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    SNEHA BINNOD's Avatar
    SNEHA BINNOD Posts: 2, Reputation: 1
    New Member

    Feb 5, 2016, 03:39 PM
    Course project
    You have just been contracted as a budget consultant by LBJ Company, a distributor of bracelets to various retail outlets across the country. The company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash.
    You have decided to prepare a cash budget for the upcoming fourth quarter in order to show management the benefits that can be gained from proper cash planning. You have worked with accounting and other areas to gather the information assembled below.
    The company sells many styles of bracelets, but all are sold for the same $10 price. Actual sales of bracelets for the last three months and budgeted sales for the next six months follow:
    July (actual) 20,000
    August (actual) 26,000
    September (actual) 40,000
    October (budget) 70,000
    November (budget) 110,000
    December (budget) 60,000
    January (budget) 30,000
    February (budget) 28,000
    March (budget) 25,000

    The concentration of sales in the fourth quarter is due to the Christmas holiday. Sufficient inventory should be on hand at the end of each month to supply 40% of the bracelets sold in the following month.

    Suppliers are paid $4 for each bracelet. Fifty-percent of a month's purchases is paid for in the month of purchase; the other 50% is paid for in the following month. All sales are on credit with no discounts. The company has found, however, that only 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.
    Monthly operating expenses for the company are given below:
    Variable expenses:
    Sales commissions 4% of sales
    Fixed expenses:
    Advertising $220,000
    Rent $20,000
    Salaries $110,000
    Utilities $10,000
    Insurance $5,000
    Depreciation $18,000
    Insurance is paid on an annual basis, in January of each year.
    The company plans to purchase $22,000 in new equipment during October and $50,000 in new equipment during November; both purchases will be for cash. The company declares dividends of $20,000 each quarter, payable in the first month of the following quarter.
    Other relevant data is given below:
    Cash balance as of September 30 $74,000
    Inventory balance as of September 30 $112,000
    Merchandise purchases for September $200,000

    The company maintains a minimum cash balance of at least $50,000 at the end of each month. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.
    The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash.
    Prepare a cash budget for the three-month period ending December 31. Include the following detailed budgets:
    a. A sales budget, by month and in total.
    b. A schedule of expected cash collections from sales, by month and in total.
    c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total.
    d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.
    2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000.
    Curlyben's Avatar
    Curlyben Posts: 18,493, Reputation: 1859

    Feb 5, 2016, 03:51 PM

    What do YOU think ?
    While we're happy to HELP we wont do all the work for you.
    Show us what you have done and where you are having problems..
    Alty's Avatar
    Alty Posts: 28,318, Reputation: 5972
    Pets Expert

    Feb 5, 2016, 05:06 PM
    Did you even try to do it? When they give you your business degree should they be sending out degrees to every online help desk as well?

    This is your work. If you don't understand how to do it, ask your teacher. If you still don't understand, tell us where you're having problems and we'll give you hints. But this is your work, and if you can't figure out how to do it, maybe this isn't the field you should be getting into.
    ma0641's Avatar
    ma0641 Posts: 15,681, Reputation: 1012
    Uber Member

    Feb 5, 2016, 07:05 PM
    WOW. " You have just been contracted" Think of all the time you could have spent trying to solve this problem. Are we to take tests for you too? Remember, this is a HELP desk, not a DO desk. A bit over the top for a first post.

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