3 no slopes does not maintain a 10000 minimum cash

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3. No. Slopes does not maintain a $10,000 minimum cash balance in July. To maintain a $10,000 cash balance in each of the three months, it could perhaps encourage its customers to pay earlier by offering a discount. Alternatively, Slopes could seek short-term credit from a bank. 6-30
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6-37 (40–50 min.) Cash budgeting, chapter appendix. Itami Wholesale Co. Statement of Budgeted Cash Receipts and Disbursements For the Months of December 2009 and January 2010 December 2009 January 2010 Cash balance, beginning $ 10,000 $ 2,025 Add receipts: Collections of receivables (Schedule 1) 235,900 285,800 (a) Total cash available for needs 245,900 287,825 Deduct disbursements: For merchandise purchases (Schedule 2) $183,875 $141,750 For variable costs (Schedule 3) 50,000 25,000 For fixed costs (Schedule 3) 10,000 10,000 (b) Total disbursements 243,875 176,750 Cash balance, end of month (a – b) $ 2,025 $111,075 Enough cash should be available for repayment of the note on January 31, 2010. Schedule 1: Collections of Receivables Collections in October November December Total December $14,400 a $50,000 b } 171,500 c $235,900 January 20,000 d $ 60,000 e } 205,800 f $285,800 a 0.08 × $180,000 b 0.20 × $250,000 c 0.70 × $250,000 × .98 d 0.08 × $250,000 e 0.20 × $300,000 f 0.70 × $300,000 × .98 6-31
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Schedule 2: Payments for Merchandise December January Target ending inventory (in units) 875 a 800 c Add units sold (sales ÷ $100) 3,000 1,500 Total requirements 3,875 2,300 Deduct beginning inventory (in units) 1,250 b 875 Purchases (in units) 2,625 1,425 Purchases in dollars (units × $70) $183,750 $99,750 December January Cash disbursements: For December, accounts payable; For January, December’s purchases at 50% $ 92,000 $ 91,875 For current month’s purchases at 50% 91,875 49,875 $183,875 $141,750 a 500 units + 0.25 ($150,000 ÷ $100) b $87,500 ÷ $70 c 500 units + 0.25($120,000 ÷ $100) Schedule 3: Marketing, Distribution, and Customer-Service Costs Total annual fixed costs, $150,000, minus $30,000 depreciation $120,000 Monthly fixed cost requiring cash outlay $ 10,000 Variable cost ratio to sales = $1,500,000 $150,000 $400,000 = 1/6 December variable costs: 1/6 × $300,000 sales $50,000 January variable costs: 1/6 × $150,000 sales $25,000 6-32
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6-38 (60 min.) Comprehensive problem; ABC manufacturing, two products. 1. Revenues Budget For the Year Ending December 31, 2009 Units Selling Price Total Revenues Chairs 172,000 $ 80 $13,760,000 Tables 45,000 $900 $40,500,000 Total $54,260,000 2a. Total budgeted marketing costs = Budgeted variable marketing costs + Budgeted fixed marketing costs = $2,011,200 + $4,500,000 = $6,511,200 Marketing allocation rate = $6,511,200 $54,260,000 = $0.12 per sales dollar 2b. Total budgeted distribution costs = Budgeted variable distribution costs + Budgeted fixed distribution co = $54,000 + $380,000 = $434,000 Chairs: 172,000 units ÷ 500 units per delivery 344 deliveries Tables: 45,000 units ÷ 500 units per delivery 90 deliveries Total 434 deliveries Delivery allocation rate = $434,000 434 deliveries = $1,000 per delivery 3. Production Budget (in Units) For the Year Ending December 31, 2009 Product Chairs Tables Budgeted unit sales 172,000 45,000 Add target ending finished goods inventory 8,500 2,250 Total required units 180,500 47,250 Deduct beginning finished goods inventory 8,000 2,100 Units of finished goods to be produced 172,500 45,150 6-33
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4a. Chairs Tables Total Machine setup overhead Units to be produced 172,500 45,150 Units per batch ÷500 ÷50 Number of setups 345 903 Hours to setup per batch × 3 × 2 Total setup hours 1,035 1,806 2,841 Total budgeted setup costs = Budgeted variable setup costs + Budgeted fixed setup costs = $97,000 + $300,740 = $397,740 Machine setup allocation rate = $397,740 2,841 setup-hours = $140 per setup hour b.
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