Sithabiso's Wraps is an all-organic restaurant located near State University. It is managed by Eunice Ndlovu,...

  

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Sithabiso's Wraps is an all-organic restaurant located near State University. It is managed by Eunice Ndlovu, and Eunice is preparing her first-quarter cash budget for this year. It is important to her because of the variation in volume and cash available caused by the return of the university students. Eunice has budgeted her revenues, cost of sales, and operating expenses based on her forecasts for January, February, and March. From her hospitality management classes, Eunice recalls that her ending cash balance for one month is the beginning cash balance of the next month, and she has compiled the following information and assumptions about her operation. Percent of revenue expected to be collected in the month it was generated (current month) Percent of revenue expected to be collected in the month after it was generated based on AR aging Accounts receivable to be collected in January from December AR 80% 20% $30,000 Percent of cost of sales to be paid in the month they were incurred (current month) Percent of cost of sales to be paid one month after they were incurred (as AP) Amount to be paid in January from AP for cost of sales incurred in December Percent of operating expenses to be paid in the month they were incurred (current month) Percent of operating expenses to be paid one month after they were incurred (from AP) Amount to be paid in January (from AP) for operating expenses incurred in December 60% 40% $19,000 70% 30% $21,000 Percent of non-operating expenses to be paid in the month they were incurred (current month) 100% Monthly rent expense $4,000 First of each quarter insurance premium $6,000 Beginning cash balance on January 1 $5,000 Ending cash balance for one month is beginning cash balance of the next month Minimum required cash balance (for emergencies) Short-term loan denominations Short-term loan interest rate $5,000 $5,000 10% a. Help Eunice complete her cash budget b. Will Eunice have to borrow any short-term loans to cover cash shortfalls in the first quarter of the year? If so, how much money will she have to borrow, and what do you think may have caused this? b. If Eunice has to borrow a short-term loan to cover cash shortfalls in the first quarter of the year, will she be able to pay it back in a timely manner? If so, when? c. By the end of the quarter, will Eunice have a surplus or deficit of cash? If she has a surplus, what should she do with the extra money? d. Overall, how do you think Eunice is doing at planning her cash receipts and cash disbursements in order to keep enough cash on hand to pay her bills? Sithabiso's Wraps is an all-organic restaurant located near State University. It is managed by Eunice Ndlovu, and Eunice is preparing her first-quarter cash budget for this year. It is important to her because of the variation in volume and cash available caused by the return of the university students. Eunice has budgeted her revenues, cost of sales, and operating expenses based on her forecasts for January, February, and March. From her hospitality management classes, Eunice recalls that her ending cash balance for one month is the beginning cash balance of the next month, and she has compiled the following information and assumptions about her operation. Percent of revenue expected to be collected in the month it was generated (current month) Percent of revenue expected to be collected in the month after it was generated based on AR aging Accounts receivable to be collected in January from December AR 80% 20% $30,000 Percent of cost of sales to be paid in the month they were incurred (current month) Percent of cost of sales to be paid one month after they were incurred (as AP) Amount to be paid in January from AP for cost of sales incurred in December Percent of operating expenses to be paid in the month they were incurred (current month) Percent of operating expenses to be paid one month after they were incurred (from AP) Amount to be paid in January (from AP) for operating expenses incurred in December 60% 40% $19,000 70% 30% $21,000 Percent of non-operating expenses to be paid in the month they were incurred (current month) 100% Monthly rent expense $4,000 First of each quarter insurance premium $6,000 Beginning cash balance on January 1 $5,000 Ending cash balance for one month is beginning cash balance of the next month Minimum required cash balance (for emergencies) Short-term loan denominations Short-term loan interest rate $5,000 $5,000 10% a. Help Eunice complete her cash budget b. Will Eunice have to borrow any short-term loans to cover cash shortfalls in the first quarter of the year? If so, how much money will she have to borrow, and what do you think may have caused this? b. If Eunice has to borrow a short-term loan to cover cash shortfalls in the first quarter of the year, will she be able to pay it back in a timely manner? If so, when? c. By the end of the quarter, will Eunice have a surplus or deficit of cash? If she has a surplus, what should she do with the extra money? d. Overall, how do you think Eunice is doing at planning her cash receipts and cash disbursements in order to keep enough cash on hand to pay her bills?