Appendix, cash flow analysis. (CMA, adapted) TabComp Inc. is a retail distributor for MZB-33 computer hardware and related software and support services. TabComp prepares annual sales forecasts, of which the first six months for 2008 are presented as follows:

TabComp Inc.

Sales Forecast Six Months—2008 Hardware Sales Software Sales and Support Total Units Dollars Sales January 130 $ 468,000 $ 192,000 $ 660,000 February 120 432,000 168,000 600,000 March 110 396,000 180,000 576,000 April 90 324,000 156,000 480,000 May 100 360,000 150,000 510,000 June 125 450,000 270,000 720,000 Total 675 $2,430,000 $1,116,000 $3,546,000 Cash sales account for 25% of TabComp’s total sales, 30% of the total sales are paid by bank credit card, and the remaining 45% are on open account (TabComp’s own charge accounts). The cash and bank credit card sales are received in the month of the sale. Bank credit card sales are subject to a 4% discount deducted at the time of the daily deposit. The cash receipts for sales on open account are 70% in the month following the sales, 28% in the second month following the sale, and the remaining are estimated to be uncollectible.

TabComp’s month-end inventory requirements for computer hardware units are 30% of the next month’s sales. A one-month lead time is required for delivery from the manufacturer. Thus, orders for computer hardware units are placed on the 25th of each month to ensure that they will be in the store by the first day of the month needed. The computer hardware units are purchased under terms of n/45, measured from the time the units are delivered to TabComp. TabComp’s purchase price for the computer units is 60%

of the selling price.

Required 1. Calculate the cash that TabComp can expect to collect during April 2008. Be sure to show all your calculations.

2. TabComp is determining the MZB-33 computer hardware units that will be ordered on January 25, 2008.

a. Determine the projected number of computer hardware units that will be ordered.

b. Calculate the dollar value of the order that TabComp will place for these computer hardware units.

c. In which month will TabComp pay for these computer hardware units?

3. As part of the annual budget process, TabComp prepares a cash budget by month for the entire year. Explain why a company such as TabComp prepares a cash budget by month for the entire year