PROJECT OBJECTIVES

The project requires to completing an Excel-based financial model template. Such models are extensively used in business planning, decision-making, and for obtaining business financing., making but also emphasizes critical thinking and general business skills. Specifically, the case has the following objectives: (1) to obtain experience using Excel within a planning and decision context; (2) to integrate a range of managerial and financial accounting concepts; and (3) to reinforce financial statement relationships through linking projected financial statements.

You will completing a financial planning model that is derived from a set of assumptions and link together statements of projected cash, income and balance sheets that articulate. An Excel template, which is available for downloading, is structured with a separate worksheet (or tab) for each of the following sections: Sheet (1) Assumptions; Sheet (2) Supporting Schedules; Sheet (3) Projected Income Statement and Balance Sheet; and Sheet (4) Projected Cash Flow.

Sheet (2) provides supporting schedules for detailed computations, which in turn links to the projected income statements and balance sheet contained within Sheet (3), along with projected cash flow in Sheet (4).

To work correctly, all cells of your model should be linked together via formulas, or cell references, across all worksheets. (A 5^th sheet labeled, Graph contains data to produce a cost-volume-profit graph from current period, baseline information. You should use the ChartWizard in Excel to create the graph. The Excel template already contains the key assumptions as well as some formulas.

Within a real-life practice situation, you would need to independently develop and obtain support for the necessary assumptions that have been provided to you. In Part I of the Excel case, you should complete the model formulas and linkages to Sheets (2), (3) and (4

To accomplish this, the financial model must articulate (i.e., interconnect, or link) across all schedules and statements. Thus, a change in assumption should flow through and automatically update all related schedules in Sheet (2) and projected statements in Sheets (3) and (4). This requires entering formulas within the cells to calculate the required values, rather than hardcoding values into the cells.

OUT-WEST PRODUCTS, INC. CASE

You're Hired!

Cynthia Valley formed Out-West Products, Inc. (OWP) in 2020 when she obtained an exclusive franchise to nationally distribute a pen-based input device that provides effortless communication with standard personal computers. Recent high sales growth of the base model pen-based input device (PID-B), along with expected sales growth for a new premium model (PID-P), requires adding new management team members. The Company hires you as a management trainee to assume direct responsibility for financial planning activities. Your first assignment is to preparing a financial plan for the next three months, starting July 1.

CASH COOLECTION PATTERN is as follows:

30% of a month's sales are collected by month-end. An additional 40% is collected in the month following, and the remaining 30% is collected in the second month following sale. Thus far bad debts have been negligible.

Since OWP's policy is to never stock out of its pen-based input devices (PIDs), and potentially forfeit market share to competitors, the Company maintains fairly high inventory levels.

Therefore, desired ending inventories are equal to 70% of the next month's sales in units.

Prior to June, OWP sold only the basic model PID-B at a price of $230 per unit. The PID-B costs OutWest Products $155 each from the manufacturer and it pays for purchases as follows:

CASH Disbursements PATTERN is as follows:

60% in the month of purchase and the remaining 40% the following month.

The company's monthly operating expenses (organized by cost behavior) are also provided in the Assumptions Sheet of the excel template. All operating expenses are paid during the month, in cash, with the exception of depreciation and insurance expenses.

New fixed assets, including personal computers and office furniture, will be purchased during September for $90,000 cash. Ignore depreciation for these newly acquired since they are insignificant. The Company declares dividends of $20,000 each quarter, payable in the first month of the following quarter.

OWP's actual balance sheet at June 30, 2020 is provided at the end of the template's Assumptions Sheet.

However, the Company also desires a minimum ending cash balance each month of $35,000 to meet regular operating expenses. Assume borrowings occur at the beginning of the period. To further simplify, assume no tax consequences.

REQUIRED:

Financial Planning Model

Complete Sheet 2 (Schedules)

1. Sales and merchandise purchase plans with supporting schedules.
   1. A sales plan by month and in total - including a schedule of projected cash collections from sales

and accounts receivable, by month and in total.

1. A purchases plan in units and in dollars, including a schedule of projected cash payments for

purchases, by month and in total.

[Note: The cost of inventory on hand is released to cost of goods sold before costs for the purchase of additional units (i.e., use a FIFO cost flow assumption for all months).]

