The drop-down list for above
The drop-down list for above
The drop-down list for above
The drop-down list for above
The drop-down list for above
The drop-down list for above
Windsor Instruments, a rapidly expanding electronic parts distributor, is in the process of formulating plans for next year. Bill Stockton, the firm's director of marketing, has completed his sales forecast and is confident that sales estimates will be met or exceeded. The following sales figures show the growth expected and will provide the planning basis for other corporate departments. Month January February March April May June Forecasted Sales $1,740,000 1,940,000 1,740,000 2,140,000 2,440,000 2,740,000 Month July August September October November December Forecasted Sales $2,940,000 2,940,000 3,140,000 3,140,000 2,940,000 3,340,000 Samantha Carlson, assistant controller, has been given the responsibility for formulating the cash flow projection, a critical element during a period of rapid expansion. The following information will be used in preparing the cash analysis. 1. 2. 3. 4. Windsor has experienced an excellent record in accounts receivable collection and expects this trend to continue. 60% of billings are collected in the month after the sale and 40% in the second month after the sale. Uncollectibles are nominal and can be ignored in the analysis. The purchase of electronic parts is Windsor's largest expenditure: the cost of these items is equal to 50% of sales. 60% of the parts are received by Windsor one month prior to sale and 40% are received during the month of sale. Historically, 80% of accounts payable have been cleared by Windsor one month after receipt of purchased parts and the remaining 20% have been cleared two months after receipt. Hourly wages, including fringe benefits, are a function of sales volume and are equal to 20% of the current month's sales. These wages are paid in the month incurred. General and administrative expenses are projected to be $2,952,000 for the next period. These include $444,000 in salaries, $696,000 in product promotions, $264,000 in property taxes, $432,000 for insurance, $372,000 in utilities, and $744,000 in depreciation. All expenses except property taxes are incurred uniformly throughout the year, and property taxes are paid in four equal installments in the last month of each calendar quarter. Windsor makes income tax payments in the first month of each quarter based on the income for the prior quarter. Windsor is subject to an effective income tax rate of 40%. Windsor's pretax income for the first quarter of the next year is projected to be $600,000. Windsor has a corporate policy of maintaining an end-of-month cash balance of $100,000. Cash is invested or borrowed monthly, as necessary to maintain this balance. 5. 6. 7. Prepare a table with the cash receipts and disbursements budget for Windsor Instruments by month for the second quarter. Be sure that all receipts, disbursements, and borrowing/investing are presented on a monthly basis. Ignore the interest expense and/or income associated with borrowing/investing. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Cash Receipts and Disbursements Budget April May June Receipts $ Disbursements Total Disbursements Excess Receipts (Disbursements) $ General and administration Property taxes Income taxes Electronic parts Wages and fringe benefits Short-Term Financing Budget April May June $ Ending cash balance Borrowing increase Borrowing decrease Beginning cash balance Excess disbursements Investment decrease Excess receipts Investment increase Although this industry has experienced rapid growth over the last few years, competition from outside the country has also increased markedly and is beginning to affect prices. In fact, an offshore electronics manufacturer recently contacted Windsor's largest customer and has offered the same electronic product at a lower price. The customer would prefer to stay with Windsor, but only if Windsor will cut prices by 20%. Assume that half of all sales are to this customer. Perform sensitivity analysis using the cash budget as a flexible budget to determine whether Windsor would be better off to reduce prices or to drop the customer. (Hint: Adjust costs that vary with sales to reflect the new level and keep fixed costs at the static budget level.) (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) OPTION #1: MAKE NO CHANGE; LOSE 50% OF SALES, PARTS COSTS, AND LABOUR COSTS Cash Receipts and Disbursements Budget April May June Receipts Disbursements Total Disbursements Excess Receipts (Disbursements) Electronic parts General and administration Property taxes Income taxes Wages and fringe benefits Short-Term Financing Budget April May June $ tA ta Ending cash balance Balance of borrowing Beginning cash balance Excess receipts (disbursements) Borrowing increase (decrease) Investment decrease (increase) OPTION #2: REDUCE PRICES BY 20%; NO CHANGE IN VOLUME OR IN LABOUR COSTS Cash Receipts and Disbursements Budget April May June Receipts $ Disbursements Total Disbursements Excess Receipts (Disbursements) Property taxes Income taxes Electronic parts Wages and fringe benefits General and administration Short-Term Financing Budget April May June $ $ $ $ $ Excess receipts (disbursements) Ending cash balance Borrowing increase (decrease) Investment decrease increase) Balance of borrowing Beginning cash balance
