Accounting

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HomeWork Week 4

3.2
If a problem is discovered during the budgeting process the manager will be able to create a different plan, which will allow them to avoid the problem.

3.12
Predicting anticipated cash shortages is vital for a business. Budgeting allows us to gain an understanding of when these cash shortages might arise and how to best manage them. For example predicting a cash shortage ahead of time will allow applications for loans to be made and hopefully approved depending on current financial situations.

3.14
While it is a good idea to have some cash saved for a rainy day having too much can be a negative for a business. For example extra cash can be used for expansion or investments, which in turn may generate for profit for the business.

3.26 Sales Budget
Oct Nov Dec Quarter
Budgeted unit sales 45 000 35 000 40 000 120 000
Selling price per unit x $6 x $6 x $6 x $6
Budgeted total sales revenue $270 000 $210 000 $240 000 $720 000 Expected cash collections:
From Sept.a credit sales $120 000 $120 000
From Oct. credit sales 135 000 135 000 270 000
From Nov. credit sales 105 000 105 000 210 000
From Dec. credit sales 120 000 120 000
Total cash collections $255 000 $240 000 $225 000 $720 000

40 000 x $6 x 15/30 = September credit sales collected in October.

3.30 Cash Budget
January
Cash receipts from sales: ($6.20 x 40 000) $248 000 ($6.20 x 35 000)
Cash payments for:
Purchases
$4.70 x (30 000 + 12 000 – 9 000) $155 100
$4.70 x (40 000 + 10 500 – 12 000)
General and administrative expenses 15 000a
Other cash payments 71 500
Total cash payments $241 600
Net cash inflow (outflow) from operations $ 6 400
Add: Beginning cash balance from operations 75 000
Ending cash balance from operations $

3.32
A) The first thing you will notice is that cash receipts from sales were at their highest in January and then made a steady decline. This is the same...
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