Question

Fill in the cash budget form according to the fact sheet.

You (and your team) work in a boutique firm called 'Business Advisory Pty. Ltd.', a business that provides advisory services to other businesses. Your role in the firm is a business consultant providing advice to business clients. To this end, you are often required to produce budgetary reports and present such reports to clients. Mr. James Hunter and Dr Olivia Ng own an Optometry business trading under the name "1-Optometry" and they have approached you (and your team). Being a brick and mortar store located in Burwood, Victoria, i- Optometry is a business that has traditionally focused on selling eyewear such as sunglasses and prescription glasses. The business also provides optometry services to customers, mainly a comprehensive eye examination. James is in charge of the management of the business while Dr Ng, manages the optometry aspects of the business. As part of their business operations, i-Optometry retails the following types of eyewear: • Sunglasses retail on average for $200 per pair of glasses. It costs $60 per pair and the business purchases these from a local supplier. • Prescription reading glasses retail for $150 each. It costs $80 to secure from the same local supplier. i-Optometry also provide comprehensive eye tests to clients who wish to assess eye health. The price of a comprehensive eye test is $75. As part of the eye-test, the Optometrist will examine the eyes, detect, diagnose and manage vision problems, and assess eye health. Optometrists can prescribe and fit glasses or contact lenses. Optometrists can also advise you on many aspects of your eye health. It is now the end of 2019. The clients have been thinking of stepping their business up to the next level and so they have approached your firm for some business advice. Specifically, they have listed some potential projects which can be implemented starting from 1st January 2020 as follows: #1 Expansion Project: The owners believe that they can improve business by expanding their storefront location. Specifically, they would like to increase the floorspace of the existing premises to include some additional display cabinets and expand the number of eye-test rooms to reduce customer wait-time. Out of all the projects this has the greatest initial capital requirements. #2 Cost Management Strategy: James suggests that selling prescription glasses does not produce enough margin. He has proposed that they focus on the sunglasses and other casual eyewear products and further increase the margins by changing suppliers. The new supplier will provide slightly inferior products but will be much cheaper than the current supplier. James would also introduce a number of other cost-cutting initiatives such as reduced wages, and energy usage. #3 Advanced Marketing Campaign Olivia has suggested that the current business model works well but they simply need to expand marketing. She believes that if more clients came to the business they can improve revenues. Specifically, if the business paid for an advertising agency to help set up an online portal, advertise in the local newspaper, put up social media ads, etc. more people will come to do eye tests. Based on her estimates, Olivia believes that while eye-tests count for a smaller proportion of revenue, they are strongly tied to the sale of prescription glasses, so the business should focus on eye-care rather than retailing sunglasses. Note that the cost of this project is a repeated amount that the business will need to pay every month on top of any existing marketing expenses. akin's Bachelor of Commerce and MBA are internationally EPAS accredited,

