Required: A. Prepare a schedule of cash collections for July, August, and September B. Prepare a cash forecast, by month, for the third quarter
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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.
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- It takes Cookie Cutter Modular Homes, Incorporated, about six days to receive and deposit checks from customers. The company’s management is considering a lockbox system to reduce the firm’s collection times. It is expected that the lockbox system will reduce receipt and deposit times to three days total. Average daily collections are $136,000 and the required rate of return is an EAR of 6 percent. Assume 365 days per year. a. What is the reduction in the outstanding cash balance as a result of implementing the lockbox system? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What is the daily dollar return that could be earned on these savings? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c-1. What is the maximum monthly charge the company should pay for this lockbox system if the payment is due at the end of the month? (Do not round intermediate calculations and…Tox ltd management expect the next three months from January to March 2018 to demand some unusual cash flows. A cash balance of R106 764 is currently on hand.1. Sales for December 2017: R1 339 200 2. Total sales forecasts are: • January 2018 R 669 600 • February 2018 R 892 800 • March 2018 R 781 200 •April 2018 R 892 800 3. 40% of all sales are on credit, while cash sales amount to 60% of total sales. 4. Cost of goods sold average 75% of sales. Inventory purchased during each month averages the cost of sales for the following month. The creditor payment period averages 15 days and goods are purchased consistently over the month. 5. Operating expenses are projected as follows: • Salaries and wages at 12% of sales paid in the month of the sale. • Other expenses at an average of 10%of sales paid in the month of the sale. • Cash receipts expected from repayment of a loan to an employee of R 22 320 due in March 2018. • Repayment of short-term loan of R11 160 is due in March 2018. •…Philip Spencer of the Spencer Corporation wants you to forecast the firm's financing needs over the fourth quarter (October through December). He has made the following observations relative to planned cash receipts and disbursements: Interest on a $75,000 bank note (principal due next March) at an 8 percent annual rate is payable in December for the three-month period just ended. The firm follows a policy of paying no cash dividends. Actual historical and future predicted sales are as follows: Historical Sales Predicted Sales August $150,000 October $200,000 September $175,000 November $220,000 December $180,000 January $200,000 The firm has a monthly rental expense of $5,000. Wages and salaries for the coming months are estimated at $25,000 per month. Of the firm's sales, 25 percent is collected in the month of the sale, 35 percent one month after the sale, and the remaining 40 percent two months after the sale. Merchandise is…
- Based on Robichek et al. (1965). The Korvair Department Store has $100,000 in available cash. At the beginning of each of the next six months, Korvair will receive revenues and pay bills as listed in the file P04_112.xlsx. It is clear that Korvair will have a short-term cash flow problem until the store receives revenues from the Christmas shopping season. To solve this problem, Korvair must borrow money. At the beginning of July, the company takes out a six-month loan. Any money borrowed for a six-month period must be paid back at the end of December along with 9% interest (early payback does not reduce the total interest of the loan). Korvair can also meet cash needs through month-to-month borrowing. Any money borrowed for a one-month period incurs an interest cost of 2.5% per month. Determine how Korvair can minimize the cost of paying its bills on time.For the month of July, Shalom Company, predicts total cash collections and disbursements of P485,000 and P440,000 respectively. For March, Shalom Company, estimates that its beginning cash balance will be P55,000. If Shalom Company just wants to maintain its beginning cash balance at the end of July, will there be a need for Shalom Company to borrow money from a bank? Yes or no? Use the underlined words as your choice. Input answers in capital letters.A company located in China has reported on its first quarter balance sheet CNY 100,000 in cash, CNY 200,000 in accounts receivables, and CNY 90,000 in current liabilities. The controller has forecasted that during the second quarter, there will be no change in the accounts receivables, but the cash balance will increase by 5% and the current liabilities will decrease by 10%. Based on the controller's forecast, what is the forecasted quick (acid-test) ratio for the second quarter? A. 1.30 B.3.39 C.3.70 D. 3.77
- The George Company has a policy of maintaining an end-of-month cash balance of at least $30,000.In months where a shortfall is expected, the company can draw in $1,000 increments on a line ofcredit it has with a local bank, at an interest rate of 12% per annum. All borrowings are assumed forbudgeting purposes to occur at the beginning of the month, while all loan repayments (in $1,000increments of principal) are assumed to occur at the end of the month. Interest is paid at the end ofeach month. For April, an end-of-month cash balance (prior to any financing and interest expense)of $18,000 is budgeted; for May, an excess of cash collected over cash payments (prior to any interest payments and loan repayments) of $22,000 is anticipated. What is the interest payment estimatedfor April (there is no bank loan outstanding at the end of March)? What is the total financing effect(cash interest plus loan transaction) for May?You have recently been hired to improve the performance of Multiplex Corporation, which has been experiencing a severe cash shortage. As one part of your analysis, you want to determine the firm's cash conversion cycle. Using the following Information and a 365-day year, your estimate of the firm's current cash conversion cycle would be __________days Current Inventory = P120,000. Accounts receivable = P157,808. Accounts payable = P25,000. Annual sales P600,000. Total annual purchases = P365,000. Purchases credit terms: net 30 days. Receivables credit terms: net 50 days. O 100 O 49 O 144 O 168Timko has a 90-day collection period and produces seasonal merchandise. Sales are lowest during the first calendar quarter of a year and the highest during the third quarter. The company maintains a relatively steady level of production which means that its cash disbursements are fairly equal in all quarters. This company is most apt to face a cash-out situation in: Multiple Cholce the fourth quarter. the third quarter. the first quarter. any quarter with equal probabilities of occurrence. the second quarter.
- A CARDBOARD BOX FACTORY pays its suppliers 40 days after making the purchase and receiving the goods. The average collection period is 45 days, i.e. its customers settle their debt with the company in that time; and the average inventory age is based on the inventory turnover which is 10 times a year. The company spends about $1.23 million in operating cycle investments. With this data we need to calculate: The operating cycle.The cash conversion cycle.The cash turnover.The minimum cash balance.You plan to make modifications to your policies so that you can decrease your PPC by 10 days, and decrease your EPI by 2 times (before converting it to days). Negotiations with your supplier have been unsuccessful and the payment term has been reduced by 10 days. With these data you have to calculate: Re-calculate the Operating Cycle, the SCC, RC and SMC introducing the proposed changes.Calculate the opportunity cost that the changes will cause, if the company's interest rate is 8%.The daily cash inflows of a company amount to $ 65,000.00. A recent analysis of their collections revealed that it took 21/2 days for customer payments to arrive by mail. Once received, the company required 1'/2 days to process them, and three days after they were deposited they appeared in the bank balances. a) What is the delay (in days) that the company normally experiences in the collection of its accounts? b) If the opportunity cost of the company is 11%, is it advisable for the company to pay an annual fee of $ 16,500.00 in order to reduce the delay in the collection of accounts by 3 days? Explain your answer.Paradise Retailers, Inc. (PRI) determined that $1,500,000 is needed for cash transactions made during the next year. Each time PRI deposits money in its checking account, a charge of $12.95 is assessed to cover clerical costs. If PRI can hold marketable securities that yield 4.5%, and then convert these securities to cash at a cost of only the $12.95 deposit charge, what is the optimal cash amount C* to transfer from marketable securities to the checking account according to the Baumol Model?