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Answered) Week 4 Working Capital There are two problems The first is a collections pattern, where you have to calculate the collections per month using a...


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Week 4
Working Capital There are two problems The first is a collections pattern, where you have to calculate the collections per month using a waterfall technique The second is a lengthy cash budgeting problem which begins with sales forecasts through material purchases and th using a waterfall technique. rough material purchases and disbursements Homework Week 4
Cash Budgeting and DFN
Scenario Analysis Dos Tacos, Inc., a manufacturer of salsa, has the following historical collection pattern for its cre
sales.
55 percent collected in the month of sale.
20 percent collected in the first month after sale.
15 percent collected in the second month after sale.
8 percent collected in the third month after sale.
2 percent uncollectible.
The sales on account have been budgeted for the last seven months as follows:
June .................................................................................... $ 53,000
July ....................................................................................... 64,000
August ................................................................................... 72,000
September ............................................................................. 80,000
October ................................................................................. 89,000
November .............................................................................105,000
December .............................................................................. 82,000
Required:
1. Compute the estimated total cash collections during October from credit sales.
2. Compute the estimated total cash collections during the fourth quarter from sales made on
during the fourth quarter.
3. Make sure to show the calculations by month during the 4th quarter (Oct-Dec) Budgeted Sales on Account:
June
$
53,000
July
$
63,000
August
$
72,000
September
$
80,000
October
$
89,000
November
$ 100,000
December
$
82,000 Collection Schedule:
In month of sale
55%
In 1st month after sale
20%
In 2nd month after sale
15%
In 3rd month after sale
8%
Uncollectible
2%
100% al collection pattern for its credit s as follows:
0
0
0
0
0
0
0 from credit sales.
h quarter from sales made on account uarter (Oct-Dec) Sales figures
20X0
Q4
S frame unit sales
S sales price
L frame unit sales
x L sales price 20X1
Q1 50,000
55,000
$
10 $
10
40,000
45,000
$
15 $
15
40% Percent of sales made for cash in the quarter of sale
60% Percent of sales made on credit Collections
80% of current quarter's credit sales
20% of previous quarter's credit sales Purchases 20X0
Q4 Direct Material purchases
Metal (pounds)
Metal price/pound
Glass sheets
Total glass needed for
production
Plus desired ending
inventory
Total glass needed for
production
Less beginning
Glass purchases(sheets)
Cost/sheet 20X1
Q1 Q2 Q3 250,000
$1 275000
$1 300,000
$1 37,000 40,750 44,500 8,150 8,900 9,650 40,650 45,150 49,650 54,150 6,650
34,000
$8 7,400
37,750
$8 8,150
41,500
$8 8,900
45,250
$8 225,000
$1
33,250
7,400 80% of current quarter's purchases paid in the current quarter
20% of previous quarter's purchases paid in the current quarter
Other expenses
Direct labor:
Direct-labor hours per frame
Rate per direct-labor hour
Manufacturing overhead:
Indirect material
Indirect labor
Other
Depreciation
Predetermined overhead rat $
Selling and admin. expenses
Payment of dividends 0.1
$
20
$
0.10
$
10,200
$
40,800
$
31,000
$
20,000
10.00 per DLH
$
100,000
$
50,000 DLH at
$
11,200
$
44,800
$
36,000
$
20,000
per quarter
per quarter $
$
$
$
$ 10
12,200
48,800
41,000
20,000 Balance Sheet as of Dec 21, 20X0
Cash
$
95,000
Accounts Receivable
$
132,000
Inventory
Raw Material
$
59,200
Finished Goods
$
167,000
Plant and Equipment, net $ 8,000,000
Total Assets
$ 8,453,200
Accounts payable
$
99,400
Common stock
$ 5,000,000
Retained earnings
$ 3,353,800
Total Liabilities and equity $ 8,453,200 Prepare the following
1 Sales budget
2 Cash receipts budget
3 Cash disbursements budget
