Question

Think about a product that you would like to develop and sell.You will be making a budget presentation to the group in hopes of receiving budget approval for your ideas. Information items to communicate at this meeting are as follows:

1) Quarterly Sales Budget for a Year

2) Quarterly Production Budget for a Year

3) Quarterly Cost of Goods Sold Budget for a Year

4) Quarterly General and Administrative (other non-manufacturing) Expense Budget for a Year

5) Quarterly Capital Expenditure Budget for a Year (assume that you are starting the business without assets)

6) Quarterly Cash Budgets for a Year

7) Budgeted Income Statement for the Entire Year (not for each quarter)

8) Budget Balance Sheet at the end of the Year (assuming A=L+E are all 0 to start the Year)

9) Budgeted Statement of Cash Flows

Numbers are for you to make up to complete the following requirements. Yes you are allowed to make your own assumptions. The numbers just need to flow through the whole project. Do not treat each question individually, instead treat each question concurrent to each other please.

Answer 1

Answer is given below

Assumptions :

• Gross Margin is 30%
• Stores fixtures are purchased Day 1 on Quarter 1
• For Production Budget - Inventory Purchase Budget is given
• Cash balance is maintained at $25,000 each quarter and accordingly borrowing/repayment is done
• Interest rate at 2% per quarter
• Repayments are in multiple of $1,000

