Bobcat Printingmakes customt---shirts and other promotional productsforstudent o
ID: 2588877 • Letter: B
Question
Bobcat Printingmakes customt---shirts and other promotional productsforstudent organizations and ... Bobcat Printingmakes customt---shirts and other promotional productsforstudent organizations and businesses. It is beginning its first year of operations and needs to plan for its first quarter of operations. They would like to maximize their profits, and understand that accurate budgeting can help achieve that goal. The budgets will be prepared based on the following information: a. Sales are budgeted at $30,000 for Month 1, $32,500 for Month 2, and $34,000 for Month 3. All sales will be done on account. Company does not expect to have any cash sales. b. Sales are collected 50% in the month of the sale, and 50% in the month following the sale. c. Cost of Goods Sold is budgeted at 40% of Sales. d. Monthly selling, general, and administrative expenses are as follows: donations are 10% of sales; advertising is 3% of sales; miscellaneous is 1% of sales; and rent is $5,000 per month. All SG&A expenses are paid in the month they are incurred. e. Since all of the orders are custom made, no inventory is kept on hand at the end of the month. f. Inventory purchases are paid in full in the month following the purchase. g. Bobcat Printing is planning to purchase a building in Month 3 for $8,000 in cash. h. They would like to maintain a minimum cash balance of $2,500 at the end of each month. The company has an agreement with a local bank that allows them to borrow, with a total line of credit of $20,000. The interest rate on these loans is 1% per month (12% annual). They would as far as able, repay the loan on the last day of the month when it has enough cash to pay the full balance and maintain an adequate ending cash balance. i. The owner makes a draw of $5,000 every month. (Note: sole proprietors and partnerships take owner’s draws, while stockholders receive dividends). When making calculations always round up (for example: 33 × 7% = 2.31, round up to 3.00). Check Figures: Gross Margin $57,900 Total assets $27,973 Ending Retained Earnings $14,373
22 .What is the projected gross profit for the first quarter of operations? A. $32,500 B. $27,900 C. $29,300 D. $57,900
23 . What is the projected interest expense for the first quarter of operations? A. $170 B. $14 C. $34 D. $17
24 . What is the projected net income the first quarter of operations? A. $14,446 B. $7,650 C. $13,200 D. $29,373
25. What is the projected beginning capital investment for the first quarter of operations? A. $0 B. Cannot be determined C. $3,985 D. $1,500
Explanation / Answer
Question - 22 ....... Gross profit = ( 30000 + 32500 + 34000) * 0.60 = 57900 .......... final answer
NOTE ... When COGS is 40%, it implies we have 60% gross profit margin ratio.
Question - 23............ Loan is taken from the bank at the end of month - 1 and repaid at the end of Month - 2
So, Interest = 1700 loan taken * 1/100 = $ 17 ..............final answer
NOTE For computing this loan amount we have to prepare a working note of CASH BUDGET for all the three months. It is as under
Question - 24
Question - 25 ........... A . $ 0
Firm is running in rented premices, no inventory balances, Purchases are paid in following month, expenses are not paid in advance..............so there is no need for beginning capital investment
Month - 1 Month - 2 Month - 3 Collection in the month of sale 15000 16250 17000 Collection in next month 0 15000 16250 Total cash collection 15000 31250 33250 Expenses COGS = Purchases 0 12000 13000 Other expenses (10+3+1= 14% of sales 4200 4550 4760 Rent 5000 5000 5000 Purchase of building 8000 Drawings 5000 5000 5000 Total cash paid 14200 26550 35760 Surplus / (-) deficit 800 4700 -2510 Beginning balance in cash 0 2500 5500 Ending balance in cash 800 7200 2990 Loan taken / (-) repaid 1700 -1700 0 Ending balance (after adjust) 2500 5500 2990