ACC 2301 Project 3 Budget Exercise
Bobcat Printing makes custom t---shirts and other promotionalproducts for student organizations and businesses. It is beginningits first year of operations and needs to plan for its firstquarter of operations. They would like to maximize their profits,and understand that accurate budgeting can help achieve that goal.The budgets will be prepared based on the followinginformation:
a. Sales are budgeted at $20,000 for Month 1, $25,000 for Month2, and $27,000 for Month 3. All sales will be done on account.Company does not expect to have any cash sales.
b. Sales are collected 60% in the month of the sale, and 40% inthe month following the sale.
c. Cost of Goods Sold is budgeted at 45% of Sales.
d. Monthly selling, general, and administrative expenses are asfollows: donations are 10% of sales; advertising is 3% of sales;miscellaneous is 1% of sales; and rent is $5,000 per month. AllSG&A expenses are paid in the month they are incurred.
e.Sincealloftheordersarecustommade,noinventoryiskeptonhandattheendofthemonth.
f. Inventory purchases are paid in full in the month followingthe purchase.
g. Bobcat Printing is planning to purchase a building in Month 3for $6,000 in cash.
h.Theywouldliketomaintainaminimumcashbalanceof$2,500attheendofeachmonth.Thecompanyhasanagreementwithalocalbankthatallowsthemtoborrow,withatotallineof credit of $20,000. The interest rate on these loans is 1% permonth (12% annual). They would as far as able, repay the loan onthe last day of the month when it has enough cash to pay the fullbalance and maintain an adequate ending cash balance.
i. Theownermakesadrawof$3,000everymonth.(Note:soleproprietorsandpartnerships take ownerâs draws, while stockholders receivedividends). Based upon the information provided, complete theoperating budgets provided in the excel template, and answer thequestions in TRACS. When making calculations always round up (forexample: 33 Ã 7% = 2.31, round up to 3.00).
Check Figures:
Gross Margin = $39,600
Total assets = $19,300
Ending Retained Earnings = $5,507
10. What is the total projected cash payments for SG&Aexpense? A. $15,000 B. $7,000 C. $25,080 D. $8,780
11. What is the projected beginning cash balance for Month 1? A.$0 B. $7,500 C. $300 D. $2,500
12. What is the projected ending cash balance for Month 1? A.$2,500 B. $1,100 C. $8,000 D. None of the above
13. Will Bobcat Printing need to borrow money in Month 1? A. YesB. No
14. If you answered "Yes" that Bobcat Printing had to borrowmoney in the first month, how much money will it need to borrow toensure it does not have a cash shortage? A. $500 B. $1,300 C.$1,800 D. Does not borrow money
15. If Bobcat Printing borrowed money in Month 1, what is theprojected interest expense it will incur for borrowing the money?A. $130 B. Bobcat Printing will not have interest because it doesnot need to borrow money in Month 1. C. $13 D. $170 E. $14
16. Bobcat Printing will have a cash surplus in Month 2. A. TrueB. False
17. If Bobcat Printing has a projected cash surplus in Month 2,how much cash will it repay for borrowing on its line of credit? A.Bobcat Printing will not have a cash surplus, therefore it willneed to borrow more money in Month 2. B. $1,100 C. $1,300 D.$1,800
18. Bobcat Printing will have cash shortage in Month 3. A. TrueB. False
19. Bobcat Printing will need to borrow money in Month 3. A.True B. False
20. How much will Bobcat Printing borrow in Month 3? A. BobcatPrinting will not have a projected cash shortage in Month 3, thusit will not borrow money B. $1,300 C. $1,643 D. $2,500
ACC 2301 Project 3 Budget Exercise
Bobcat Printing makes custom t---shirts and other promotionalproducts for student organizations and businesses. It is beginningits first year of operations and needs to plan for its firstquarter of operations. They would like to maximize their profits,and understand that accurate budgeting can help achieve that goal.The budgets will be prepared based on the followinginformation:
a. Sales are budgeted at $20,000 for Month 1, $25,000 for Month2, and $27,000 for Month 3. All sales will be done on account.Company does not expect to have any cash sales.
b. Sales are collected 60% in the month of the sale, and 40% inthe month following the sale.
c. Cost of Goods Sold is budgeted at 45% of Sales.
d. Monthly selling, general, and administrative expenses are asfollows: donations are 10% of sales; advertising is 3% of sales;miscellaneous is 1% of sales; and rent is $5,000 per month. AllSG&A expenses are paid in the month they are incurred.
