Exercise 10.48 Hammocks and Swings, Ltd. has projected sales in units for four months of operations as follows: April 20,000 May 25,000 June 35,000 July 40,000 August 30,000 The hammocks sell for $35 each. Fifty-five percent of the customers are expected to pay in the month of sale and take a 3% discount; 30% are expected to pay in the month following the sale; 13% are expected to pay two months following the sale. The remaining 2% will never pay. February sales totaled $70,000 and March sales totaled $350,000. It takes 3 metres of material to produce a hammock. The material cost is $5 per metre. In April, 10,000 metres of material are in beginning inventory; managers want to end each month with enough materials for 5% of the next month's production. The firm pays for 75% of its material purchases in the month of purchase and 25% in the following month. Materials paid for within the month of purchase are eligible for a 2% discount. It takes hours of 0.75 hours of labour to produce each hammock. Labour is paid $18 per hour and is paid in the same month as worked. Overhead is estimated to be $1.50 per unit plus $15,000 per month (including depreciation of $6,500). Overhead costs are paid as they are incurred. Hammocks and Swings will begin April with 2,000 hammocks in finished goods inventory and no work-inprocess inventory. The managers want to end each month with 10% of the following month's sales in finished goods inventory. They will end each month with no work in process. Selling and administrative expenses are estimated to be $0.50 per hammock sold plus $20,000 per month (including depreciation of $7,500). Your answer is partially correct. Try again. Prepare a cash budget listing cash receipts and disbursements for the second quarter of the year by month and in total. The firm will begin April with a cash balance of $65,000. (Hint: It would be helpful to use Excel to prepare this budget. Use an input section for the basic information. Then, this section can be changed to answer the following requirements.) Feb Mar Apr May Jume x Sales units $ Revenue X x Cash Collections April May June Total $ $ $ Feb March x April May X June x Total CASH DISBURSEMENTS (for Materials) May June April Total March May DOOM 0000 June X x Total CASH BUDGET May June Cash Balance, Apr. 1 176755 134430.63 1 Cash Collections T Cash Available Cash disbursements Overhead - Fixed Labour 0.0000000 mg boldado D.OOOCONO DO 010 Selling & Admin. - Variable Selling & Admin. - Fixed Material Toverhead - Variable Total cash disbursements $ Excess (Deficiency) X Your answer is partially correct. Try again. In March, the long range weather forecasts call for an early spring with unseasonably warm temperatures. As a result, the managers of Hammocks and Swings revised the sales forecast to the following: 30000 April May 40000 June 35000 July 30000 August 25000 Prepare a new cash budget to help managers plan for this change. Cash Collections April May June Total Feb 9100 $U March 105000 45500 X x April 373450 210000 May 466812.5 June X Total 487550 722312.5 CASH DISBURSEMENTS (for Materials) May June April Total March X April 000 0000 May June X Total CASH BUDGET May April June Total Cash Balance, Apr. 1 x V x Cash Collections Cash Available Cash disbursements Material X Labour 1 Odddddd ddo 1000000 000 0000 000 MOTION X Selling & Admin. - Variable Overhead - Fixed Selling & Admin. - Fixed X Overhead - Variable X X Total cash disbursements Excess (Deficiency) x Your answer is partially correct. Try again. As a result of the expected increase in sales, managers expect the following changes: Forty-five percent of customers will pay in the month of sale and take the 3% discount, 30% will pay in the month following the sale; 18% will pay in the second month following the sale; 5% will pay in the third month following the sale; and 2% will remain uncollectible. Adjust the cash budget to reflect this additional information. Cash Collections April May June Total X x Feb 9100 9100 March 105000 45500 150500 April $ 458325 315000 189000 962325 May 611100 420000 1031100 x June 534712.5 534712.5 X Total 572425 971600 1143712.5 2687737.5 CASH DISBURSEMENTS (for Materials) May June April Total X March April May 10000 00000 June |x X Total CASH BUDGET May April June Total Cash Balance, Apr. 1 X Cash Collections x Cash Available Cash disbursements X Overhead - Fixed Labour X x Selling & Admin. - Variable Selling & Admin. - Fixed x X Material Overhead - Variable X Total cash disbursements Excess (Deficiency) LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT In the past, Hammocks and Swings has negotiated a line of credit with their bank. The terms of this agreement state an annual interest rate of 3%, borrowing must occur at the start of a month and repayment is accepted only at month-end; a minimum cash balance of $25,000 must be maintained to qualify for the line of credit. There are no restrictions on the amount that can be borrowed; however, there is a minimum repayment amount of 1% of the outstanding loan. Include this information in a cash budget for Hammock and Swings managers. CASH BUDGET May April June Total Cash Balance, Apr. 1 65000 25000 25000 65000 x X Cash Collections 572425 Cash Available 637425 Cash disbursements Overhead - Fixed Labour Selling & Admin. - Variable Selling & Admin. - Fixed Material X Overhead - Variable X Total cash disbursements Dodd ddddddd ndo cidade Jolde doldtad x Excess (Deficiency) Repayments - Principal Repayments - Interest X Borrowings x x Cash Balance 25000 25000