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Labor costs equal 20 of sales other operating costs

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∙ Labor costs equal 20% of sales; other operating costs of $5,000 per month (including $2,000) ofdepreciation.Both are paid in the month incurred.The cash balance on October 1 is $4,300.A minimum cash balance of $4,000 is required at theend of the month.Money is borrowed in multiples of $1,000.∙ The company will issue $6,000 of common stock and pay $10,000 in dividends in October.∙ There isno debt outstanding at October 1.Required:Prepare a projected cash flow statement in good form for the month ended October 31.Answer:Cash Inflows:Cash collections from customers:August (0.28 × $30,000)$8,400September (0.50 × $20,000)10,000October (0.20 × $50,000)10,000Total$28,400
20Cash Outflows:Cash outflows for operating:Suppliers** $14,350Labor10,000Operating costs3,000Total$27,350Net cash flows this month$1,050Opening cash4,300Cash dividends paid(10,000)Cash from stock issue6,000Cash Available1,350Opening Loan0Borrowing Made3,000Borrowing Repaid0Ending Loan3,000Ending cash$4,350**$7,350 + $7,000 = Oct (0.30 × $25,000 × .98) + Sept (0.70 × $10,000).Diff: 2Terms:cash budgetObjective:3AACSB:Analytical skillsMAL:This question is not available in MyAccountingLab.
2145) Describe operating and financial budgets and give at least two examples of each that arediscussed in the textbook.Answer:Operating budgets specify the expected outcomes of any selling, capital spending,manufacturing, purchasing, labor management, and administrative activities during the planningperiod.Operations personnel use these plans to guide and coordinate activities during the planningperiod.Examples of operating budgets include the sales plan, capital spending plan, production plan,materials purchasing plan, labor hiring and training plan, and the administrative anddiscretionary spending plan.Financial budgets are used to evaluate the financial consequences of a proposed decision.They estimate the financial consequences of investment, production and sales plan (identifyfinancial consequences of activities summarized in operating budgets).Examples of financial budgets include the projected balance sheet, projected income statement,and projected cash flow statement.Diff: 2Terms:operating budget, financial budgetObjective:3AACSB:Reflective thinkingMAL:This question is not available in MyAccountingLab.46) Discuss the importance of the sales forecast and items that influence its accuracy.Answer:All other budgets are based on information from the sales forecast.The demand forecast is a challenge to predict because its accuracy depends on the ability toforecast the state of the general economy, changes in the industry, actions of the competition, theability of the sales staff, and developments in technology. Each of these items affects individualproducts or product lines and are quantified and aggregated to obtain the forecast.Diff: 2Terms:sales forecastObjective:3AACSB:Reflective thinkingMAL:This question is not available in MyAccountingLab.

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