Jana and Cindy are planning to launch UP-PACK, a business that upcycles disposable masks into high quality packaging material. They think it can be a viable business but they need your advice; they want to make sure they aren't taking too big of a risk. Use the information below to create a 6 month cash budget. Based on their research of the industry, they plan to provide credit terms to their customers of 35% payment during the month of sale and 65% payment in the month following sale. Manufacturing supply costs are relatively low since they can get free used disposable masks from health care facilities but there are costs incurred to clean and upcycle the masks. They project their costs of goods sold (COGS) to be 24% of each month's sales. They anticipate having to pay 60% of these costs in the month of purchase and 40% in the month following purchase. Fortunately, Jana's brother has a large empty garage that they can operate in for the first year which saves them from renting space. They are going to contribute to his utility costs as listed in the chart below. Because they are selling to businesses, their marketing budget is largely allocated to personal selling (reflected in payroll costs). Jana and Cindy have $5,500 set aside as their beginning cash balance. Going forward, they do not want their cash balance to go below $3,000. Because they have strong personal credit histories and other sources of household income from their respective partners, they have been approved for a bank line of credit at a rate of 6%. If they need to use this line of credit, they will pay interest in the month following borrowing. Once they have a cash surplus, they will pay down as much of the outstanding line of credit as possible. Cash Budget Q4 Line of Credit Interest for May is: a) $591 b) $7,395 c) $49 d) $5,443 Cash Budget Q5 Financing Required in April is: a) $3,000 b) $2,021 c) $0 d) $194
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Jana and Cindy are planning to launch UP-PACK, a business that upcycles disposable masks into high quality packaging material. They think it can be a viable business but they need your advice; they want to make sure they aren't taking too big of a risk. Use the information below to create a 6 month
Based on their research of the industry, they plan to provide credit terms to their customers of 35% payment during the month of sale and 65% payment in the month following sale.
Fortunately, Jana's brother has a large empty garage that they can operate in for the first year which saves them from renting space. They are going to contribute to his utility costs as listed in the chart below.
Because they are selling to businesses, their marketing budget is largely allocated to personal selling (reflected in payroll costs).
Jana and Cindy have $5,500 set aside as their beginning cash balance. Going forward, they do not want their cash balance to go below $3,000. Because they have strong personal credit histories and other sources of household income from their respective partners, they have been approved for a bank line of credit at a rate of 6%. If they need to use this line of credit, they will pay interest in the month following borrowing. Once they have a cash surplus, they will pay down as much of the outstanding line of credit as possible. Cash Budget Q4
Line of Credit Interest for May is:
- a) $591
- b) $7,395
- c) $49
- d) $5,443
Cash Budget Q5
Financing Required in April is:
- a) $3,000
- b) $2,021
- c) $0
- d) $194
Cash Budget Q6
Ending Cash Balance in June is:
- a) $3,000
- b) $7,799
- c) $4,799
- d) $2,596
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