Question

339 AF211 Budget Project Hepare the following hodes for a retail company on a computer spread computer spreadsheet such as Exel Follow the format of ere your textbook Your name and section sumber should appear n one pod format. That is it should the property labeled and should start and i pe breaks in the middle There can be more than one hedges or a budget schedule N o rrample the Sales Baded and the schedule ale of Cash Collections) so long as they completely fiton Cash Collections) sokog the budgets shows in chapter 9 of your best cache. The budgets should be in good format. That is it should be po pe without having the breaks in the middle. There can be more s.gos- that some page Required: 1. Prepare a sales budget for January through May. The selling price Sur student identification number os data for the hosted ales in units by multips 10.000 lowever, bote that if your ID contains the number Ouse 10 instead units would be: For example, if the last five digits in your student the budgeted sales in units December of the previous year 10.000 80.000 86361 January 0000 0.000 10 of January through May. The selling price per unit is $50.00. Use the last five digits of he bodgeted sales in units by multiplying each number by February March 60.000 100.000 30.000 20.000 60,000 April 10,000 2. Prepare a purchases budget for January through March, and the first quarter in local. Assume that the company only sells one product that can be purchased at $500 BT unit The market for this product is very competitive and customers highly value service such as quality and on time delivery of the product. Also assume that currently it is company policy that ending inventory should equal 50% of next month's projected sales 3. Prepare a cash budget for January through March and for the first quarter in total. The company maintains a minimum cash balance of $70,000.00, and this was the balance in the cash account on January 1. Past experience shows that 40% of sales are collected in the month of the sale, and 60% in the month following the sale. Selling cost is $12 per unit sold. Other expenses include $35,000 per month for rent, $14,000 for advertising, and 566,000 per month for depreciation. All costs are paid in the current month except inventory purchases, which are paid in the month following the purchase (ie. January purchases are paid in February). The company has an open line of credit with a bank and can borrow at an annual rate of 12%. For simplification assume that all loans are made at the beginning of the month when borrowing is needed and repayments are made at the end of a month if there is enough cash to make the payment. Also, interest associated with a loan is only paid at the time when that loan or a portion thereof is paid. Additionally, all loans and repayments (not the interest portion) can cely be made in increments of 51000 and the company would like to pay its debts, or a portion thereof, as soon as it has enough cash to do so. 4. Prepare the Budgeted Income Statement based on the information given above, Label the budgets prepared in Steps 14 as budget scenario A. 5. Repeat steps 2-4 for budget scenarios Band C using the following Desired Ending Inventory assumptions Linding Inventory ISE 6. Write a brief analysis of the three inventory policies depicted in the budget scenarios A, B and C and recommend a policy that the company should implement. Give reasons for your recommendation. Your write-up should be based on the results you obtained from the analyses in steps 1-5 above. Assume that you are writing on behalf of a professional consultant advising the President of the company about the company's inventory policies. You will should be in the form of a one-page Memo to the President of the company. Organization, grammar, and spelling are important

Answer 1

Scenario-A

	Closing Inventory	50%		Dec Sales-	80000	April Sales-	10000
1	Sales Budget
		January	February	March	Total
	No. of units	60000	30000	60000	150000
	S.P per unit	50	50	50	50
	Total Sales	3000000	1500000	3000000	7500000
2	Purchase Budget
		January	February	March	Total		Dec
	Current Sales	60000	30000	60000	150000		80000
	Closing Inventory	15000	30000	5000	50000		30000
	-Opening Inventory	-30000	-15000	-30000	-75000		-40000
	Purchase	45000	45000	35000	125000		70000
	Cost per unit	35	35	35	35		35
	Total Purchase	1575000	1575000	1225000	4375000		2450000
3	Cash Budget
		January	February	March	Total
	Sales Collection:
	40% in same month	1200000	600000	1200000	3000000
	60% in next month	2400000	1800000	900000	5100000
	Selling Cost	-720000	-360000	-720000	-1800000
	Rent	-35000	-35000	-35000	-105000
	Advertising	-44000	-44000	-44000	-132000
	Purchase paid in next month	-2450000	-1575000	-1575000	-5600000
	Total CashFlow (a)	351000	386000	-274000	463000
	Opening Cash balance (b)	70000	70000	70000	70000
	Minimum Cash requirement (c )	70000	70000	70000	210000
	Excess/(Deficit) (d=a+b-c)	351000	386000	-274000	463000
	Borrowing/(Repayment) (e=-d)	-351000	-386000	274000	-463000
	Ending Cash Balance (f=a+b+e)	70000	70000	70000	70000
4	Budgeted Income Statement
		January	February	March	Total
	Sales	3000000	1500000	3000000	7500000
	Closing Stock	525000	1050000	175000	1750000
	Less:
	Opening Stock	-1050000	-525000	-1050000	-2625000
	Purchase	-1575000	-1575000	-1225000	-4375000
	Selling Cost	-720000	-360000	-720000	-1800000
	Rent	-35000	-35000	-35000	-105000
	Advertising	-44000	-44000	-44000	-132000
	Depreciation	-66000	-66000	-66000	-198000
	Interest on Borrowing	0	0	2740	2740
	Net Profit/ (Loss)	35000	-55000	37740	17740

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