BUSN 5200

 

 

 

 

 

Homework Assignment for Week 5:

 

 

 

For Week 5, please turn in the answers to the following questions:

 

 

 

Question 1.  Prepare a budget for this year for the Administrative Department at Tom’s Toyota Company based on the following information:

 

 

 

                                    Last Year         Forecasting Assumption            Budget for this Year

 

 

 

            Salaries            $60,000           2% increase                              ___________

 

            Stationary         $     900           1% decrease                            ___________

 

            Telephone        $  2,500           3% increase                             ___________

 

            Electricity         $  1,200           2.5% increase                          ___________

 

            Office Rent       $10,000           2% increase                             ___________

 

            Depreciation     $  4,000          no change                                 ___________

 

                        Total:  $78,600                                                 ___________

 

 

 

Question 2.  Define a “Static Budget.”

 

 

 

Question 3.  Define a “Flexible Budget.”

 

 

 

Question 4.  Define the term “Zero-based Budgeting.”

 

 

 

Question 5.  Define “Period Budgets.”

 

 

 

Question 6.  Define “Rolling Budgets.”

 

 

 

Question 7.  Big Bob’s Discount Appliances expects sales of $5,000, $5,000, and $10,000 during April, May, and June (big sale in June).  To build business, Big Bob lets all customers buy on credit, and all do so.  In the past, 50% of Big Bob’s sales have been collected during the month of sale, 40% are collected the following month, and 10% the month after that.  If this trend continues, what will be Big Bob’s total cash collections in the month of June?

 

 

 

Question 8.  Little Louie’s expects to have $100 in cash on hand at the beginning of June, and the company’s target cash balance is $100.  Net cash flow for June is minus $300.  Assuming that Little Louie’s borrows to meet short‑term cash needs and pays back as soon as surplus cash is available, what will be the company’s ending cash balance after financing at the end of June?

 

 

 

Question 9.  Ma & Pa Kettle’s Chili Company has begun selling a new chili recipe and they want you to help them with next year’s budgeted financial statements.  Using the worksheet below, complete Ma & Pa’s forecast and answer the questions which follow.

 

Assumptions:

 

 

 

To begin with, Ma & Pa are sure sales will grow 50% next year.  Assume that is true.  Then assume that COGS, Current Assets, and Current Liabilities all vary directly with Sales (that means if sales grows a certain percentage, then the account in question will grow by that same percentage).  Assume that fixed expenses will remain unchanged and that $1,000 worth of new Fixed Assets will be obtained next year.  Lastly, the current dividend policy will be continued next year.

 

 

 

 

 

                                                  Ma & Pa Kettle Chili Company, Inc.

 

 

 

                                                                Financial Forecast

 

 

 

                        Estimated

 

This year       for next year

 

 

 

 Sales                           $10,000          ________

 

 COGS                                         4,000          ________

 

 Gross Profit                      6,000          ________

 

 Fixed Expenses                3,000          ________

 

 Before‑Tax Profit             3,000          ________

 

 Tax @ 33.3333%            1,000         ________

 

 Net Profit                       $2,000          ________

 

 

 

 Dividends                          $0              ________

 

 

 

 Current Assets              $25,000          ________

 

 Net Fixed Assets            15,000          ________

 

 Total Assets                 $40,000          ________

 

 

 

 Current Liabilities       $17,000________

 

 Long‑term debt                3,000          ________

 

 Common Stock                7,000          ________

 

 Retained Earnings           13,000         ________

 

 Total Liabs & Eq        $40,000           ________

 

 

 

Amount need to balance the balance sheet         ________

 

            (Projected total assets minus projected

 

             total liabilities & equity *)

 

 

 

* If this number is positive it means Ma & Pa need additional external funding to finance their projected asset growth.  If this number is negative it means Ma & Pa have programmed too much financing for the amount of assets they project.