Complete Sheet 3 (Inc. St. and Bal. Sheet)

1. Projected contribution format income statements by month and in total.
2. Projected balance sheet for the quarter as of September30.

Complete Sheet 4 (Statements of Cash Flow)

1. Projected statements of cash by month and in total - internal budget format.

Graph

Use the data in the Graph worksheet to creating a cost-volume-profit graph.

Highlight the cells A13:H16. Click insert and Select a line chart type for the CVP graph (your choice of style).

Be sure that your graph closely resembles a standard CVP graph or points will not be awarded.

A B C D 2 Projected Statements of Cash Flow 3 4 5 Projected Statements of Cash Flow 6 Internal Budget Format 7 8 Schedule 9 Beginning cash balance 10 Cash collections (b) 11 Total cash available 12 Cash disbursements 13 Inventory purchases (e) 14 Variable operating expenses 15 Fixed operating expenses Capital Acquisitions 16 17 Interest 18 Dividends 19 Total disbursements 20 Minimum cash balance 21 Total cash needed 22 Cash excess (deficit) 23 Financing 24 Borrowing 25 Repayments 26 Total cash from financing 27 Ending cash balance 28 29 30 1 ady Accessibility. Unavailable Line-of-Credit Balance Assumptions Schedules Inc St & Bal Sht E Cash Flow F July Graph G August 3,518 X H September 4,629 Total Paste 45 46 47 48 50 Ready [Copy L15 Format Painter E 5 Clipboard D C A B 4 5 Schedule a: Sales plan 6 Weighted average sales price 7 8 Total Units 9 Credit sales, 100% 10 11 12 NOTE: Actual A/R should be collected in July and Aug. 13 Schedule b: Cash collections 14 From current month's sales 15 From sales 1 month before 16 From sales 2 months before 17 Total collections 18 19 20 21 Schedule c: Purchases plan in units 22 Desired units in ending inventory 23 Plus units sold 24 Total needed 25 Less beginning inventory 26 Required purchases 27 28 29 30 Schedule d: Purchases plan (dollars) 31 Weighted average unit cost 32 33 Desired ending inventory 34 Plus cost of goods sold 35 Total requirements 36 Less beginning inventory 37 Total purchases 38 39 40 Note: Actual A/P should be paid in July only 41 Schedule e: Cash pmts for purchases 42 From accounts payable (630) 43 0.00 0.00 0.00 Total payments BIU-B Font Assumptions Accessibility: Unavailable O Type here to search Schedules W 11 1 Inc St & Bal Sht 11 F August i 1 Alignment G September Cash Flow Graph C XX Total (2 LO BIU - - * Fent A 1 Graph Data 2 Weighted average computations: 3 Sales price per unit S 4 Variable costs per unit 5 Weighted average unit cost 6 Sales commissions 7 Shipping and handling 8 Total variable costs per unit 9 10 Fixed costs in total 11 12 CVP Graph Data: 13 Sales Levels 14 Revenue 5 Fixed Costs 6 Total Costs 7 B 9 Assumptions Accessibility: Unavailable Type here to search P Schedules S $ B 250.36 171.80 12.52 20.00 204.32 0 SO $0 SO Inc St & Bal Sht Cash Flow Ei C Alignment C 5.000 $1.251.785 SO $1,021,589 Graph Merge & Center + $-%9A Number 10,000 $2,503.571 SO $2.043,179 X E 15.000 $3.755.356 SO $3,064,768 Conditional Format as Neutral Formatting Table- F 20,000 $5,007,141 SO $4,086,357 Styles G 25,000 $6,258,927 SO $5,107,946 H 30,000 $7,510,712 SO $6,129.536 1 LY A 1 Key Check Figures 2 Schedules 3 Schedule B 4 Total collections 5 Schedule D 6 COGS 7 8 Schedule E Total Payments 10 Projected Income statements 11 Net Income before Taxes 12 Projected Balance Seet 13 Accounts Receivable 