Ivory Garments, a rapidly expanding garments producer based in Jordan, is in the process of formulating...

 

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Ivory Garments, a rapidly expanding garments producer based in Jordan, is in the process of formulating plans for 2022. The Director of Marketing has completed his 2022 forecast and is confident that sales estimates will be met or exceeded. The following forecasted sales figures show the growth expected and will provide the planning basis for other corporate departments. SALES SALES January February March April May June 1. 2. 3 $4,600,000 5,000,000 4,600,000 5,400,000 6,000,000 6,600,000 The Financial Controller of Ivory Garments 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: 4 5 Salaries Promotion Property taxes Insurance Utilities Depreciation Total Continued on next page L Semester 1-2021/22 July August Most of the customers of Ivory Garments have a good track record in making the payments when due. The company collects 20% of its billings in the month of the sale, 50% in the month after the sale and 30% in the second month after the sale Uncollectible accounts are insignificant and should not be considered in the analysis. September October The purchase of fabric is Ivory Garments' largest expenditure; the cost of these items equals 50% of sales. The company receives 60% of the fabrics one month prior to sale and 40% during the month of sale. Prior experience shows that accounts payable are paid by Ivory Garments one month after receipt of the purchased fabrics. November December Administrative expenses are projected to be $4,280,000 for 2022. All of these expenses are incurred uniformly throughout the year except the property taxes which are paid in four equal instalments in the last month of each quarter. The composition of administrative expenses is: $ 960,000 320,000 480,000 720,000 600,000 1,200,000 $4,280,000 $7,000,000 7,000,000 7,400,000 7,400,000 7,000,000 7,800,000 Page 4 of 7 C39MT Income tax payments are made by Ivory Garments in the first month of each quarter based on income for the prior quarter. Ivory's income tax rate is 30% Ivory's net income for the first quarter of 2022 is projected to be $1,350,000 Ivory Garments uses a calendar year reporting period 5. Ivory Garments uses a calendar year reporting period. Required: a) Assuming that the closing cash balance at the end of the first quarter is $450,000, prepare a budgeted schedule of cash receipts and disbursements for Ivory Garments by month, for the second quarter of 2022 (i.e., for the months of April, May and June). (27 marks) b) Explain the concept of "master budget and critically discuss its benefits to an organization. (8 marks) (Total 35 marks) Ivory Garments, a rapidly expanding garments producer based in Jordan, is in the process of formulating plans for 2022. The Director of Marketing has completed his 2022 forecast and is confident that sales estimates will be met or exceeded. The following forecasted sales figures show the growth expected and will provide the planning basis for other corporate departments. SALES SALES January February March April May June 1. 2. 3 $4,600,000 5,000,000 4,600,000 5,400,000 6,000,000 6,600,000 The Financial Controller of Ivory Garments 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: 4 5 Salaries Promotion Property taxes Insurance Utilities Depreciation Total Continued on next page L Semester 1-2021/22 July August Most of the customers of Ivory Garments have a good track record in making the payments when due. The company collects 20% of its billings in the month of the sale, 50% in the month after the sale and 30% in the second month after the sale Uncollectible accounts are insignificant and should not be considered in the analysis. September October The purchase of fabric is Ivory Garments' largest expenditure; the cost of these items equals 50% of sales. The company receives 60% of the fabrics one month prior to sale and 40% during the month of sale. Prior experience shows that accounts payable are paid by Ivory Garments one month after receipt of the purchased fabrics. November December Administrative expenses are projected to be $4,280,000 for 2022. All of these expenses are incurred uniformly throughout the year except the property taxes which are paid in four equal instalments in the last month of each quarter. The composition of administrative expenses is: $ 960,000 320,000 480,000 720,000 600,000 1,200,000 $4,280,000 $7,000,000 7,000,000 7,400,000 7,400,000 7,000,000 7,800,000 Page 4 of 7 C39MT Income tax payments are made by Ivory Garments in the first month of each quarter based on income for the prior quarter. Ivory's income tax rate is 30% Ivory's net income for the first quarter of 2022 is projected to be $1,350,000 Ivory Garments uses a calendar year reporting period 5. Ivory Garments uses a calendar year reporting period. Required: a) Assuming that the closing cash balance at the end of the first quarter is $450,000, prepare a budgeted schedule of cash receipts and disbursements for Ivory Garments by month, for the second quarter of 2022 (i.e., for the months of April, May and June). (27 marks) b) Explain the concept of "master budget and critically discuss its benefits to an organization. (8 marks) (Total 35 marks)

Answer rating: 100% (QA)

Question b Master Budget The master budget which also includes budgeted financial statements a cash ... View the full answer