Homework Assignment for Week 5:
For Week 5, please turn in the answers to the following questions:
Question 1. Prepare a budget for this year for the Administrative Department at Tom’s
Toyota Company based on the following information:
Salaries
Stationary
Telephone
Electricity
Office Rent
Depreciation
Total:
Last Year
Forecasting Assumption
Budget for this Year
$60,000
$ 900
$ 2,500
$ 1,200
$10,000
$ 4,000
$78,600
2% increase
1% decrease
3% increase
2.5% increase
2% increase
no change
___________
___________
___________
___________
___________
___________
___________
Question 2. Define a “Static Budget.”
Question 3. Define a “Flexible Budget.”
Question 4. Define the term “Zero-based Budgeting.”
Question 5. Define “Period Budgets.”
Question 6. Define “Rolling Budgets.”
Question 7. Big Bob's Discount Appliances expects sales of $5,000, $5,000, and $10,000
during April, May, and June (big sale in June). To build business, Big Bob lets all
customers buy on credit, and all do so. In the past, 50% of Big Bob's sales have been
collected during the month of sale, 40% are collected the following month, and 10% the
month after that. If this trend continues, what will be Big Bob's total cash collections in
the month of June?
Question 8. Little Louie’s expects to have $100 in cash on hand at the beginning of June,
and the company's target cash balance is $100. Net cash flow for June is minus $300.
Assuming that Little Louie’s borrows to meet short-term cash needs and pays back as
soon as surplus cash is available, what will be the company's ending cash balance after
financing at the end of June?
Question 9. Ma & Pa Kettle’s Chili Company has begun selling a new chili recipe and
they want you to help them with next year’s budgeted financial statements. Using the
worksheet below, complete Ma & Pa’s forecast and answer the questions which follow.
Assumptions:
To begin with, Ma & Pa are sure sales will grow 50% next year. Assume that is true.
Then assume that COGS, Current Assets, and Current Liabilities all vary directly with
Sales (that means if sales grows a certain percentage, then the account in question will
grow by that same percentage). Assume that fixed expenses will remain unchanged and
that $1,000 worth of new Fixed Assets will be obtained next year. Lastly, the current
dividend policy will be continued next year.
Ma & Pa Kettle Chili Company, Inc.
Financial Forecast
This year
Estimated
for next year
$10,000
4,000
6,000
3,000
3,000
1,000
$2,000
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________
________
________
________
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________
$0
________
Current Assets
Net Fixed Assets
Total Assets
$25,000
15,000
$40,000
________
________
________
Current Liabilities
Long-term debt
Common Stock
Retained Earnings
Total Liabs & Eq
$17,000
3,000
7,000
13,000
$40,000
________
________
________
________
________
Sales
COGS
Gross Profit
Fixed Expenses
Before-Tax Profit
Tax @ 33.3333%
Net Profit
Dividends
Amount need to balance the balance sheet
(Projected total assets minus projected
total liabilities & equity *)
________
* If this number is positive it means Ma & Pa need additional external funding to
finance their projected asset growth. If this number is negative it means Ma & Pa
have programmed too much financing for the amount of assets they project.
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