Please answer the followinh below, thank you!

1 Question 4-Performance Measurement (8 marks) 2 The president feels very strongly that Mountain Sports should expand operations to a second location. She has even found a prime location in Canmore, Alberta, One of the great things about Canmore is its proximity to the mountains, and its only about 10 minutes away from this beautiful, vibrant and internationally known Banff tourist town. Research indicates that the Canmore market is well suited to both cross-country skis and bikes that competition is fairly limited. 4 The investment in assets (cash, inventory, equipment) required for the new location is $ 162,000 5 Minimum required return on investments 16% 6 Actual 2019 return on investment of the original location 20% 7 8 Management has provided the following income statement to the bank manager the expected net income in Static Budget % 9 Amount 10 Sales in Units 4,200 11 Sales 525,000 100% 12 Less: Variable Costs: 13 Cost of Goods Sold 225,000 43% 14 Sales Commissions 78,750 15% 15 Total Variable Costs 303,750 58% 221,250 42% 16 Contribution Margin 17 Less: Fixed Costs: 18 Advertising 21,000 19 Property Taxes 9,000 20 Rent 54,000 21 Salaries & Wages 113,000 22 Total Fixed Costs: 197,000 23 Net Operating Income 24.250 24 25 Part A: (4 marks) Calculate the following performance measurements for the proposed Canmore expansion: 26 Margin (see Chapter 11 notes) 5% 27 Turnover (use investment in assets in equation) 29 30 Return on Investment 3 Stin 112 45 NN 3.2 15% Question 5-Cash Budget (30 marks) Mountain Sports has aquired an open line of credit up to a maximum of $350,000. It will be necessary to convince the bank manager of this new Canmore branch ability to repay its line of credit including any interest. Management has provided the following list of assumptions to help in the preparation of the cash budget (note: you will need to use the projected income statement provided in Question 4 to complete the cash budget): 1. Beginning cash balance invested by owners $ 56,000 Quarter 1 Quarter 2 Quarter 3. Quarter 4 2. Sales by quarter (as % of total projected sales) 28% 29% 21% 22% 3. Type of collections from customers: Cash Sales 40% 60% 3 Credit Sales (accounts receivable) 5 Cash sales are collected in the quarter of the sale, all credit sales are collected in the quarter after the sale. 6 7 4. Merchandise purchases Merchandise purchases (cost of goods sold) are all paid in the quarter following purchase. (Quarter 1 purchases are bought in Quarter 1 but paid for in quarter 2). 8 19 20 5. Operating expenses 21 All other operating expenses (all expenses except cost of goods 22 6. Required investment in equipment paid in cash in the first quarter 23 $ 138,000 A G 21 All other operating expenses (all expenses except cost of goods 22 6. Required investment in equipment paid in cash in the first quarter 23 $ 138,000 25 7. Quarterly income tax payments paid in cash $ 8,000 26 27 8. Minimum cash balance S 21,000 28 29 9. Borrowing and Repayments: Any borrowing will take place on the first day of the quarter and any repayments are paid at the end of the quarter. All borrowing and payments are made in increments of $1,000, Interest on borrowing can be ignored. 30 31 Required: Prepare a cash budget for the first year of operation in Canmore by quarter and in total. Show dearly on your budget the quarter(s) in which borrowing will be needed and the quarter(s) in which repayments can be made, as requested by the company's bank 32 Mountain Sports Cash Budget For the year ended December 31 33 34 Quarter 2 Year Summary 35 1 3 21% 4 22% 36 Percent of Sales 28% $147,000 $110.250 $115,500 37 Estimated Sales 38 35 CASH BALANCE, Beginning 56,000 40 Collections from customers AN Pach Pales 05 03 Case Intro 01 S 02 29% $152,250 04 06 E 100% $525,000 Dropdowns H Note from Instructor: Total sales amount taken from question 4. Remember to refer to question 4 as this cash budget is a continuation of the Canmore expansion introduced in Question 4. This will be important for the cash disbursements as well! 1944 34 35 36 Percent of Sales 37 Estimated Sales 39 CASH BALANCE, Beginning 40 Collections from customers 41 Cash Sales 42 Credit Sales 43 CASH AVAILABLE 44 Less: Cash Payments 45 Merchandise purchases (COGS) 46 Sales Commissions 47 Advertising 48 Property Taxes 49 Rent 50 Salaries & Wages 51 Equipment Purchase 52 Income tax Installment 53 Total Disbursements 54 Cash Excess (Deficiency) 43 Case Intro A 01 $ 02 1 28% $147,000 56,000 03 C Quarter 2 29% $152,250 04 D 21% $110,250 05 4 22% $115,500 06 F Year Summary 100% $525,000 Dropdowns G H Note from Instructor Total sales amount taken from question 4 Remember to refer to question 4 as this cash budget is a continuation of the Canmore expansion introduced in Question 4. This will be important for the cash disbursements as well x 1144 49 Rent 50 Salaries & Wages 51 Equipment Purchase 52 Income tax Installment 53 Total Disbursements 54 Cash Excess (Deficiency) 55 Financing (Note 1) 56 Borrow 57 negative) 58 Net Financing 59 Cash Balance, Ending 60 61 Note 1: Financing Calculations 62 Cash excess (Deficiency) 63 Minimum cash balance 64 Amount to borrow (repay) 65 increment of $1,000 66 Jx A Repayment of Principal (show as Borrowing (Repayments) Rounded to B D E F G