Appendix 5 - Budget at we are very proud of the sales for one of the baskets, the Easter PT Toys has a toy basket line that we are very proud of. The sales for one of occur in March every year. The company has estimated the following sales for the months of the year for the Easter basket: Month Expected sales in units 10,000 The baskets are considered deluxe as they are very intricate. As such, the company can sell the baskets or 30. Based on past history, the company expects that 10% of sales are cash of the credit sales, hair is collected one month after sale and the remainder is collected two months after sale. Accounts receivable as at January 1st was $50.000 all of which is expected to be collected in January. Each basket requires 2 meters of plastic. The cost per meter is $2.00. The company wants to ensure it has enough plastic on hand at all times and therefore has indicated that ending inventory will be 20% of the following month's production needs for plastic. The company had 1.000 meters of plastic on hand as at January 1st. The company puts all purchases of plastic on account and pays for it the month following purchase. Purchases of plastic in December amounted to $2,000. Due to the intricate design, the company uses substantially all production line workers to create the baskets. Each basket takes 1.5 hours to produce and the direct labor rate per hour is $12.00 The company expects to incur $40,000 of operating expenses each month, this includes $5,000 of depreciation expense. The company plans to pay cash dividends of $3,000 in January. There is a minimum cash balance set by management of $5,000 at the end of each month. The company has access to a line of credit. Any borrowings and repayments must be made in multiples of $1,000. The company is subject to a 5% annual interest rate. For simplicity, assume interest is not compounded. Assume that borrowings are made at the beginning of the month and repayments are made at the end of the month. The company started the year with $10,000 in the bank. Priyan has told you that he has hired a new manager and she wants to know the following: Create a sales budget for the first quarter of the year. Create a cash receipts budget for the first quarter of the year. 0 What is the accounts receivable balance as at March 31"? Create a production budget for the first four months of the year. Create a direct materials budget for the first quarter of the year. Create a cash disbursements budget for direct materials for the first quarter of the year. What is the accounts payable balance as at March 31"? Create a direct labor budget for the first quarter of the year. Create a cash budget for the first quarter of the year. Today's date is January 5. You are a friend of Thomas Thomas (a man so nice they named him twice) His son, Priyan Thomas has just finished his first year of operations at his toy company, PT Toys (December 31 year end). He has invited you for a coffee to talk about something that is on his mind. Priyan: "I don't know what's going wrong! The store is busy but there is no money in my bank account If I don't figure out what is going on, I may go bankrupti" You: "What can I do to help"? Priyan: "Could you help me understand my financials a little better and maybe help with some business decisions? It's a holiday tomorrow, so the store is closed. I'll sit down and write you a note with all the things that I could use your help with." Priyan knows that you just graduated from University and you have a good understanding of Accounting. You agree to help out your friend. PT Toys carries a wide variety of different products and manufactures some toys on their own. The next day you receive an e-mail from Priyan Hi buddy! Thanks for helping me out. I really appreciate it. I've attached a couple items to the e-mail for you. I've given you a bunch of different documents from various departments and items we carry. Don't try and combine things together as it wouldn't make sense... I have a hard time making sense of it myself! The first is my Income statement I made for the last 3 months for my Stuffed Toys line found within my "Large Toy" department. It's an internal document and I put down some information about my operations (Appendix 1). Should I be looking at my financials differently? I really have no idea what I need to make during the year to break even. When I started the business a year ago, I wanted to make $85,000 after taxes on the Small, Medium, Large and Figurine parts of my business (appendix 2). I did just receive a distressing e-mail from my supplier, Springs by Stan. Stan is the only local company that sells the springs I use in my trampolines (see appendix 3). Stan has told me that he will only be able to supply me with 26,750 springs each month, but I think I need more than that! What should I do? I also have a few more operational decisions I need to make that I could use your advice (appendix 4) What's a good way to plan for my business? Could you tell me some advantages for doing a budget? I heard my banker talk about a cash budget. Can you help me prepare a cash budget? I've given you some information to help (appendix 5). Thanks Buddy Priyan You take in all the information and get down to work. Required: Complete Appendix 1-5 questions using the information provided in the question as well as from the e mail Priyan has given you. Appendix 5 - Budget has a toy basket line that we are very proud of. The sales for one of the baskets, the Easter et, occur in March every year. The company has estimated the following sales for the first five months of the year for the Easter basket: Month Expected sales in units February March May The baskets are considered deluxe as they are very intricate. As such, the company can sell the baskets for $30. Based on past history, the company expects that 10% of sales are cash. Of the credit sales, halt is collected one month after sale and the remainder is collected two months after sale. Accounts receivable as at January 1st was $50,000; all of which is expected to be collected in January. Each basket requires 2 meters of plastic. The cost per meter is $2.00. The company wants to ensure it has enough plastic on hand at all times and therefore has indicated that ending inventory will be 20% of the following month's production needs for plastic. The company had 1,000 meters of plastic on hand as at January 1st. The company puts all purchases of plastic on account and pays for it the month following purchase. Purchases of plastic in December amounted to $2,000. Due to the intricate design, the company uses substantially all production line workers to create the baskets. Each basket takes 1.5 hours to produce and the direct labor rate per hour is $12.00 The company expects to incur $40,000 of operating expenses each month, this includes $5,000 of depreciation expense. The company plans to pay cash dividends of $3,000 in January There is a minimum cash balance set by management of $5,000 at the end of each month. The company has access to a line of credit. Any borrowings and repayments must be made in multiples of $1,000. The company is subject to a 5% annual interest rate. For simplicity, assume interest is not compounded. Assume that borrowings are made at the beginning of the month and repayments are made at the end of the month. The company started the year with $10,000 in the bank. Priyan has told you that he has hired a new manager and she wants to know the following: Create a sales budget for the first quarter of the year. Create a cash receipts budget for the first quarter of the year. o What is the accounts receivable balance as at March 31"? Create a production budget for the first four months of the year. Create a direct materials budget for the first quarter of the year. o Create a cash disbursements budget for direct materials for the first quarter of the year. o What is the accounts payable balance as at March 31"? Create a direct labor budget for the first quarter of the year. Create a cash budget for the first quarter of the year