Alpha-Tech, a rapidly growing distributor of electronic components, is formulati
ID: 2334710 • Letter: A
Question
Alpha-Tech, a rapidly growing distributor of electronic components, is formulating its plans for 20x5. Carol Jones, the firm's marketing director, has completed the following sales forecast. ALPHA-TECH 20x5 Forecasted Sales in thousands) Month JanuarY February March April May une Sales $11,000 12,000 11,000 13,500 14,500 16,000 17,000 17,000 18,000 18,000 17,000 19,000 August September October ovember Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. The following information will be used in preparing the cash flow projection. .Alpha-Tech's excellent record in accounts receivable collection is expected to continue. Sixty percent of billings are collected the month after the sale, and the remaining 40 percent two months after. .The purchase of electronic components is Alpha-Tech's largest expenditure, and each month's cost of goods sold is estimated to be 40 percent of sales. Seventy percent of the parts are recelved by Alpha-Tech one month prior to sale, and 30 percent are recelved during the month of sale Historically, 75 percent of accounts payable has been paid one month after receipt of the purchased components, and the remaining 25 percent has been paid two months after receipt. . . Hourly wages and fringe benefits, estimated to be 30 percent of the current month's sales, are paid in the month incurred. . General and administrative expenses are projected to be $16,320,000 for the year. The breakdown of these expenses is presented in the following schedule. All cash expenditures are paid uniformly throughout the year, except the property taxes, which are paid in four equal installments at the end of each quarter. 20x5 Forecasted General and Administrative Costs (in thousands) Salaries and fringe benefits Promotion Property taxes Insurance Utilities Depreciation Total $ 3,200 ,100 1,510 1,550 1,800 ,160 $16,320Explanation / Answer
Alpha-Tech
Alpha-Tech
Cash Budget
for the second quarter of 20x5
Description
April
May
June
Beginning balance
$545,000
$545,000
$2,060,000
Collections:
February Sales
$4,800,000
March Sales
$6,600,000
$4,400,000
April Sales
$8,100,000
$5,400,000
May Sales
$8,700,000
Total receipts
$11,400,000
$12,500,000
$14,100,000
Total cash available
$11,945,000
$13,045,000
$16,160,000
Disbursements:
Accounts Payable
$4,955,000
$5,535,000
$6,085,000
Wages
$4,050,000
$4,350,000
$4,800,000
General and Administrative
$887,500
$887,500
$887,500
Property Taxes
$377,500
Income Taxes
$1,720,000
Total Disbursements
$11,612,500
$10,772,500
$12,150,000
Cash Balance
$332,500
$2,272,500
$4,010,000
Cash Borrowed
$212,500
Cash Repaid
($212,500)
Ending Balance
$545,000
$2,060,000
$4,010,000
Calculations:
. cash receipts - 60% of sales in first month and 40% of sales in second month.
Accounts payable
Cost of goods sold - 40% of Sales
Month
COGS
Proportion
February
March
April
May
June
February
$4,800,000
30%
$1,440,000
March
$4,400,000
70%
$3,080,000
March
$4,400,000
30%
$1,320,000
April
$5,400,000
70%
$3,780,000
April
$5,400,000
30%
$1,620,000
May
$5,800,000
70%
$4,060,000
May
$5,800,000
30%
$1,740,000
June
$6,400,000
70%
$4,480,000
$4,520,000
$5,100,000
$5,680,000
$6,220,000
Payments
Accounts Payable
Proportion
February
$4,520,000
25%
$1,130,000
March
$5,100,000
75%
$3,825,000
March
$5,100,000
25%
$1,275,000
April
$5,680,000
75%
$4,260,000
April
$5,680,000
25%
$1,420,000
May
$6,220,000
75%
$4,665,000
0
0
$4,955,000
$5,535,000
$6,085,000
Gen & Admin -
Total expenses
$16,320,000
Less: Depreciation (non-cash expense)
($4,160,000)
Less: Property taxes (paid once in quarter)
($1,510,000)
Gen & Admin -
$10,650,000
monthly expense
10,650,000/12 = $887,500
Property taxes - 4 equal installments at end of each quarter
to be paid in June = $1,510,000/4 = $377,500
Income tax - to paid in first month of the quarter
income tax = 40% of estimated income of first quarter = 40% x $4,300,000
income tax = $1,720,000
Minimum cash balance – cash balance in April
= $545,000 - $332,500 = $212,500
Alpha-Tech
Cash Budget
for the second quarter of 20x5
Description
April
May
June
Beginning balance
$545,000
$545,000
$2,060,000
Collections:
February Sales
$4,800,000
March Sales
$6,600,000
$4,400,000
April Sales
$8,100,000
$5,400,000
May Sales
$8,700,000
Total receipts
$11,400,000
$12,500,000
$14,100,000
Total cash available
$11,945,000
$13,045,000
$16,160,000
Disbursements:
Accounts Payable
$4,955,000
$5,535,000
$6,085,000
Wages
$4,050,000
$4,350,000
$4,800,000
General and Administrative
$887,500
$887,500
$887,500
Property Taxes
$377,500
Income Taxes
$1,720,000
Total Disbursements
$11,612,500
$10,772,500
$12,150,000
Cash Balance
$332,500
$2,272,500
$4,010,000
Cash Borrowed
$212,500
Cash Repaid
($212,500)
Ending Balance
$545,000
$2,060,000
$4,010,000
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