In this assignment, you will apply management accounting techniques and financing knowledge to provide information for decision making based on a hypothetical scenario.

The overall scenario

Rasa Pty Ltd is a newly created company that intends to import dulamak from West Sumatra in Indonesia, which it will sell to furnishing retailers. Dulamak are ornately embroidered cloth squares that have been traditionally used by the Minangkabau people to cover ritual gifts in ceremonies like weddings. Rasas founder, Jed, believes these will be popular in Australia for home decorations If successful, the company has potential in the future to expand into similar product lines.

You are a management consultant that must present the following to Rasas founder, Jed:

1. An initial cash budget for the first 6 months of operation (August to January) based on the forecasts and other information provided.

Information provided in a briefing by Jed

Rasa Pty Ltd has entered into a contract with a supplier of hand-embroidered dulamak made with high quality materials. The supplier contract specifies a price of $50 per dulamak for orders of 500 or more units. The price will remain fixed for one year and a 30-day credit period has been negotiated. Orders will be made at the beginning of each month to allow enough delivery lead time to ensure Jed has inventory on hand at the end of each month to cover the next months forecast sales. Freight inward including import taxes will amount to $15 per unit and be paid in the month following delivery.

Jed spent $2,000 in June to set up the company, buy samples, negotiate with the supplier and do some market testing. Based on this initial research, Jed has forecast sales and purchases in units for the first 6 months of full operation, with a launch in the first week of August. His forecasts are shown in the table below. He expects sales to spike in the three weeks leading up to Christmas. After that sales will level out back at the November level for the foreseeable future.

Based on market testing and discussions with retailers, Jed has decided on a selling price of $75 per dulamak and all customers will be offered credit. He estimates that collections will be as follows: 30% in the month of sale, 60% in the month after sale and 10% in the second month after sale.

Jed intends to hire one part-time employee at a total cost (including on-costs) of $2,500 per month. Office space, which will include an inventory storeroom, will be rented for $2,000 per month. Other monthly operating costs will be motor vehicle running expenses of $600 and other overheads totalling $3,000. All these monthly expenses will be paid during the month when incurred, commencing from the month of the launch.

The company will purchase some assets on the 1st of August: a motor vehicle for $35,000 with a useful live of 5 years; office furniture and fittings for $10,000 with a useful life of 10 years; and office equipment for $12,000 with a useful life of 3 years. All assets have an expected salvage value of zero and will be depreciated using the straight-line method.

Jed is keen for Rasa Pty Ltd to be making a profit (before interest and tax) of $8,000 per month by the end of the first 6 months. He intends to invest cash into the company bank account at the end of July for an amount covering Augusts cash payment needs.

Thats all the info we are given there is no more, So don't worry

Thx

Month July Aug Sep Oct Nov Dec Jan Sales (units) 0 500 750 1,000 1,200 1,500 1,200 Purchases (units) 500 750 1,000 1,200 1,500 1,200 1,200 Month July Aug Sep Oct Nov Dec Jan Sales (units) 0 500 750 1,000 1,200 1,500 1,200 Purchases (units) 500 750 1,000 1,200 1,500 1,200 1,200