Bobcat Printing makes custom t---shirts and other promotional products for student organizations and businesses. It is beginning its first year of operations and needs to plan for its first quarter of operations. They would like to maximize their profits, and understand that accurate budgeting can help achieve that goal. The budgets will be prepared based on the following information:

a. Sales are budgeted at $30,000 for Month 1, $32,500 for Month 2, and $34,000 for Month 3. All sales will be done on account. Company does not expect to have any cash sales.

b. Sales are collected 50% in the month of the sale, and 50% in the month following the sale. c. Cost of Goods Sold is budgeted at 40% of Sales.

d. Monthly selling, general, and administrative expenses are as follows: donations are 10% of sales; advertising is 3% of sales; miscellaneous is 1% of sales; and rent is $5,000 per month. All SG&A expenses are paid in the month they are incurred.

e. Since all of the orders are custom made, no inventory is kept on hand at the end of the month.

f. Inventory purchases are paid in full in the month following the purchase. g. Bobcat Printing is planning to purchase a building in Month 3 for $8,000 in cash.

h. They would like to maintain a minimum cash balance of $2,500 at the end of each month. The company has an agreement with a local bank that allows them to borrow, with a total line of credit of $20,000. The interest rate on these loans is 1% per month (12% annual). They would as far as able, repay the loan on the last day of the month when it has enough cash to pay the full balance and maintain an adequate ending cash balance.

i. The owner makes a draw of $5,000 every month. (Note: sole proprietors and partnerships take owners draws, while stockholders receive dividends). Based upon the information provided, complete the operating budgets provided in the excel template, and answer the questions in TRACS. When making calculations always round up (for example: 33 7% = 2.31, round up to 3.00).

Check Figures: Gross Margin $57,900 Total assets $27,973 Ending Retained Earnings $14,373

Question 3 of 33

How much cash does Bobcat Printing expect to collect in the first quarter of operations?

A. $96,500

B. $15,000

C. $23,250

D. $79,500

Question 4 of 33

To what can we attribute the difference between projected total sales and projected cash received in the first quarter of operations?

A. An allowance for doubtful accounts is used because with credit sales, some customers may not make payment.
B. Bobcat Printing pays it liabilities 30 days after purchase.
C. The Conservatism Concept requires us to understate total assets and understate expenses.
D. Bobcat Printing collects part of its sales one month after the original sale.

Question 5 of 33

1.0 Points

What are budgeted cash payments for inventory purchases in the first quarter of operations?

A. $13,000
B. $25,000
C. $14,600
D. $38,600

Question 6 of 33

1.0 Points

What is the total budgeted Cost of Goods Sold for the first quarter of operations?

A. $18,600

B. $12,000

C. $25,000

D. $38,600

Question 7 of 33

1.0 Points

To what can we attribute the difference between budgeted cost of goods sold and projected cash payments for inventory in the first quarter of operations?

A. Bobcat Printing sells its inventory in the month of purchase, and pays for its inventory one month following purchase.

B. Customers do not pay for the goods it purchases until 30 days after the date of purchase.

C. Due to the Matching Concept, cash sales require payments for inventory in the month they occur.

D. There is no difference between the cost of goods sold and cash payments.

Question 8 of 33

1.0 Points

What is another name for cost of goods sold?

A. Period cost

B. Capitalize cost

C. Overhead cost

D. Product cost

Question 9 of 33

1.0 Points

What is the total budgeted SG&A expense for the quarter?

A. $28,510

B. $9,200

C. $13,440

D. $7,440

Question 10 of 33

1.0 Points

What is the total projected cash payments for SG&A expense?

A. $9,760

B. $28,510

C. $13,440

D. $4,800

Question 11 of 33

1.0 Points

Why are there no A/R cash collections during the first month of the Sales Budget?

A. It is the first month of operations, so there are no prior credit sales.

B. There should be A/R cash collections for the first month of the Sales budget.

C. Due to the cash method, cash collections from A/R do not begin until the second month of the quarter.

D. None of the above are true.

Question 12 of 33

1.0 Points

What is the projected beginning cash balance for Month 1?

A. $0

B. $7,500

C. $300

D. $2,500

Question 13 of 33

1.0 Points

What is the projected ending cash balance for Month 1?

A. $2,500

B. $1,100

C. $8,000

D. None of the above.

Question 14 of 33

1.0 Points

Will Bobcat Printing need to borrow money in Month 1?

A. Yes

B. No

Question 15 of 33

1.0 Points

If you answered "Yes" that Bobcat Printing had to borrow money in the first month, how much money will it need to borrow to ensure it does not have a cash shortage?

A. $1,700

B. $1,400

C. $500

D. Bobcat Printing does not borrow in the first month.

Question 16 of 33

1.0 Points

If Bobcat Printing borrowed money in Month 1, what is the projected interest expense it will incur for borrowing the money?

A. $140

B. Bobcat Printing will not have interest because it does not need to borrow money in Month 1.

C. $17

D. $170

E. $14

Question 17 of 33

1.0 Points

Bobcat Printing will have a cash surplus in Month 2.

True

False