Answer 1

					CASH BUDGET
Particulars	Jan-20	Feb-20	Mar-20	Apr-20	May-20	Jun-20	Jul-20	Aug-20	Sep-20	Oct-20	Nov-20	Dec-20
Opening cash balance	$ 15,000.00	$    5,000.00	$ 11,808.00	$ 16,960.00	$   1,677.00	$   5,450.00	$     3,516.00	$ (20,740.00)	$ (21,829.00)	$ (12,634.00)	$(16,348.00)	$    4,892.00
Cash Inflows:
CASH SALES	$ 37,240.00	$ 41,000.00	$ 38,560.00	$ 36,120.00	$ 35,240.00	$ 30,720.00	$   29,400.00	$   30,040.00	$   40,960.00	$   47,680.00	$ 52,840.00	$ 55,640.00
TESTS	$    6,600.00	$    7,275.00	$    8,175.00	$    9,075.00	$   9,450.00	$   8,475.00	$     9,075.00	$   10,425.00	$   11,475.00	$   12,525.00	$ 14,100.00	$ 14,550.00
Credit sales 70%	$    6,517.00	$    7,175.00	$    6,748.00	$    6,321.00	$   6,167.00	$   5,376.00	$     5,145.00	$     5,257.00	$     7,168.00	$     8,344.00	$    9,247.00	$    9,737.00
Credit Sales 20%		$    1,862.00	$    2,050.00	$    1,928.00	$   1,806.00	$   1,762.00	$     1,536.00	$     1,470.00	$     1,502.00	$     2,048.00	$    2,384.00	$    2,642.00
Credit Sales 10%			$       931.00	$    1,025.00	$      964.00	$      903.00	$        881.00	$        768.00	$        735.00	$        751.00	$    1,024.00	$    1,192.00
Total Cash Available	$ 65,357.00	$ 62,312.00	$ 68,272.00	$ 71,429.00	$ 55,304.00	$ 52,686.00	$   49,553.00	$   27,220.00	$   40,011.00	$   58,714.00	$ 63,247.00	$ 88,653.00
Cash Outflows
Sales staff expense	$    8,000.00	$    8,000.00	$    8,000.00	$    8,000.00	$   8,000.00	$   8,000.00	$     8,000.00	$     8,000.00	$     8,000.00	$     8,000.00	$    8,000.00	$    8,000.00
Office staff expense	$    4,500.00	$    4,500.00	$    4,500.00	$    4,500.00	$   4,500.00	$   4,500.00	$     4,500.00	$     4,500.00	$     4,500.00	$     4,500.00	$    4,500.00	$    4,500.00
Optometrists	$ 13,000.00	$ 13,000.00	$ 13,000.00	$ 13,000.00	$ 13,000.00	$ 13,000.00	$   13,000.00	$   13,000.00	$   13,000.00	$   13,000.00	$ 13,000.00	$ 13,000.00
Drawings by partners	$    6,400.00	$    6,400.00	$    6,400.00	$    6,400.00	$   6,400.00	$   6,400.00	$     6,400.00	$     6,400.00	$     6,400.00	$     6,400.00	$    6,400.00	$    6,400.00
Marketing Expense	$          75.00	$         75.00	$         75.00	$          75.00	$        75.00	$        75.00	$           75.00	$           75.00	$           75.00	$           75.00	$          75.00	$         75.00
General insurance							$     3,000.00
Bank account fees	$       144.00			$       144.00			$        144.00			$        144.00
Office Supplies	$          90.00	$         90.00	$         90.00	$          90.00	$        90.00	$        90.00	$           90.00	$           90.00	$           90.00	$           90.00	$          90.00	$         90.00
Council Rates												$       600.00
Rent	$ 19,200.00			$ 19,200.00			$   19,200.00			$   19,200.00
Water, gas and Electricity			$       495.00			$      495.00			$        495.00			$       495.00
Glasses amount payable	$    8,948.00	$ 18,439.00	$ 18,752.00	$ 18,343.00	$ 17,789.00	$ 16,610.00	$   15,884.00	$   16,984.00	$   20,085.00	$   23,653.00	$ 26,290.00	$ 23,631.00
Total Cash Spent	$ 60,357.00	$ 50,504.00	$ 51,312.00	$ 69,752.00	$ 49,854.00	$ 49,170.00	$   70,293.00	$   49,049.00	$   52,645.00	$   75,062.00	$ 58,355.00	$ 56,791.00
Closing cash balance	$    5,000.00	$ 11,808.00	$ 16,960.00	$    1,677.00	$   5,450.00	$   3,516.00	$ (20,740.00)	$ (21,829.00)	$ (12,634.00)	$ (16,348.00)	$    4,892.00	$ 31,862.00

Note: Due to lack of information , following things have been assumed and answers will be changed accordingly.

1. opening Cash balance of $15000 in month of January.

2. 30% of material required in January has been already purchased in December last year as given in question for other months.

3.Expense like rent have been accounted in month in which it is paid as cash will flow in that month only.