1. Student Enterprises has the following business transaction estimates relating to the first quarter of 2019.

 

    $                     $                      $

                                                                                  JAN.                    FEB.                     March

  

Credit Sales                                                      120000               140000               160000                            

Cash Sales                                                             35000                 40000                  43000                             

Receipts from Accounts Receivable `1.    calculate             calculate              calculate         

Wages                                                                   35000                35000                  35000              

Office Furniture                                                     5000                  7000                          0

Prepayments                                                             0                         0                    4250

Administrative Expense                                   15000                16000                  15000

Depreciation on Office Furniture                     4000                  4000                    4000

Receipt of Loan                                                             0              150000                          0

Credit Purchases                                          47000                49000                  52000                               Payments of Accounts Payable 2.    calculate            calculate              calculate

Accrued Expenses                                                       0                         0                    7600                                

Notes

1.Actual Receipts from Accounts Receivable are 70% of the previous months

Credit Sales and the balance of 30% owing is received in the following month.

Credit Sales for December 2018 were $100,000 as they were in November 2018.

Cash Sales were $20,000 in November and December of 2018.

 

2.Payment of Accounts Payable is paid 60% of purchases in the month of 

purchase and the remaining 40% in the month following. Purchases in

December 2018 were $44,000.

 

3 The cash balance at 1 January 2019 was $79 550.

 

 

Required

 

Calculate a cash budget month by month for the quarter ending 31 March 2019.

 

Note that 1 mark will be deducted for each incorrect posting to the cash budget.        

                                                                                                            

 

 

 

2.     A company produces compasses for outdoor activities. The production capacity is 45 000 compasses, and the company is currently operating at 85 per cent capacity due to current orders. Variable manufacturing costs are $10 per unit. Fixed manufacturing costs are $425 000. Under current arrangements (orders) the compasses are sold directly to a single outdoor adventure company at $25 each. The compass producing company has been approached for a one off special offer from an overseas wholesaler whom wishes to purchase an additional 5000 compasses at $13 per unit.

 

Required

a.        Calculate the available production capacity.

b.        Calculate the contribution margin per unit for both the current production of compasses and the special order compasses.

c.        Should the special order be accepted? Show calculations.

d.        What is the opportunity cost if the overseas wholesaler required 10000 compasses?

e.        Would you recommend the special order if the overseas wholesaler required 10 000 compasses?                                                                 

                                                                                                                

3.     The compass manufacturing company is finding interest from a number of overseas wholesalers and is considering purchasing a special machine which will assist in the manufacturing process. It is assumed that the machine will be efficient enough not to affect capacity constraints outlined in Question 2. This special machine will costs $134 500 and is expected to earn annual net cash inflows of $66 000, $66 000, $57 000 and $39 900, before it wears out sufficiently to be unreliable and must be sold in the final manufacturing year for an

estimated $27 400.                                                                                                                                                                                                                  

Required

a. If funds can earn 4 per cent, what is the special machines NPV?

b. If funds earn 7 per cent, what is the special machines NPV?

c. If funds earn 9 per cent, what is the special machines NPV?

d. Advise management on your recommendation(s) considering a, b and c above.

e. What advice would you give management if required payback period is two years?

Show calculations for a, b, c and e