Homework - Problem #1 This is a continuation of the Simply Organic analysis we did for April through June in class. During the last week of May, a restaurant chain approached Simply Organic about being their provider of fresh fruits and vegetables beginning in July. If the company agrees to serve this customer, sales will increase dramatically The Company has prepared comparative Sales Budgets for the next 4 months, as follows: April May June July August Without new customer With new customer $ 26,000 28,600 31,460 34,606 38,066 $ 26,000 28.600 31,460 106,460 117,106 To adequately serve the new customer, the business would need to make some changes: 1. The company would have to hire an additional delivery person increasing the monthly expenditure for salaries from $ 2,500 to $ 5.000. Even though the contract with the restaurant begins in July, the new expenditures for a driver and van would begin in June to provide adequate time for training. 2. The company would need an additional delivery van. One could be leased for $ 750 per month. 3. The company would increase the desired ending inventory each month from 10% of the next month's cost of goods sold to 20% 4. The company must continue to have a minimum cash balance of $ 8.000. The company is presently paying $ 4.000 a month to a family member who loaned the business money to get started. The family member is eager to get her money back so she can travel. You suspect that if the company accepts this contract, you will not be able to make the June installment on the note, but in the long-run the company will make so much more money that you will be able to pay-off the loan much faster. Determine the maximum amount of the loan you can pay off in July and still maintain the minimum cash balance of $ 8.000 Required: Prepare a new cash budget for June and July assuming the company accepts the new contract. Homework - Problem #1 This is a continuation of the Simply Organic analysis we did for April through June in class. During the last week of May, a restaurant chain approached Simply Organic about being their provider of fresh fruits and vegetables beginning in July. If the company agrees to serve this customer, sales will increase dramatically The Company has prepared comparative Sales Budgets for the next 4 months, as follows: April May June July August Without new customer With new customer $ 26,000 28,600 31,460 34,606 38,066 $ 26,000 28.600 31,460 106,460 117,106 To adequately serve the new customer, the business would need to make some changes: 1. The company would have to hire an additional delivery person increasing the monthly expenditure for salaries from $ 2,500 to $ 5.000. Even though the contract with the restaurant begins in July, the new expenditures for a driver and van would begin in June to provide adequate time for training. 2. The company would need an additional delivery van. One could be leased for $ 750 per month. 3. The company would increase the desired ending inventory each month from 10% of the next month's cost of goods sold to 20% 4. The company must continue to have a minimum cash balance of $ 8.000. The company is presently paying $ 4.000 a month to a family member who loaned the business money to get started. The family member is eager to get her money back so she can travel. You suspect that if the company accepts this contract, you will not be able to make the June installment on the note, but in the long-run the company will make so much more money that you will be able to pay-off the loan much faster. Determine the maximum amount of the loan you can pay off in July and still maintain the minimum cash balance of $ 8.000 Required: Prepare a new cash budget for June and July assuming the company accepts the new contract
