Bonita Products, a rapidly growing distributor of home gardening equipment, is f
ID: 2600793 • Letter: B
Question
Bonita Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm's marketing director, has completed the following sales forecast. Sales Month Month January February March Sales Ju August $904,300 $1,002,600 $1,503,900 $1,503,900 ril Ma June $904,300 $1,158,500 $1,254,900 $1,405,100 September October November December $1,610,000 $1,610,000 $1,503,900 $1,700,100 Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information. All sales are made on credit. . Bonita's excellent record in accounts receivable collection is expected to continue, with 60% of billings collected in the month after sale and the remaining 40% collected two months after the sale · Cost of goods sold, Bonita's largest expense, is estimated to equal 40% of sales dollars. Seventy percent of inventory is purchased one month prior to sale and 30% during the month of sale. For example, in April, 30% of April cost of goods sold is purchased and 70% of May cost of goods sold is purchased. · All purchases are made on account. Historically, 75% of accounts payable have been paid during the month of purchase, and the remaining 25% in the month following purchase · Hourly wages and fringe benefits, estimated at 30% of the current month's sales, are paid in the month incurred. General and administrative expenses are projected to be $1,560,800 for the year A breakdown of the expenses follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter Salaries and fringe benefits Advertising Property taxes Insurance Utilities Depreciation Total $325,500 378,900 137,400 193,900 178,300 346,800 $1,560,800Explanation / Answer
Required Budgets are as prepared below:
Bonita products Schedule of expected Cash collections For the quarter ended June 30 Month Particulars April May June Total July February Sales 401,040 401,040 March Sales 542,580 361720 904,300 April Sales 695100 463400 1,158,500 May sales 752,940 752,940 June Sales 0 0 Total collections 943,620 1,056,820 1,216,340 3,216,780 Bonita products Account Receivable For the quarter ended June 30 Month Particulars July August Total May sales 501,960 501,960 June Sales 843,060 562,040 1,405,100 Total Account Receivable 1,345,020 562,040 1,907,060 Bonita products Merchandise Purchase Budget For the quarter ended June 30 Month Particulars March April May June July Sales 904,300 1,158,500 1,254,900 1,405,100 1,503,900 Cost of goods sold (40% of sales) 361,720 463,400 501,960 562,040 601,560 70% of next month COGS 324,380 351,372 393,428 421,092 30% of current month COGS 108,516 139,020 150,588 168,612 Purchases 432,896 490,392 544,016 589,704 Bonita products Schedule of expected Cash payments For the quarter ended June 30 Month Particulars April May June Total Beginning Accounts Payable $108,224 $108,224 April Purchases $367,794 $122,598 $490,392 May Purchases $408,012 $136,004 $544,016 June Purchases $442,278 $442,278 Total payments $476,018 $530,610 $578,282 $1,584,910 Bonita products Cash Budget For the quarter ended June 30 Month Particulars April May June Total Collection from customers $943,620 $1,056,820 $1,216,340 $3,216,780 cash available for use $943,620 $1,056,820 $1,216,340 $3,216,780 Less: cash Disbursements Merchandise purchase $476,018 $530,610 $578,282 1,584,910 Hourly wages and fringe benefits 271,290 347,550 376,470 995,310 Salaries and Fringe benefits (325,500/12) 27,125 27,125 27,125 81,375 Advertising (378,900/12) 31,575 31,575 31,575 94,725 Property taxes (137,400/4) 34,350 34,350 Insurance (193,900/12) 16,158 16,158 16,158 48,475 Utilities (178,300/12) 14,858 14,858 14,858 44,575 Total disbusrement 837,025 967,877 1,078,819 2,883,720 Cash surplus/Deficit 106,595 88,943 137,521 333,060