e.Sincealloftheordersarecustommade,noinventoryiskeptonhandattheendofthemonth.
f. Inventory purchases are paid in full in the month followingthe purchase.
g. Bobcat Printing is planning to purchase a building in Month 3for $6,000 in cash.
h.Theywouldliketomaintainaminimumcashbalanceof$2,500attheendofeachmonth.Thecompanyhasanagreementwithalocalbankthatallowsthemtoborrow,withatotallineof credit of $20,000. The interest rate on these loans is 1% permonth (12% annual). They would as far as able, repay the loan onthe last day of the month when it has enough cash to pay the fullbalance and maintain an adequate ending cash balance.
i. Theownermakesadrawof$3,000everymonth.(Note:soleproprietorsandpartnerships take ownerâs draws, while stockholders receivedividends). Based upon the information provided, complete theoperating budgets provided in the excel template, and answer thequestions in TRACS. When making calculations always round up (forexample: 33 Ã 7% = 2.31, round up to 3.00).
Check Figures:
Gross Margin = $39,600
Total assets = $19,300
Ending Retained Earnings = $5,507
10. What is the total projected cash payments for SG&Aexpense? A. $15,000 B. $7,000 C. $25,080 D. $8,780
11. What is the projected beginning cash balance for Month 1? A.$0 B. $7,500 C. $300 D. $2,500
12. What is the projected ending cash balance for Month 1? A.$2,500 B. $1,100 C. $8,000 D. None of the above
13. Will Bobcat Printing need to borrow money in Month 1? A. YesB. No
14. If you answered "Yes" that Bobcat Printing had to borrowmoney in the first month, how much money will it need to borrow toensure it does not have a cash shortage? A. $500 B. $1,300 C.$1,800 D. Does not borrow money
15. If Bobcat Printing borrowed money in Month 1, what is theprojected interest expense it will incur for borrowing the money?A. $130 B. Bobcat Printing will not have interest because it doesnot need to borrow money in Month 1. C. $13 D. $170 E. $14
16. Bobcat Printing will have a cash surplus in Month 2. A. TrueB. False
17. If Bobcat Printing has a projected cash surplus in Month 2,how much cash will it repay for borrowing on its line of credit? A.Bobcat Printing will not have a cash surplus, therefore it willneed to borrow more money in Month 2. B. $1,100 C. $1,300 D.$1,800
18. Bobcat Printing will have cash shortage in Month 3. A. TrueB. False
19. Bobcat Printing will need to borrow money in Month 3. A.True B. False
20. How much will Bobcat Printing borrow in Month 3? A. BobcatPrinting will not have a projected cash shortage in Month 3, thusit will not borrow money B. $1,300 C. $1,643 D. $2,500
Related questions
Flexible Budget for Selling and Administrative Expenses for aService Company
Morningside Technologies Inc. uses flexible budgets that arebased on the following data:
| Sales commissions | 7% of sales |
| Advertising expense | 25% of sales |
| Miscellaneous administrative expense | $1,850 per month plus 3% of sales |
| Office salaries expense | $17,000 per month |
| Customer support expenses | $2,600 plus 4% of sales |
| Research and development expense | 5,750 per month |
Prepare a flexible selling and administrative expenses budgetfor April for sales volumes of $115,000, $145,000, and $175,000.Enter all amounts as positive numbers.
| Morningside Technologies Inc. | |||
| Flexible Selling and Administrative ExpensesBudget | |||
| Forthe Month Ending April 30 | |||
| Total sales | $115,000 | $145,000 | $175,000 |
| Variable cost: | |||
| Sales commissions | $ | $ | $ |
| Advertising expense | |||
| Miscellaneousadministrative expense | |||
| Customer support expense | |||
| Total variable cost | $ | $ | $ |
| Fixed cost: | |||
| Miscellaneous administrative expense | $ | $ | $ |
| Office salaries expense | |||
| Customer support expense | |||
| Research and development expense | |||
| Total fixed cost | $ | $ | $ |
| Total selling and administrativeexpenses | $ | $ | $ |
2.