1) Sales Budget Sales Budget Cash sales Sales on Account Quarter 1 $350,000 $122,500 $227,500 Quarter 2 $420,000 $147,000 $273,000 Quarter 3 $504,000 $176,400 $327,600 Quarter 4 Full Year $604,800 $1,878,800 $211,680 $657,580 $393,120 $1,221,220 Schedule of Cash Receipts | Quarter 1 $122,500 Current Cash Sales Plus collections from A/R Total Collections Quarter 2 $147,000 $227,500 $374,500 Quarter 3 $176,400 $273,000 $449,400 Quarter 4 Full Year $211,680 $657,580 $327,600 $828,100 $539,280 $1,485,680 | $122,500 2) Producton Budget Inventory purchase Budget) COGS Add: Closing stock (20% of next month COGS) Inventory Needed Less Opening Stock Required Purchase (On Account) | Quarter 1 | Quarter 2 $245,000 $294,000 $58,800 $70,560 $303,800 $364,560 $58,800 $303,800 $305,760 Quarter 3 $352,800 $84,672 $437,472 $70,560 $366,912 Quarter 4 Full Year $423,360 $1,315,160 $90,000 $90,000 $513,360 $1,405,160 $84,672 $428,688 $1,405,160 3) Cost of Goods Sold Budget Sales Cost of Goods Sold -70% Quarter 1 $350,000 $245,000 Quarter 2 $420,000 $294,000 Quarter 3 $504,000 $352,800 Quarter 4 Full Year $604,800 $1,878,800 $423,360 $1,315,160 Schedule of Cash payment for purchases Quarter 1 Quarter 2 Quarter 3 Quarter 4 Full Year $182,280 Payment Payment of Current Moth Account payable Payment for prior month Accounts payable Total payment for purchases $183,456 $121,520 $304,976 $220,147 $122,304 $342,451 $257,213 $843,096 $146,765 $390,589 $403,978 $1,233,685 $182,280 4) General and Administrative Budget Salary expense Sales commission (4% of Sales) Supplies expense ( 2% of Sales) Utilities Depreciation on stores fixtures Rent Miscellaneous Quarter 1 $19,100 $14,000 $7,000 $2,500 $5,100 $5,900 $2,300 Quarter 2 $19,100 $16,800 $8,400 $2,500 $5,100 Quarter 3 $19,100 $20,160 $10,080 $2,500 $5,100 $5,900 $2,300 Quarter 4 $19,100 $24,192 $12,096 $2,500 $5,100 $5,900 $2,300 Full Year $76,400 $75,152 $37,576 $10,000 $20,400 $23,600 $9,200 $2,300 Total Selling and administrative expense 55,900 60,100 65,140 71,188 252,328 5) Capital Expenditure Budget Quarter 2 Quarter 3 Quarter 4 Stores fixtures Total Capital Expenditure | Quarter 1 $103,400 $103,400 Full Year $103,400 $103,400 $0 $0 $0 Schedule of Cash payments for S & A Expenses Quarter 1 $19,100 $7,000 Salary expense Sales commission (4% of Sales) Supplies expense ( 2% of Sales) Utilities Rent Miscellaneous | Total cash for Selling and administrative expense Quarter 2 $19,100 $14,000 $8,400 $2,500 $5,900 $2,300 - $52,200 $52,200 Quarter 3 $19,100 $16,800 $10,080 $2,500 $5,900 $2,300 $56,680 Quarter 4 $19,100 $20,160 $12,096 $2,500 $5,900 $2,300 $62,056 Full Year $76,400 $50,960 $37,576 $7,500 $23,600 $9,200 $205,236 $5,900 $2,300 $34,300 6) Cash Budget | Quarter 1 Quarter 2 $25,852 $374,500 $400,352 Quarter 3 $25,668 $449,400 $475,068 Quarter 4 Full Year $25,689 $539,280 $1,485,680 $564,969 $1,485,680 $122,500 $122,500 $304,976 $52,200 $342,451 $56,680 Opening Balance of Cash Cash Collections from customers Cash available for disbursement Payments for Merchandise purchase (paid at end of the month) Selling and administrative expense Purchase of Stores fixtures Cash paid for disbursements Net Cash available Financing Borrowings (at the beginning of the month) Borrowings (at the end of the month) Repayments at the end of month) Interest (at 2% per month) Total financing Closing cash balance $182,280 $34,300 $103,400 $319,980 -$197,480 $403,978 $1,233,685 $62,056 $205,236 $103,400 $466,034 $1,542,321 $98,935 -$56,641 $357,176 $43,176 $399,131 $75,937 $103,400 $122,000 -$13,000 -$4,508 -$17,508) $25,668 -$2,068 $223,332) $25,852 $103,400 $122,000 -$70,000-$129,000 -$3,328 -$14,152 -$73,328 $82,248 $25,607 $25,607 -$46,000 -$4,248 -$50,248 $25,689 Minimum cash balance maintained is $25,000 end of each Quarter Interest at 2% per Quarter on unpaid loan $1,878,800 $1,315,160 $563,640 ABC Company Performa Income Statement For the Quarter Needed December 31st Sales Less Cost of Goods Sold Gross profit Salary expense Sales commission (4% of Sales) Supplies expense ( 2% of Sales) Utilities Depreciation on stores fixtures Rent Miscellaneous Interest on short term loans $76,400 $75,152 $37,576 $10,000 $20,400 $23,600 $9,200 $14,152 $266,480 $297,160 Net Income ABC Company Proforma Balance Sheet December 31st Assets Current Assets Cash Accounts receivable Inventory $25,607 $393,120 $90,000 $508,727 $103,400 -$20,400 $83,000 $591,727 Fixed Assets Stores fixture Less: Depreciation during the year Total Assets Current liabilities Accounts payable Outstanding expense Short term borrowing Total Current Liabilities Stockholders' equity Retained earnings Total Liabilities and Stockholders' Equity $171,475 $26,692 $96,400 $294,567 $297,160 $591,727 Budgeted Statement of Retained Earnings Retained earnings - Opening Balance Add: Net profit Retained earnings - Closing Balance 297,160 297,160 Accounts receivable closing balance Opening Balance Add : Sales Less: Collection Closing Balance 1,878,800 -1,485,680 393,120 Accounts payable closing balance Opening Balance Add: Purchases Less : Payment Closing Balance 1,405,160 -1,233,685 171,475 107 ABC Company Proforma Statement of Cash flows For the Year Ended December 31st Cash Flow from Operating Activities Cash received from Customers $1,485,680 Cash payment to Vendors -$1,233,685 Cash payment for Operating Expenses -$205,236 Interest paid to Bank $14,152 Net cash from Operating Activities $32,607 Cash Flow from Investing Activities Purchase of Stores Fixtures -$103,400 $225,400 -$129,000 Cash Flow from Financing Activities Short term borrowing Repayment of short term borrowing Net cash from Financing Activities Net Cash inflow/(Outflow) Cash-Closing balance $96,400 $25,607 $25,607