14 Inventory Fixed Assets, net of 15 depreciation 16 Total Assets 17 Accounts Payable 18 Projected SCF 19 Cash excess (deficit) 20 21 Sheet! Ready Accessibility Investigate Type here to search At August July $2,274,993 $2,572,479 $1,692,384 $1,909,842 $2,076,010 $1,985,264 $125,877 $161,323 August -$166,635 X September $3,079,662 $1,587,432 $1,522,000 $6,230,594 $896,796 July -$527,715 D September $2,858,704 $2,156,968 $2,177,350 $203,086 September -$206,252 E Sched E15 $929,200 F G 58 0 1 Format Painter : Clipboard B53 A B C 18 Sales Price Sensitivity --> 19 Unit selling price PID-6 20 PIO-P 21 22 Unit cost PID-6 PID-P 23 24 25 Weighted Average Sales Price 26 Weighted Average Unit Cost 27 28 Gross Profit % PID-B PID-P 29 30 WTD AVG 31 32 Other Assumptions 33 Ending cash balance (per month) 34 Ending inventory as percentage 35 of next month's sales 36 Percentage of purchases paid in: 37 Current month 38 Following month 39 Percentage of sales collected in: 40 Current month 41 Following month 42 Second following month 43 New fixed asset purch September 44 Quarterly dividends 45 Line-of-credit annual interest 40 48 Balance Sheet: Actual as of June 30 49 Assets 50 Cash & Equivalents May June 51 Accounts Receivable 52 $ 579,600 S 1,626,100 53 Inventory 7,140 units 54 Prepaid insurance 55 Fixed assets, net of depreciation 56 Total Assets 57 58 Liabilities and Stockholder's Equity 59 Accounts payable, purchases 60 Line-of-credit 61 Dividends payable 62 Capital stock, no par 63 Retained earnings 64 Total liabilities and stockholder's equity 05 66 67 Assumptions Accessibility: Unavailable Type here to search eady 5 X fx 49 45 $ 449 449 449 44 Font =F12 D35 E 230 360 155 225 252.50 165.50 32.6% 40.8% 34.5% Schedules $35,000 70% 60% 40% 30% 40% 30% $90,000 $20,000 8% SS SS S S 12 47 47 F -2.00% 221 S 216 S 225 S 372 S 365 $ 358 S 155 S 155 S 155 S 225 S 225 S 225 S 250.39 $ 249.70 $250.36 $ 166.90 $ 171.80 $ 312% 29.8% 28.4% 39.6% 38.3% 37.tx 33.37 32.3% 31.4% Operating expenses Variable: Sales commissions Shipping & handling Fixed: (96 of sales (per unit) Wages and salaries Rent Utilities Insurance expired Depreciation Other S&A Advertising Campaign $40,000 2,205,700 1,181,670 20.000 1,480,000 $4.927,370 $970.464 20,000 1,750,000 2.186.906 $4.927.370 Inc St & Bal Sht G -2.00% Alignment -2.00% 350 155 225 246.73 172.50 26.9% 35.87% 30.0 5.0% $ 20.00 (per month) $300,000 30.000 10,000 4,500 16,000 40.000 Cash Flow -2.00% OTHER INFO Scenario II_A_2C Oper Inc LOC= Sensitivity II_C_2A Inv T/O : Sensitivity II_C_2B Days Sale #DIVIOL Qual of Ind #REF! Op Margir #DIV/0! Asset TIO Graph 0 V K $42 A B C D 5 Projected Income Statements 6 7 Sales 8 Less vanable expenses 9 Cost of goods sold 10 Sales commissions 11 Shipping & handling 12 Total variable expenses 13 Contribution margin 14 Less fixed expenses 15 Wages and salaries 16 Rent 17 Utilities 18 Insurance expense 19 Depreciation expense 20 Other Selling & Admin. Advertising Campaign Less: Interest Expense Schedule (a) (d) 21 22 Total fixed expenses 23 24 Operating income 25 26 Net Income before Taxes 27 28 29 Projected Balance Sheet 30 31 Cash & Equivalents 12 Accounts receivable 3 Inventory 4 Prepaid insurance 5 Fixed assets, net of depreciation 6 Total assets 7 B Accounts payable, purchases Interest payable Line-of-Credit Dividends payable Capital stock, no par Retained earnings Total liabilities and