Sales and Production Budgets
Sonic Inc. manufactures two models of speakers, Rumble andThunder. Based on the following production and sales data for June,prepare (a) a sales budget and (b) a production budget.
| Rumble | Thunder | ||
| Estimated inventory (units), June 1 | 278 | 77 | |
| Desired inventory (units), June 30 | 319 | 67 | |
| Expected sales volume (units): | |||
| East Region | 4,100 | 4,600 | |
| West Region | 5,000 | 4,350 | |
| Unit sales price | $115 | $185 |
a. Prepare a sales budget.
| SonicInc. | |||
| SalesBudget | |||
| Forthe Month Ending June 30 | |||
| Product and Area | Unit Sales Volume | Unit Selling Price | Total Sales |
| Model Rumble: | |||
| East Region | $ | $ | |
| West Region | |||
| Total | $ | ||
| Model Thunder: | |||
| East Region | $ | $ | |
| West Region | |||
| Total | $ | ||
| Total revenue from sales | $ | ||
3.
Cash Budget
The controller of Sonoma Housewares Inc. instructs you toprepare a monthly cash budget for the next three months. You arepresented with the following budget information:
| May | June | July | ||||
| Sales | $90,000 | $111,000 | $142,000 | |||
| Manufacturing costs | 38,000 | 48,000 | 51,000 | |||
| Selling and administrative expenses | 26,000 | 30,000 | 31,000 | |||
| Capital expenditures | _ | _ | 34,000 | |||
The company expects to sell about 10% of its merchandise forcash. Of sales on account, 60% are expected to be collected in themonth following the sale and the remainder the following month(second month following sale). Depreciation, insurance, andproperty tax expense represent $9,000 of the estimated monthlymanufacturing costs. The annual insurance premium is paid inSeptember, and the annual property taxes are paid in November. Ofthe remainder of the manufacturing costs, 75% are expected to bepaid in the month in which they are incurred and the balance in thefollowing month.
Current assets as of May 1 include cash of $34,000, marketablesecurities of $49,000, and accounts receivable of $107,800 ($79,000from April sales and $28,800 from March sales). Sales on accountfor March and April were $72,000 and $79,000, respectively. Currentliabilities as of May 1 include $10,000 of accounts payableincurred in April for manufacturing costs. All selling andadministrative expenses are paid in cash in the period they areincurred. An estimated income tax payment of $13,000 will be madein June. Sonomaâs regular quarterly dividend of $9,000 is expectedto be declared in June and paid in July. Management wants tomaintain a minimum cash balance of $27,000.
Required:
1. Prepare a monthly cash budget and supportingschedules for May, June, and July. Input all amounts as positivevalues except overall cash decrease and deficiency which should beindicated with a minus sign.
| Sonoma Housewares Inc. | |||
| CashBudget | |||
| Forthe Three Months Ending July 31 | |||
| May | June | July | |
| Estimated cash receipts from: | |||
| Cash sales | $ | $ | $ |
| Collection of accounts receivable | |||
| Total cash receipts | $ | $ | $ |
| Estimated cash payments for: | |||
| Manufacturing costs | $ | $ | $ |
| Selling and administrative expenses | |||
| Capital expenditures | |||
| Other purposes: | |||
| Income tax | |||
| Dividends | |||
| Total cash payments | $ | $ | $ |
| Cash increase or (decrease) | $ | $ | $ |
| Cash balance at beginning of month | |||
| Cash balance at end of month | $ | $ | $ |
| Minimum cash balance | |||
| Excess or (deficiency) | $ | $ | $ |
4.
Factory Overhead Cost Budget
Sweet Tooth Company budgeted the following costs for anticipatedproduction for August:
| Advertising expenses | $259,400 |
| Manufacturing supplies | 14,220 |
| Power and light | 42,400 |
| Sales commissions | 290,020 |
| Factory insurance | 24,690 |
| Production supervisor wages | 124,710 |
| Production control wages | 32,420 |
| Executive officer salaries | 264,390 |
| Materials management wages | 35,670 |
| Factory depreciation | 20,210 |
Prepare a factory overhead cost budget, separating variable andfixed costs. Assume that factory insurance and depreciation are theonly fixed factory costs.
| SweetTooth Company | ||
| Factory Overhead Cost Budget | ||
| Forthe Month Ending August 31 | ||
| Variable factory overhead costs: | ||
| Manufacturingsupplies | $ | |
| Power and light | ||
| Production supervisorwages | ||
| Production controlwages | ||
| Materials managementwages | ||
| Total variable factory overhead costs | $ | |
| Fixed factory overhead costs: | ||
| Factory insurance | $ | |
| Factory depreciation | ||
| Total fixed factory overhead costs | ||
| Total factory overhead costs | $ | |
