Shown below are the budgeted sales for ABC Company for the next six months: Sale

Question

  Shown below are the budgeted sales for ABC Company for the next six months: 

                    Sales for Cash     Sales on Account January               $18,000             $ 70,000  February              $15,000             $ 90,000  March                 $24,000             $120,000  April                 $19,000             $100,000  May                   $26,000             $130,000  June                  $14,000             $ 95,000 

 On average, 30% of the sales on account are collected in the month of sale, 40% are collected in the month following sale, 10% are collected in the second month following sale, and the remaining 20% is collected three months after the month of sale. 

 Calculate the expected cash collections for April. Do not use decimals in your answer. 

 Foto Company manufactures and sells a product called JYMP. Results from last year from the sale of JYMP appear below: 

 Sales revenue (8,000 JYMPs @ $120 each) .............. $960,000 Variable costs .......................................  640,000 Contribution margin ..................................  320,000 Fixed costs: Salaries of line supervisors .........................  100,000 Advertising expense ..................................  132,000 Allocated general overhead ...........................  160,000 Net loss .............................................  <72,000> 

 Foto Company is considering eliminating the JYMP product line. The company has determined that if the JYMP product line is discontinued, the contribution margin of its other products will increase by $120,000. 

 Calculate the increase in company profits if the JYMP product line is discontinued. Do not use decimals or type the word increase after your answer. 

 On January 1, 2008, ABC Company borrowed $150,000 from the bank. The loan is a 10-year note payable that requires annual payments of $24,500 every December 31, beginning December 31, 2008. Assume the loan has a 10% annual interest rate. 

 Calculate the amount of the note payable at December 31, 2009 that would be classified as a long-term liability. Do not use decimals in your answer. 

 Apnea Video Rental Store is considering the purchase of an almost new minivan to deliver and pick up video tapes from customers. The minivan will cost $95,000 and is expected to last 10 years. However, the minivan's engine will need to be overhauled at a cost of $5,000 at the end of year 3. In addition, purchasing this minivan would require an immediate investment of $15,000 in working capital which would be released for investment elsewhere at the end of the 10 years. The minivan is expected to have a $10,000 salvage value at the end of 10 years. This delivery service is expected to generate net cash inflows of $20,000 per year in each of the 10 years. Apnea's cost of capital is 8%.  Calculate the net present value (NPV) of this investment opportunity. Do not use decimals in your answer.  You will need to use the time value of money factors posted on carmen to answer this question. No credit will be awarded for this question using a means other than these table factors to answer this question. 

Explanation / Answer

The assumptions given for collection of cash on accounts sales are

On the month of sale 30% is collected

On the next month 40% is collected

On second month following the month of sale 10% is collected

On third month following the month of sale 20% is collected

The calculations of expected cash collections are given below

The total expected cash collections are $120,000 for the month of April

January February March April Particulars Cash collections ($) Credit collections ($) Total Cash collections ($) Credit collections ($) Total Cash collections ($) Credit collections ($) Total Cash collections ($) Credit collections ($) Total Cash sales 18000 15000 24000 19000 Credit sales january collections 21000 28000 7000 14000 February collections 27000 36000 9000 March collections 36000 48000 April collections 30000 Total collections 18000 21000 39000 15000 55000 70000 24000 79000 103000 19000 101000 120000

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