1. Battery Power, a family owned battery store, began Oct w/ $10,500 cash. Manag
ID: 2442025 • Letter: 1
Question
1. Battery Power, a family owned battery store, began Oct w/ $10,500 cash. Management forcasts that collections from credit customers will be $11,000 in October and $15,000 in November. The store is scheduled to receive $6,000 cash on a business note receivable in October. Projected cash payments include inventory purchases ($13,000 in Oct. & $13,900 in Nov.) and operating expenses ($3,000 each month).Battey Pwer's bank requires a $10,000 minimum balance in the store's checking account. At the end of any month when the account balance dips below $10,000, the bank automatically extends credit to the store in multiples of $1,000. Battery Power borrows as little as possible and pays back loans in quarterly installments of $2,000, plus 4% interest on the entire unpaid principal. The first payment occurs three month after the loan.
a.) Prepare Battery Power's cash budget for October and November
b.) How much cash wil Battery Power borrow in November if collections from customers that month total $12,000 instead of $15,000?
2..) Western Outfitters, Inc., revenue and expense information for April follows:
Sales revenue......................................................$560,000
Cost of goods sold(standard).....................................342,000
Direct materials price variance................................ 2,000 F
Direct materials efficiency variance.......................... 6,000 F
Direct labor price variance..................................... 4,000 U
Direct Labor efficiency Variance.............................. 2,000 F
Overhead flexible budget variance............................ 3,500 U
Production volume variance.................................... 8,000 F
Prepare a standard cost income statement for management through gross profit. Report all standard cost variance for management's use. Has management done a good or poor job on controlling costs? Explain.
Explanation / Answer
b)
Cash Budget if collections $12000
Cash Budget October November Opening Cash 10500 10463 Collection from Customers(11000-6000) 5000 15000 Loan from bank 11000 0 Notes Receivable 0 6000 Total Cash Available 26500 31463 Cash Disbursments Cash payment 13000 13900 Operating Expences 3000 3000 Interest on loan 11000*4%*1/12 37 23 Loan Payment 4000 Total Cash payment 16037 20923 Closing Cash balance 10463 10540b)
Cash Budget if collections $12000
November Opening Cash 10463 Collection from Customers(11000-6000) 12000 Loan from bank 0 Notes Receivable 6000 Total Cash Available 28463 Cash Disbursments Cash payment 13900 Operating Expences 3000 Interest on loan 11000*4%*1/12 23 Loan Payment 1000 Total Cash payment 17923 Closing Cash balance 10540Related Questions
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