Barnum Stores has six locations. The firm wishes to expand by two more stores and needs...

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Barnum Stores has six locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr Barnum, the banker, will finance construction if the firm can present an acceptable three- month financial plan for January through March. The following are actual and forecasted sales. Actual sales October: $280'000 November: $280'000 December: $280'000 Forecasted sales January: $350'000 February: $350'000 March: $300'000 April: $380'000 Of the firm's sales, 40 percent are for cash and the other 60 percent are on credit. Of credit sales, 30 percent are paid in the month after sale, 30 percent are paid in the second month after sale and 30% are paid in the third month after the sale (10% of the credit sales are not collected). Material cost 40 percent of sales and are paid during the month of the respective sales. Labor expense is 30 percent of sales and is paid for in the month of sales. Selling and administrative expense is 6 percent of sales and is also paid in the month of sales. Overhead expense is $25'000 in cash each month. Depreciation expense is $10'000 per month. Taxes of $12'000 for the year will be paid in advance in January and dividends of $2'000 will be paid in March. Cash at the beginning of January is $80'000 and the minimum cash balance that the firm needs to have is $75'000. If needed, the firm may have to borrow to maintain this minimum level of cash, while it repays the loan as soon as possible. For January, February and March, prepare: - a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowings and repayments (use the Excel table provided, make sure that you use Excel formulas) - a budgeted income statement, showing gross profit, operating income (EBIT) and net income (assuming interest expense is zero). Assume that Material purchased represents the COGS (i.e. it is sold during the month when it is purchased); (1 point) - a flexible budget for $460'000 on the basis of the month of March, showing gross profit and operating income (EBIT). Assume that only COGS is variables, the other costs are fixed; (1 point) Barnum Stores has six locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr Barnum, the banker, will finance construction if the firm can present an acceptable three- month financial plan for January through March. The following are actual and forecasted sales. Actual sales October: $280'000 November: $280'000 December: $280'000 Forecasted sales January: $350'000 February: $350'000 March: $300'000 April: $380'000 Of the firm's sales, 40 percent are for cash and the other 60 percent are on credit. Of credit sales, 30 percent are paid in the month after sale, 30 percent are paid in the second month after sale and 30% are paid in the third month after the sale (10% of the credit sales are not collected). Material cost 40 percent of sales and are paid during the month of the respective sales. Labor expense is 30 percent of sales and is paid for in the month of sales. Selling and administrative expense is 6 percent of sales and is also paid in the month of sales. Overhead expense is $25'000 in cash each month. Depreciation expense is $10'000 per month. Taxes of $12'000 for the year will be paid in advance in January and dividends of $2'000 will be paid in March. Cash at the beginning of January is $80'000 and the minimum cash balance that the firm needs to have is $75'000. If needed, the firm may have to borrow to maintain this minimum level of cash, while it repays the loan as soon as possible. For January, February and March, prepare: - a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowings and repayments (use the Excel table provided, make sure that you use Excel formulas) - a budgeted income statement, showing gross profit, operating income (EBIT) and net income (assuming interest expense is zero). Assume that Material purchased represents the COGS (i.e. it is sold during the month when it is purchased); (1 point) - a flexible budget for $460'000 on the basis of the month of March, showing gross profit and operating income (EBIT). Assume that only COGS is variables, the other costs are fixed; (1 point)

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