Question

1.

2. Imagine the COVID-19 pandemic had started in December (the month preceding the schedules you completed in part a) 2018. Milley Manufacturing now estimates that sales (in units and dollars) will be 40% less than originally anticipated for January, February and March and hopes that normal operations will resume in April and May. As a result, the company should qualify for the Canada Emergency Wage Subsidy (Claim Period 2 which reimbursed the company for 75% of its wages as long as payments to employees were not reduced and revenues declined at least 30%. Recalculate the budgets and statements from parts 1 and 2, identifying the assumptions you must make.

3. Provide any suggestions, recommendations, or issues for the company to consider in making their decision.

The following data relate to the operations of Milley Corporation, and wholesale distributor of durable hats with hidden pockets that are popular for adventure travel. The hats are sold in travel boutiques and department stores nationwide. Current assets as of December 31: $6,000 36,000 Cash 9,800 Accounts Receivable 110,885 Inventory 32,550 Buildings and Equipment, net 100,000 Accounts Payable 30,135 Common Shares Retained Earnings a. The gross margin in 30% of sales. b. Actual and budgeted sales data are as follows: December (actual) $60,000 70,000 January 80,000 February 85,000 March 55,000 April c. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales. d. Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold. e. One-quarter of a month's inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. f. Monthly expenses are as follows: commissions, $12,000; rent $1,800; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. g. Equipment will be acquired for cash: $3,000 in January and $8,000 in February. h. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rates on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. (1). Cash sales Credit sales Total collections expected cash collections January Febuary march Quarter 28000 32000 34000 94000 36000 42000 48000 126000 64000 74000 82000 220000 (2). Purchase budget January Febuary march Quarter Budgeted COGS 49000 56000 59500 164500 add Desired ending invent 11200 11900 7700 30800 total needs 60200 67900 67200 195300 less beginning inventory 9800 11200 11900 32900 Required purchases 50400 56700 55300 162400 February March Quarter $ January 6,000 64,000 70,000 Cash balance, beginning Add cash collections Total cash available Less cash disbursements: For inventory For operating expenses For equipment Total disbursements Excess deficiency) of cash Financing Borrowings Repayments Interest Total financing Cash balance, ending 45,150 19,400 3,000 67,550 2.450 The following data relate to the operations of Milley Corporation, and wholesale distributor of durable hats with hidden pockets that are popular for adventure travel. The hats are sold in travel boutiques and department stores nationwide. Current assets as of December 31: $6,000 36,000 Cash 9,800 Accounts Receivable 110,885 Inventory 32,550 Buildings and Equipment, net 100,000 Accounts Payable 30,135 Common Shares Retained Earnings a. The gross margin in 30% of sales. b. Actual and budgeted sales data are as follows: December (actual) $60,000 70,000 January 80,000 February 85,000 March 55,000 April c. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales. d. Each month's ending inventory should equal 20% of the following month's budgeted cost of goods sold. e. One-quarter of a month's inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. f. Monthly expenses are as follows: commissions, $12,000; rent $1,800; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. g. Equipment will be acquired for cash: $3,000 in January and $8,000 in February. h. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rates on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. (1). Cash sales Credit sales Total collections expected cash collections January Febuary march Quarter 28000 32000 34000 94000 36000 42000 48000 126000 64000 74000 82000 220000 (2). Purchase budget January Febuary march Quarter Budgeted COGS 49000 56000 59500 164500 add Desired ending invent 11200 11900 7700 30800 total needs 60200 67900 67200 195300 less beginning inventory 9800 11200 11900 32900 Required purchases 50400 56700 55300 162400 February March Quarter $ January 6,000 64,000 70,000 Cash balance, beginning Add cash collections Total cash available Less cash disbursements: For inventory For operating expenses For equipment Total disbursements Excess deficiency) of cash Financing Borrowings Repayments Interest Total financing Cash balance, ending 45,150 19,400 3,000 67,550 2.450