Brighton, Inc. manufactures kitchen tiles. The company recently
expanded, and the controller believes that it will need to borrow cash
to continue operations. In considering the loan, the bank requested a
projected income statement and cash budget for Q2 (April, May and June).
The following information is available:
§The company budgeted sales at 600,000 units per month in April,
June, and July and at 450,000 units in May and August. The company sold
500,000 units in March. The selling price is $4 per unit.
§The beginning Cash balance at 4/1 is $400,000.
§Accounts Receivable balance at 3/31 is $100,000. 75% of this balance
will be collected in April and 25% of the balance will be collected in
§All sales are credit sales. Collections from customers are projected as follows:
§50% of current month sales are collected
§25% of current month sales are collected in the following month.
§24% of current month sales are collected in the second month following the month of sale.
§1% of sales are never collected.
§The inventory of finished goods on April 1 was 120,000 units. The
finished goods inventory at the end of each month equals 20 percent of
sales anticipated for the following month. There is no work in process.
§The inventory of raw materials on April 1 was 57,000 pounds. At the
end of each month, the raw materials inventory must equal 40 percent of
production requirements for the following month.
§Purchases made in the current month are paid for in the following
month. The company purchased 100,000 pounds of material during the month
§Selling expenses are 10 percent of gross sales. Administrative
expenses, which include depreciation of $2,500 per month on office
furniture and fixtures, total $165,000 per month.
§The manufacturing budget for tiles, based on normal production of 500,000 units per month, follows:
Using the MS Excel template provided, prepare the projected income
statement and cash budget along with the following supporting schedules
for the bank:
· Sales Budget
· Production Budget (in units)
· Raw Materials Budget
· Direct Labor Budget
· Manufacturing Overhead budget
· Selling & Administrative Budget
· Projected Cash Collections
· Projected Cash Disbursements
You will also note that there are FOUR questions on the front tab of
the Excel Workbook (Income Statement Tab). The questions are highlighted
in YELLOW. Please provide a short answer for each of these questions
after completing the spreadsheets.
You will submit the COMPLETED MS Excel Workbook to DROPBOX as your case submission.
§Total Operating Profit (Income Statement Tab) $552,947
§Ending Cash Balance (Cash Budget Tab) $236,500
§Total Production in Units (Production Budget Tab) 1,650,000
§Total Raw Material Cost (in $) (Raw Materials Budget Tab) $1,650,000
§Total Manufacturing Overhead Cost (Mfg Overhead Tab) $1.860,000
§Total Cash Disbursements (Cash Disbursements Schedule) $5,189,500