10,600 per month. Taxes of $8,600 will be paid in January, and dividends of $5,000 will be paid in March. Cash at the beginning of January is $92,000, and the minimum desired cash balance is $87,000.
Harry's Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecast sales figures: Actual Forecast Additional Information November $260,000 January $400,000 April forecast $400,000 440,000 410,000 December 340,000 February March Of the firm's sales, 60 percent are for cash and the remaining 40 percent are on credit. Of credit sales, 20 percent are paid in the month after sale and 80 percent are paid in the second month after the sale. Materials cost 20 percent of sales and are purchased and received each month in an amount sufficient to cover the following month's expected sales. Materials are paid for in the month after they are received. Labor expense is 50 percent of sales and is paid for in the month of sales. Selling and administrative expense is 15 percent of sales and is paid in the month of sales. Overhead expense is $31,000 in cash per month. Depreciation expense is $10,600 per month. Taxes of $8,600 will be paid in January, and dividends of $5,000 will be paid in March. Cash at the beginning of January is $92,000, and the minimum desired cash balance is $87,000.
Chapter6: Managing Cash Flow
Section: Chapter Questions
Problem 13SEP
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Concept explainers
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.
Question
Transcribed Image Text:b. Prepare a schedule of monthly cash payments for January, February, and March.
Harry's Carryout Stores
Cash Payments Schedule
January
February
March
Payments for purchases
Labor expense
Selling and administrative
Overhead
Taxes
Dividends
Total cash payments
$
$
Transcribed Image Text:Harry's Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr.
Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through
March. The following are actual and forecast sales figures:
Actual
Additional Information
$400,000
Forecast
November
December
$260,000 January
340,000 February
March
$400,000 April forecast
440,000
410,000
Of the firm's sales, 60 percent are for cash and the remaining 40 percent are on credit. Of credit sales, 20 percent are paid in the
month after sale and 80 percent are paid in the second month after the sale. Materials cost 20 percent of sales and are purchased and
received each month in an amount sufficient to cover the following month's expected sales. Materials are paid for in the month after
they are received. Labor expense is 50 percent of sales and is paid for in the month of sales. Selling and administrative expense is 15
percent of sales and is paid in the month of sales. Overhead expense is $31,000 in cash per month.
Depreciation expense is $10,600 per month. Taxes of $8,600 will be paid in January, and dividends of $5,000 will be paid in March.
Cash at the beginning of January is $92,000, and the minimum desired cash balance is $87,000.
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