1 Problem 2 G H I J K L M N O P Q 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: 2 3 Sales figures 4 20X1 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. 20X0 04 Q1 50,000 55,000 S 10 S 40,000 45,000 $ 15 S 40% Percent of sales made for cash in the quarter of sale 60% Percent of sales made on credit 6 S frame unit sales 7 S sales price 8 L frame unit sales 9 L sales price 10 11 12 Collections 13 15 2. HCI'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.) 80% of current quarter's credit sales 20% of previous quarter's credit sales 3. The S frame sells for $10, and the L frame sells for $15. These prices are expected to hold constant throughout 20x1. 14 15 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. 20X0 20X1 Q4 Q1 5. Selling and administrative expenses, all paid in cash, are $100,000 per quarter. 16 17 Purchases 18 19 20 S frame unit purchases 21 S manufacturing cost per unit 22 L frame unit purchases 23 L manufacturing cost per unit 50,000 6. Dividend payments are $50,000 per quarter. 55,000 $7 45,000 $10 7. The beginning cash balance for Q1 of 20x1 is $95,000. 40.000 $10 Prepare the following for each of the four quarters of 20x1: 80% of current quarter's purchases paid in the current quarter 20% of previous quarter's purchases paid in the current quarter 1. Sales budget 2. Cash receipts budget 3. Cash disbursements budget 28 Other expenses 29 Selling and admin. expenses $ 100,000 per quarter 30 Payment of dividends $ 50,000 per quarter 31 32 Prepare the following: 1 Sales budget 2 Cash receipts budget 3 Cash disbursements budget 4 Summary cash budget