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 ________ ________ ________ ________ ________ ________ ________ $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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