Helen Bowers, owner of Helen's Fashion Design, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2018 and 2019: May 2018 180,000 September 2013 180,000 October 2018 360,000 November 2018 540,000 December 2018 January 2019 720,000 June 2018 July 2018 August 2018 360,000 360,000 90,000 180,000 Collections estimates obtained from the credit and collection department are as follows: • Collections within the month of sale – 10% • Collections the month following the sale – 75% Collections the second month following the sale – 15% Payments for labor and raw materials are typically made during the month following the one in which these costs have been incurred. Total labor and raw materials are estimated for each month as follows: 90,000 September 90,000 October 126,000 November 882,000 December May 2018 306,000 June July August 234,000 162,000 90,000 General and administrative salaries will amount to approximately 27,000 a month; lease payments under long-term lease contracts will be 9,000 a month; depreciation charges will be 36,000 a month; miscellaneous expenses will be 2,700 a month; income tax payments of 63,000 will be due in both September and December; and a progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will amount to 132,000 and a minimum cash balance of 90,000 will be maintained throughout the cash budget period. a. Prepare a cash budget for the last 6 months of 2018 on Excel. b. Prepare an estimate of the required financing (or excess funds) that Bowers will need to borrow (or will have available to invest) for each month during that period.
Helen Bowers, owner of Helen's Fashion Design, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2018 and 2019: May 2018 180,000 September 2013 180,000 October 2018 360,000 November 2018 540,000 December 2018 January 2019 720,000 June 2018 July 2018 August 2018 360,000 360,000 90,000 180,000 Collections estimates obtained from the credit and collection department are as follows: • Collections within the month of sale – 10% • Collections the month following the sale – 75% Collections the second month following the sale – 15% Payments for labor and raw materials are typically made during the month following the one in which these costs have been incurred. Total labor and raw materials are estimated for each month as follows: 90,000 September 90,000 October 126,000 November 882,000 December May 2018 306,000 June July August 234,000 162,000 90,000 General and administrative salaries will amount to approximately 27,000 a month; lease payments under long-term lease contracts will be 9,000 a month; depreciation charges will be 36,000 a month; miscellaneous expenses will be 2,700 a month; income tax payments of 63,000 will be due in both September and December; and a progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will amount to 132,000 and a minimum cash balance of 90,000 will be maintained throughout the cash budget period. a. Prepare a cash budget for the last 6 months of 2018 on Excel. b. Prepare an estimate of the required financing (or excess funds) that Bowers will need to borrow (or will have available to invest) for each month during that period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:Helen Bowers, owner of Helen's Fashion Design, is planning to request a line of credit from her bank.
She has estimated the following sales forecasts for the firm for parts of 2018 and 2019:
May 2018
June 2018
July 2018
August 2018
180,000 September 2018
180,000 October 2018
360,000 November 2018
540,000 December 2018
January 2019
720,000
360,000
360,000
90,000
180,000
Collections estimates obtained from the credit and collection department are as follows:
Collections within the month of sale – 10%
Collections the month following the sale – 75%
Collections the second month following the sale – 15%
Payments for labor and raw materials are typically made during the month following the one in which
these costs have been incurred. Total labor and raw materials are estimated for each month as follows:
May 2018
306,000
90,000 September
90,000 October
126,000 November
882,000 December
234,000
162,000
90,000
June
July
August
General and administrative salaries will amount to approximately 27,000 a month; lease payments
under long-term lease contracts will be 9,000 a month; depreciation charges will be 36,000 a month;
miscellaneous expenses will be 2,700 a month; income tax payments of 63,000 will be due in both
September and December; and a progress payment of 180,000 on a new design studio must be paid in
October. Cash on hand on July 1 will amount to 132,000 and a minimum cash balance of 90,000 will be
maintained throughout the cash budget period.
a. Prepare a cash budget for the last 6 months of 2018 on Excel.
b. Prepare an estimate of the required financing (or excess funds) that Bowers will need to borrow
(or will have available to invest) for each month during that period.
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