Question
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
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 $20,000 for Month 1, $25,000 for Month 2, and $27,000 for Month 3. All sales will be done on account. Company does not expect to have any cash sales. b. Sales are collected 60% in the month of the sale, and 40% in the month following the sale. c. Cost of Goods Sold is budgeted at 45% 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. Sincealloftheordersarecustommade,noinventoryiskeptonhandattheendofthe month. f. Inventory purchases are paid in full in the month following the purchase. g. BobcatPrinting is planning to purchase a building in Month 3 for $6,000 in cash. h. Theywouldliketomaintainaminimumcashbalanceof$2,500attheendofeachmonth. Thecompanyhasanagreementwithalocalbankthatallowsthemtoborrow,withatotalline ofcreditof$20,000.Theinterestrateontheseloansis1%permonth(12%annual).They wouldasfaras able,repaytheloanonthelastdayofthemonthwhenithasenoughcashto pay the full balance and maintain an adequate ending cash balance. i. The owner makes a draw of $3,000 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 $39,600 Total assets $19,300 Ending Retained Earnings $5,507
Questions:
12)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. $500
B. Bobcat Printing does not borrow in the first month.
C. $1,800
D. $1,300
13)If Bobcat Printing borrowed money in Month 1, what is the projected interest expense it will incur for borrowing the money?
A. $130
B. Bobcat Printing will not have interest because it does not need to borrow money in Month 1.
C. $13
D. $170
E. $14
14)Bobcat Printing will have a cash surplus in Month 2.
|
15)If Bobcat Printing has a projected cash surplus in Month 2, how much cash will it repay for borrowing on its line of credit?
A. Bobcat Printing will not have a cash surplus, therefore it will need to borrow more money in Month 2.
B. $1,100
C. $1,300
D. $1,800
16)Bobcat Printing will have cash shortage in Month 3.
|
17)Bobcat Printing will need to borrow money in Month 3.
|
18)How much will Bobcat Printing borrow in Month 3?
A. $2,500
B. Bobcat Printing will not have a projected cash shortage in Month 3, thus it will not borrow money
C. $1,643
D. $1,300
19)
What is the projected gross profit for the first quarter of operations?
A. $14,507
B. $39,600
C. $57,900
D. $29,300
20)
What is the projected interest expense for the first quarter of operations?
A. $34
B. $170
C. $19
D. $13
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started