Befitting Fashion Ltd Cash Budget Assignment Help With Solution

Befitting Fashion Ltd Cash Budget Assignment Help

1.Befitting Fashion Ltd has provided the estimates below for the January – March quarter in 2015:

January February March
$ $          $
  Sales of inventory 70,000 80,000 90,000
  Purchases of        inventory 25,000 30,000 40,000
  Operating expenses 20,000 21,000 23,500

You are also given the following additional information:
•25% of sales are cash sales, the remaining 75% are credit sales and are collected as follows:
a)30% of credit sales are collected in the month of sale
b)70% of credit sales are collected in the following month after sale
•Sales in the month of December 2014 were $42,857.
•All purchase of inventory is made on credit and are paid for in the same month they are incurred.
•Operating expenses include depreciation expense each month of $3,000. All expenses are paid for in the same month they are incurred.
•Loan repayments of $10,000 per month are due to start in February.
•The firm expects to sell some old machinery for $5,000 in January. New machinery worth $70,000 will be purchased in March (depreciation expense will not change as a result).
•The cash balance on 30th December 2014 is $5,000.
a) Prepare a Schedule of expected receipts from Debtors (Account receivable) for Befitting Fashion Ltd for the three months January to March 2015. Show all workings.
b) Prepare a cash budget for Befitting Fashion Ltd for the three months January to March 2015. Show all workings.
c) Befitting Fashion Ltd is budgeting for a cash deficit at the end of one of the months included in their cash budget. Briefly explain how Befitting Ltd could prepare for this forecasted deficit.
2.A good friend of yours, who owns a fashion shop, is confused by her firm’s statement of financial performance and statements of financial position, and comes to you for help.
The statement of financial performance for the financial year ended at 30 June 2014, prepared by an accountant, shows a net profit of $110,000.
However, there is only a $65,000 increase from 2013 to 2014 in the balance of her firm’s Cash at Bank account in the statement of financial positions for those years.
She has checked with other accounting experts and they report no error or fraud.
Yet, your friend is still very puzzled why the $65,000 increase in her firm’s Cash at Bank account from 2013 to 2014 does not equal the net profit of $110,000 made in the financial year that ended 30 September 2014.
She is concerned about firm’s working capital and has provided you with the following ratios:

2012 2013 2014
Receivables turnover (days) 45 46 49
Inventory turnover (days) 58 61 62
Payables turnover (days) 46 45 43

a)Outline and discuss two reasons why a Net Profit amount can differ from the change in a firm’s Cash at Bank account from 2013 to 2014.
b)Calculate the operating cash cycle period (days) for the 3 years and comments on management of working capital over the past 3 years.

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3.Ogleby Company estimates that 240,000 direct labor hours will be worked during 2010 in the Assembly Department. On this basis, the following budgeted manufacturing overhead data are computed.

Variable Overhead Costs Fixed Overhead Costs
Indirect labor $ 72,000 Supervision $ 75,000
Indirect materials 48,000 Depreciation 30,000
Repairs 36,000 Insurance 12,000
Utilities 26,400 Rent 9,000
Lubricants 9,600 Property taxes 6,000
$192,000 $132,000

It is estimated that direct labor hours worked each month will range from 18,000 to 24,000 hours. During January, 20,000 direct labor hours were worked and the following overhead costs were incurred.

Variable Overhead Costs Fixed Overhead Costs
Indirect labor $ 6,200 Supervision $ 6,250
Indirect materials 3,600 Depreciation 2,500
Repairs 2,400 Insurance 1,000
Utilities 1,700 Rent 850
Lubricants 830 Property taxes 500
$14,730 $11,100

(a) Prepare a monthly manufacturing overhead flexible budget for each increment of 2,000 direct labor hours over the relevant range for the year ending December 31, 2010.
(b) Prepare a manufacturing overhead budget report for January.
(c) Comment on management’s efficiency in controlling manufacturing overhead costs in January.
4.The Current Designs staff has prepared the annual manufacturing budget for the rotomolded line based on an estimated annual production of 4,000 kayaks during 2013. Each kayak will require 54 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). The polyethylene powder used in these kayaks costs $1.50 per pound, and the finishing kits cost $170 each. Each kayak will use two kinds of labor—2 hours of type I labor from people who run the oven and trim the plastic, and 3 hours of work from type II workers who attach the hatches and seat and other hardware. The type I employees are paid $15 per hour, and the type II are paid $12 per hour.
Manufacturing overhead is budgeted at $396,000 for 2013, broken down as follows.

                 Variable costs
Indirect materials $  40,000
Manufacturing supplies


Maintenance and utilities




                       Fixed costs










During the first quarter, ended March 31, 2013, 1,050 units were actually produced with the following costs.
Polyethylene powder ………………………$ 87,000
Finishing kits …………………………………..178,840
Type I labor ………………………………………31,500
Type II labor ……………………………………..39,060
Indirect materials ……………………………10,500
Manufacturing supplies ……………….14,150
Maintenance and utilities …………26,000
Supervision ……………………………………20,000
Insurance ………………………………………….3,600
Depreciation …………………………………..27,450
Total …………………………………………..$438,100
(a) Prepare the annual manufacturing budget for 2013, assuming that 4,000 kayaks will be produced.
(b) Prepare the flexible budget for manufacturing for the quarter ended March 31, 2013. Assume activity levels of 900, 1,000, and 1,050 units.
(c) Assuming the rotomolded line is treated as a profit center, prepare a flexible budget report for manufacturing for the quarter ended March 31, 2013, when 1,050 units were produced.

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