a) Prepare an analysis of cash requirements for the following:
• Purchases for the year for BBCC’s most costly source of direct ingredients — vanilla flavouring. Base this on the 20X8 forecast sales, the budgeted costs for BBCC’s three products and BBCC’s paying habits in Exhibit 8. Note: Show all supporting schedules and calculations — include production budget, direct material usage budget — vanilla, direct material purchase budget — vanilla and cash disbursement schedule for vanilla purchase. Round quantities to litres.
• Cash requirements for the systems upgrade. Base this on the budget provided in Table 4 in Exhibit 8 and the consultant’s estimated payments as outlined in the exhibit. Prepare a quarterly cash budget.

b) Comment on cash requirements. Consider that BBCC attempts to keep enough cash on hand per quarter to deal with a maximum cash flow demand of $23,000 for these direct ingredients purchases. Consider how much more cash BBCC will need to have on hand to cover the maximum cash flow demand during a quarter for the information technology project.

  
 
 

Exhibit 8 Cash budget To compensate for this, a cash requirements budget for the coming year would be useful. The information is below. Production and cash requirements The following tables provide the details required to prepare the production and purchases budget for 20X8. Additional information is as follows: BBCC's accounts payable payment policy is to pay 80% of purchases in the quarter purchased and the remainder in the quarter following purchase. When planning for ending chocolate bar inventories, the company's policy is to have 7% of the next quarter's sales available on hand at the end of the quarter for The- Bar and Alamonde. Because Salt-Lick is made to order, no ending inventories of bars are kept. Also, it plans to have 9% of next quarter's estimated ingredients requirements on hand at the end of the quarter for all products. Table 1: Sales forecasts for 20X8 and the first half of 20X9 Quarter The-Bar Alamonde Salt-lick Total 20X8 Q1 20X8 Q2 208 208 04 20X8 totals 180,400 187,000 206,800 178,200 752,400 188,600 193,200 118,800 123,200 134,200 116.600 492,800 124,200 127,650 66,000 69,300 77,000 68.200 280,500 69,000 70,150 365,200 379,500 418,000 363,000 1,525,700 381,800 391,000 20X9 Q1 20X9 Q2 Table 2: Ending inventories and last-quarter ingredients purchases The-Bar Alamonde Salt-Lick 12,628 8,316 Sugar Vanilla Almonds 482 kg 29 litres 23 kg Fourth-quarter 20X7 purchases Sugar Vanilla Almonds $3,800 $23,000 $2,500