stockholders' equity Accessibility: Unavailable Type here to search E LL F July 3,518 ($3,518) G August September 6,004 4,629 ($4,629) ($6,004) Assets Liabilities and Stockholders' Equity Assumptions Schedules Inc St & Bal Sht Cash Flow Graph I ** + Total 14,151 ($14,151) September 6,004 900,602 EQUAL X A B C D 2 Projected Statements of Cash Flow 3 4 5 Projected Statements of Cash Flow 6 Internal Budget Format 7 8 Schedule 9 Beginning cash balance 10 Cash collections (b) 11 Total cash available 12 Cash disbursements 13 Inventory purchases (e) 14 Variable operating expenses 15 Fixed operating expenses Capital Acquisitions 16 17 Interest 18 Dividends 19 Total disbursements 20 Minimum cash balance 21 Total cash needed 22 Cash excess (deficit) 23 Financing 24 Borrowing 25 Repayments 26 Total cash from financing 27 Ending cash balance 28 29 30 1 ady Accessibility. Unavailable Line-of-Credit Balance Assumptions Schedules Inc St & Bal Sht E Cash Flow F July Graph G August 3,518 X H September 4,629 Total Paste 45 46 47 48 50 Ready [Copy L15 Format Painter E 5 Clipboard D C A B 4 5 Schedule a: Sales plan 6 Weighted average sales price 7 8 Total Units 9 Credit sales, 100% 10 11 12 NOTE: Actual A/R should be collected in July and Aug. 13 Schedule b: Cash collections 14 From current month's sales 15 From sales 1 month before 16 From sales 2 months before 17 Total collections 18 19 20 21 Schedule c: Purchases plan in units 22 Desired units in ending inventory 23 Plus units sold 24 Total needed 25 Less beginning inventory 26 Required purchases 27 28 29 30 Schedule d: Purchases plan (dollars) 31 Weighted average unit cost 32 33 Desired ending inventory 34 Plus cost of goods sold 35 Total requirements 36 Less beginning inventory 37 Total purchases 38 39 40 Note: Actual A/P should be paid in July only 41 Schedule e: Cash pmts for purchases 42 From accounts payable (630) 43 0.00 0.00 0.00 Total payments BIU-B Font Assumptions Accessibility: Unavailable O Type here to search Schedules W 11 1 Inc St & Bal Sht 11 F August i 1 Alignment G September Cash Flow Graph C XX Total (2 LO BIU - - * Fent A 1 Graph Data 2 Weighted average computations: 3 Sales price per unit S 4 Variable costs per unit 5 Weighted average unit cost 6 Sales commissions 7 Shipping and handling 8 Total variable costs per unit 9 10 Fixed costs in total 11 12 CVP Graph Data: 13 Sales Levels 14 Revenue 5 Fixed Costs 6 Total Costs 7 B 9 Assumptions Accessibility: Unavailable Type here to search P Schedules S $ B 250.36 171.80 12.52 20.00 204.32 0 SO $0 SO Inc St & Bal Sht Cash Flow Ei C Alignment C 5.000 $1.251.785 SO $1,021,589 Graph Merge & Center + $-%9A Number 10,000 $2,503.571 SO $2.043,179 X E 15.000 $3.755.356 SO $3,064,768 Conditional Format as Neutral Formatting Table- F 20,000 $5,007,141 SO $4,086,357 Styles G 25,000 $6,258,927 SO $5,107,946 H 30,000 $7,510,712 SO $6,129.536 1 LY A 1 Key Check Figures 2 Schedules 3 Schedule B 4 Total collections 5 Schedule D 6 COGS 7 8 Schedule E Total Payments 10 Projected Income statements 11 Net Income before Taxes 12 Projected Balance Seet 13 Accounts Receivable 14 Inventory Fixed Assets, net of 15 depreciation 16 Total Assets 17 Accounts Payable 18 Projected SCF 19 Cash excess (deficit) 20 21 Sheet! Ready Accessibility Investigate Type here to search At August July $2,274,993 $2,572,479 $1,692,384 $1,909,842 $2,076,010 $1,985,264 $125,877 $161,323 August -$166,635 X September $3,079,662 $1,587,432 $1,522,000 $6,230,594 $896,796 July -$527,715 D September $2,858,704 $2,156,968 $2,177,350 $203,086 September -$206,252 E Sched E15 $929,200 F G 58 0 1 Format Painter : Clipboard B53 A B C 18 Sales Price Sensitivity --> 19 Unit selling price PID-6 20 PIO-P 21 22 Unit cost PID-6 PID-P 23 24 25 Weighted Average Sales Price 26 Weighted Average Unit Cost 27 28 Gross Profit % PID-B PID-P 29 30 WTD AVG 31 32 Other Assumptions 33 Ending cash balance (per month) 34 Ending inventory as percentage 35 of next month's sales 36 Percentage of purchases paid in: 37 Current month 38 Following month 39 Percentage of sales collected in: 40 Current month 41 Following month 42 Second following month 43 New fixed asset purch September 44 Quarterly dividends 45 Line-of-credit annual interest 40 48 Balance Sheet: Actual as of June 30 49 Assets 50 Cash & Equivalents May June 51 Accounts Receivable 52 $ 579,600 S 1,626,100 53 Inventory 7,140 units 54 Prepaid insurance 55 Fixed assets, net of depreciation 56 Total Assets 57 58 Liabilities and Stockholder's Equity 59 Accounts payable, purchases 60 Line-of-credit 61 Dividends payable 62 Capital stock, no par 63 Retained earnings 64 Total liabilities and stockholder's equity 05 66 67 Assumptions Accessibility: Unavailable Type here to search eady 5 X fx 49 45 $ 449 449 449 44 Font =F12 D35 E 230 360 155 225 252.50 165.50 32.6% 40.8% 34.5% Schedules $35,000 70% 60% 40% 30% 40% 30% $90,000 $20,000 8% SS SS S S 12 47 47 F -2.00% 221 S 216 S 225 S 372 S 365 $ 358 S 155 S 155 S 155 S 225 S 225 S 225 S 250.39 $ 249.70 $250.36 $ 166.90 $ 171.80 $ 312% 29.8% 28.4% 39.6% 38.3% 37.tx 33.37 32.3% 31.4% Operating expenses Variable: Sales commissions Shipping & handling Fixed: (96 of sales (per unit) Wages and salaries Rent Utilities Insurance expired Depreciation Other S&A Advertising Campaign $40,000 2,205,700 1,181,670 20.000 1,480,000 $4.927,370 $970.464 20,000 1,750,000 2.186.906 $4.927.370 Inc St & Bal Sht G -2.00% Alignment -2.00% 350 155 225 246.73 172.50 26.9% 35.87% 30.0 5.0% $ 20.00 (per month) $300,000 30.000 10,000 4,500 16,000 40.000 Cash Flow -2.00% OTHER INFO Scenario II_A_2C Oper Inc LOC= Sensitivity II_C_2A Inv T/O : Sensitivity II_C_2B Days Sale #DIVIOL Qual of Ind #REF! Op Margir #DIV/0! Asset TIO Graph 0 V K $42 A B C D 5 Projected Income Statements 6 7 Sales 8 Less vanable expenses 9 Cost of goods sold 10 Sales commissions 11 Shipping & handling 12 Total variable expenses 13 Contribution margin 14 Less fixed expenses 15 Wages and salaries 16 Rent 17 Utilities 18 Insurance expense 19 Depreciation expense 20 Other Selling & Admin. Advertising Campaign Less: Interest Expense Schedule (a) (d) 21 22 Total fixed expenses 23 24 Operating income 25 26 Net Income before Taxes 27 28 29 Projected Balance Sheet 30 31 Cash & Equivalents 12 Accounts receivable 3 Inventory 4 Prepaid insurance 5 Fixed assets, net of depreciation 6 Total assets 7 B Accounts payable, purchases Interest payable Line-of-Credit Dividends payable Capital stock, no par Retained earnings Total liabilities and stockholders' equity Accessibility: Unavailable Type here to search E LL F July 3,518 ($3,518) G August September 6,004 4,629 ($4,629) ($6,004) Assets Liabilities and Stockholders' Equity Assumptions Schedules Inc St & Bal Sht Cash Flow Graph I ** + Total 14,151 ($14,151) September 6,004 900,602 EQUAL X