4 Summary cash budget HCJ Corporation is completing their cash budget for the following year. The
make the acquisition on January 2 of next year, and it will take most of the
production process to take full advantage of the new equipment.”
The robot will cost $1,000,000 financed with a a one-year $1,000,000 loan
negotiated a repayment schedule of four equal installments on the last day
The interest rate will be 10 percent, and interest payments will be quarterl HCJ Corporation is a manufacturer of metal picture frames. The firm’s two
frames; 5 x 7 inches) and L (large frames; 8 x10 inches). The primary raw m
24-inch glass sheets. Other raw materials, such as cardboard backing, are
materials.
Here is the provided budget information
1. Sales in the fourth quarter of 20x0 are expected to be 50,000 S frame
years, sales in each product line will grow by 5,000 units each quarter over
sales in the first quarter of 20x1 are expected to be 55,000 units. 2. HCJ's sales history indicates that 60 percent of all sales are on credit,
company’s collection experience shows that 80 percent of the credit sales
sale is made, while the remaining 20 percent is collected in the following q
able to collect 100 percent of its accounts receivable.) Q4 3. The S frame sells for $10, and the L frame sells for $15. These prices a
throughout 20x1. Year 325000
$1 1,150,000
$1 48,250 170,500 10,400 10,400 58,650 207,600 9,650
49,000
$8 per hour
$
13,200
$
52,800
$
46,000
$
20,000 7,400
173,500
$8 $
$
$
$ 46,800
187,200
154,000
20,000 4. HCJ's production team attempts to end each quarter with enough fini
cover 20 percent of the following quarter’s sales. Moreover, an attempt is
the glass sheets needed for the following quarter’s production. Since meta
just-in-time basis; inventory is negligible. The purchase and production q
5. All direct-material purchases are made on account, and 80 percent of e
the same quarter as the purchase. The other 20 percent is paid in the next
6. Indirect materials are purchased as needed and paid for in cash. Work7. Projected manufacturing costs in 20x1 are as follows:
Direct material:
Metal strips. @ $1 per foot
Glass sheets: $8 per sheet
Direct labor for both products .1 hour @ $20 per hour
Manufacturing overhead: .1 direct-labor hour @ $10 per hour
Total manufacturing cost per unit . S: $7
L: $10
1. Sales budget:
2. Cash receipts budget:
3. Cash disbursements budget: (including purchases of direct materials and
4. Summary cash budget: udget for the following year. They are going to buy an industrial robot. They will
year, and it will take most of the year to train the personnel and reorganize the
of the new equipment.”
with a a one-year $1,000,000 loan from My Bank and Trust Company. I’ve
equal installments on the last day of each quarter.
nterest payments will be quarterly as well al picture frames. The firm’s two product lines are designated as S (small
8 x10 inches). The primary raw materials are flexible metal strips and 9-inch by
, such as cardboard backing, are insignificant in cost and are treated as indirect re expected to be 50,000 S frames and 40,000 L frames. Over the next two
by 5,000 units each quarter over the previous quarter. For example, S frame
ted to be 55,000 units. percent of all sales are on credit, with the remainder of the sales in cash. The
at 80 percent of the credit sales are collected during the quarter in which the
ent is collected in the following quarter. (For simplicity, assume the company is
receivable.) rame sells for $15. These prices are expected to hold constant nd each quarter with enough finished-goods inventory in each product line to
s sales. Moreover, an attempt is made to end each quarter with 20 percent of
quarter’s production. Since metal strips are purchased locally, HCJ buys on a
The purchase and production quantities are shown.
on account, and 80 percent of each quarter’s purchases are paid in cash during
her 20 percent is paid in the next quarter.
eded and paid for in cash. Work-in-process inventory is negligible.
1 are as follows: $20 per hour
hour @ $10 per hour
L: $10 purchases of direct materials and payments for same)

 


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