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:

5)

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.

6)

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

A. $8,780

B. $7,000

C. $13,440

D. $25,080

7)

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

A. $25,080

B. $15,000

C. $8,780

D. $7,000

8)

Are there 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. None of the above are true.

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

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