Week 4Working Capital There are two problems The first is a collections pattern, where you have to calculate the collections per month using a waterfall technique The second is a lengthy cash budgeting problem which begins with sales forecasts through material purchases and th using a waterfall technique. hrough material purchases and disbursements Homework Week 4Cash Budgeting and DFNScenario Analysis Dos Tacos, Inc., a manufacturer of salsa, has the following historical collection pattern for its cresales.55 percent collected in the month of sale.20 percent collected in the first month after sale.15 percent collected in the second month after sale.8 percent collected in the third month after sale.2 percent uncollectible.The sales on account have been budgeted for the last seven months as follows:June ………………………………………………………………………… $ 53,000July …………………………………………………………………………… 64,000August ……………………………………………………………………….. 72,000September ………………………………………………………………….. 80,000October ……………………………………………………………………… 89,000November …………………………………………………………………..105,000December …………………………………………………………………… 82,000Required:1. Compute the estimated total cash collections during October from credit sales.2. Compute the estimated total cash collections during the fourth quarter from sales made onduring the fourth quarter.3. Make sure to show the calculations by month during the 4th quarter (Oct-Dec) Budgeted Sales on Account:June$53,000July$63,000August$72,000September$80,000October$89,000November$ 100,000December$82,000 Collection Schedule:In month of sale55%In 1st month after sale20%In 2nd month after sale15%In 3rd month after sale8%Uncollectible2%100% al collection pattern for its credit s as follows:0000000000 from credit sales.h quarter from sales made on account uarter (Oct-Dec) Sales figures20X0Q4S frame unit salesS sales priceL frame unit salesx L sales price 20X1Q1 50,00055,000$10 $1040,00045,000$15 $1540% Percent of sales made for cash in the quarter of sale60% Percent of sales made on credit Collections80% of current quarter’s credit sales20% of previous quarter’s credit sales Purchases 20X0Q4 Direct Material purchasesMetal (pounds)Metal price/poundGlass sheetsTotal glass needed forproductionPlus desired endinginventory 20X1Q1 225,000$133,2507,400 Q2 Q3 250,000$1 275000$1 300,000$1 37,000 40,750 44,500 8,150 8,900 9,650 Total glass needed forproduction 40,650 45,150 49,650 54,150 Less beginningGlass purchases(sheets)Cost/sheet 6,65034,000$8 7,40037,750$8 8,15041,500$8 8,90045,250$8 80% of current quarter’s purchases paid in the current quarter20% of previous quarter’s purchases paid in the current quarterOther expensesDirect labor:Direct-labor hours per frameRate per direct-labor hourManufacturing overhead:Indirect materialIndirect laborOtherDepreciationPredetermined overhead rate $ 0.1$20$0.10$10,200$40,800$31,000$20,00010.00 per DLH DLH at$11,200$44,800$36,000$20,000 $$$$$ 1012,20048,80041,00020,000 Selling and admin. expensesPayment of dividends $$ 100,000 per quarter50,000 per quarter Balance Sheet as of Dec 21, 20X0Cash$95,000Accounts Receivable$132,000InventoryRaw Material$59,200$167,000Finished GoodsPlant and Equipment, net $ 8,000,000Total Assets$ 8,453,200Accounts payable$99,400Common stock$ 5,000,000Retained earnings$ 3,353,800Total Liabilities and equity $ 8,453,200 Prepare the following1 Sales budget2 Cash receipts budget3 Cash disbursements budget4 Summary cash budget HCJ Corporation is completing their cash budget for the following year. Thwill make the acquisition on January 2 of next year, and it will take most othe production process to take full advantage of the new equipment.âThe robot will cost $1,000,000 financed with a a one-year $1,000,000 loanegotiated a repayment schedule of four equal installments on the last dayThe interest rate will be 10 percent, and interest payments will be quarterl HCJ Corporation is a manufacturer of metal picture frames. The firmâs twoframes; 5 x 7 inches) and L (large frames; 8 x10 inches). The primary raw m24-inch glass sheets. Other raw materials, such as cardboard backing, arematerials.Here is the provided budget information1. Sales in the fourth quarter of 20×0 are expected to be 50,000 S frameyears, sales in each product line will grow by 5,000 units each quarter oversales in the first quarter of 20×1 are expected to be 55,000 units. 2. HCJ’s sales history indicates that 60 percent of all sales are on credit,companyâs collection experience shows that 80 percent of the credit salessale is made, while the remaining 20 percent is collected in the following qable to collect 100 percent of its accounts receivable.) 3. The S frame sells for $10, and the L frame sells for $15. These prices athroughout 20×1. Q4 Year 325000$1 1,150,000$1 48,250 170,500 10,400 10,400 58,650 207,600 9,65049,000$8 per hour$13,200$52,800$46,000$20,000 7,400173,500$8 $$$$ 46,800187,200154,00020,000 4. HCJ’s production team attempts to end each quarter with enough fincover 20 percent of the following quarterâs sales. Moreover, an attempt isthe glass sheets needed for the following quarterâs production. Since metajust-in-time basis; inventory is negligible. The purchase and production q5. All direct-material purchases are made on account, and 80 percent of ethe same quarter as the purchase. The other 20 percent is paid in the nex6. Indirect materials are purchased as needed and paid for in cash. Work7. Projected manufacturing costs in 20×1 are as follows:Direct material:Metal strips. @ $1 per footGlass sheets: $8 per sheetDirect labor for both products .1 hour @ $20 per hourManufacturing overhead: .1 direct-labor hour @ $10 per hourTotal manufacturing cost per unit . S: $7L: $101. Sales budget:2. Cash receipts budget:3. Cash disbursements budget: (including purchases of direct materials and4. Summary cash budget: budget for the following year. They are going to buy an industrial robot. Theynext year, and it will take most of the year to train the personnel and reorganizeage of the new equipment.âwith a a one-year $1,000,000 loan from My Bank and Trust Company. Iâveequal installments on the last day of each quarter.nterest payments will be quarterly as well al picture frames. The firmâs two product lines are designated as S (small8 x10 inches). The primary raw materials are flexible metal strips and 9-inch bys, such as cardboard backing, are insignificant in cost and are treated as indirect re expected to be 50,000 S frames and 40,000 L frames. Over the next twoby 5,000 units each quarter over the previous quarter. For example, S frameted to be 55,000 units. percent of all sales are on credit, with the remainder of the sales in cash. Theat 80 percent of the credit sales are collected during the quarter in which theent is collected in the following quarter. (For simplicity, assume the company iss receivable.) rame sells for $15. These prices are expected to hold constant nd each quarter with enough finished-goods inventory in each product line tos sales. Moreover, an attempt is made to end each quarter with 20 percent ofquarterâs production. Since metal strips are purchased locally, HCJ buys on aThe purchase and production quantities are shown.on account, and 80 percent of each quarterâs purchases are paid in cash duringher 20 percent is paid in the next quarter.eeded and paid for in cash. Work-in-process inventory is negligible.1 are as follows: $20 per hourhour @ $10 per hourL: $10 purchases of direct materials and payments for same)
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