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Instructions Week 4 Cash Budgeting There are two problems The first is a collections pattern, where you have to calculate the collections per month using a waterfall technique. The second is a lengthy cash budgeting problem which begins with sales forecasts through material purchases and disbursements Collections problem Problem 1 Budgeted Sales on Account: Collection Schedule: June$ 53,000In month of sale55% July$ 63,000In 1st month after sale20% August$ 72,000In 2nd month after sale15% September$ 80,000In 3rd month after sale8% October$ 89,000Uncollectible2% November$ 100,000100% December$ 82,000 Dos Tacos, Inc., a manufacturer of salsa, has the following historical collection pattern for its credit sales. 55 percent collected in the month of sale. 20 percent collected in the first month after sale. 15 percent collected in the second month after sale. 8 percent collected in the third month after sale. 2 percent uncollectible. The sales on account have been budgeted for the last seven months as follows: June .................................................................................... $ 53,000 July ....................................................................................... 63,000 August ................................................................................... 72,000 September ............................................................................. 80,000 October ................................................................................. 89,000 November .............................................................................100,000 December .............................................................................. 82,000 Required: 1. Compute the estimated total cash collections during October from credit sales. 2. Compute the estimated total cash collections during the fourth quarter from credit sales. 3. Make sure to show the calculations by month during the 4th quarter (Oct-Dec) Cash budget problem Problem 2 Sales figures 20X020X1 Q4Q1 S frame unit sales50,00055,000 S sales price$ 10$ 10 L frame unit sales40,00045,000 L sales price$ 15$ 15 40%Percent of sales made for cash in the quarter of sale 60%Percent of sales made on credit Collections 80%of current quarter's credit sales 20%of previous quarter's credit sales Purchases20X020X1 Q4Q1 S frame unit purchases50,00055,000 S manufacturing cost per unit$7$7 L frame unit purchases40,00045,000 L manufacturing cost per unit$10$10 80%of current quarter's purchases paid in the current quarter 20%of previous quarter's purchases paid in the current quarter Other expenses Selling and admin. expenses$ 100,000per quarter Payment of dividends$ 50,000per quarter Prepare the following: 1Sales budget 2Cash receipts budget 3Cash disbursements budget 4Summary cash budget HCJ Corporation is completing their cash budget for the following year. HCJ Corporation is a manufacturer of metal picture frames. The firm’s two product lines are designated as S (small frames; 5 x 7 inches) and L (large frames; 8 x 10 inches). Here is the provided budget information: 1. Sales in the fourth quarter of 20x0 are expected to be 50,000 S frames and 40,000 L frames. Over the next year, sales in each product line will grow by 5,000 units each quarter over the previous quarter. For example, S frame sales in the first quarter of 20x1 are expected to be 55,000 units. 2. HCJ's sales history indicates that 60 percent of all sales are on credit, with the remainder of the sales in cash. The company’s collection experience shows that 80 percent of the credit sales are collected during the quarter in which the sale is made, while the remaining 20 percent is collected in the following quarter. (For simplicity, assume the company is able to collect 100 percent of its accounts receivable.) 3. The S frame sells for $10, and the L frame sells for $15. These prices are expected to hold constant throughout 20x1. 4. Total manufacturing cost per unit is $7 for the S frame and $10 for the L frame. All manufacturing cost purchases are made on account, and 80 percent of each quarter’s purchases are paid in cash during the same quarter as the purchase. The other 20 percent is paid in the next quarter. Units sold equal units purchased. 5. Selling and administrative expenses, all paid in cash, are $100,000 per quarter. 6. Dividend payments are $50,000 per quarter. 7. The beginning cash balance for Q1 of 20X1 is $95,000. Prepare the following for each of the four quarters of 20x1: 1. Sales budget 2. Cash receipts budget 3. Cash disbursements budget 4. Summary cash budget