EXERCISE 7.

2
2) The company " Comercial del Sur SA", prepare their budgets for 2002. Here is some data from the company: Sales forecast for 2002 Sales 2002: JANUARY FEBRUARY MARCH APRIL Some balance sheet data at December 31, 2001: Balance Sheet 2001: CASH CUSTOMERS November sales December sales INVENTORY OF GOODS SUPPLIERS (GOODS) ADDITIONAL INFORMATION: $ $ $ $ 140,000 140,000 160,000 200,000

$ $

36,000 80,000

a) The sales are on credit. The 60% of sales is charged for the following month of the transaction, 40% to the second month

Sales Charge: 1er month 2do month % charged after the transaction 60% 40%

Sales 2002: JANUARY $ FEBRUARY 140,000 $ 84,000 MARCH 84,000 APRIL 96,000 $ MARCH 56,000 APRIL 56,000 MAY 64,000

FEBRUARY

140,000 $

MARCH

160,000 $

APRIL

MAY 200,000 $ 120,000

JUNE $ 80,000

b) The cost of sales is 50% of sales COST OF SALES = Sales 2002: JANUARY FEBRUARY MARCH APRIL $ $ $ $ 140,000 140,000 160,000 200,000 50% SALES Cost of Sales 2002: JANUARY FEBRUARY MARCH APRIL

c) Other variable costs are 10% of sales, you pay the same month in which they are incurred. OTHER EXPENSES VAR = Sales 2002: JANUARY FEBRUARY MARCH APRIL $ $ $ $ 140,000 140,000 160,000 200,000 10% SALES Other Expenses variables 2002: JANUARY FEBRUARY MARCH APRIL

d) The final inventory is 150% of what is required for sales the following month. Inventory Final = 150% SALES NEXT MONTH Inventory Final 2002: $ $ $ $ 70,000 70,000 80,000 100,000 JANUARY FEBRUARY MARCH

Cost of Sales 2002: JANUARY FEBRUARY MARCH APRIL

The Finals are made initial inventory for the next month Inventory Final 2002: December JANUARY FEBRUARY MARCH Inventory Initial 2002: $ $ $ $ 52,000 105,000 120,000 150,000 JANUARY FEBRUARY MARCH APRIL

e) Purchases are paid the following month made f) Fixed expenses are $ 15,000 per month. Includes $ 5,000 of depreciation expense WITH FIXED EXPENSES D= $ 15,000 DEPRECIATION = $ 5,000 NO FIXED EXPENSES DEP = $ 10,000 g) Top management will implement in 2001 a new policy on cash

Perform: 1) Prepare a purchases budget for each of the first three months of 2002 and describe your procedure 2) Prepare an income statement for each of the first 4 months 3) Prepare a cash budget for each of the first four months of 2002, showing the balance before interest and ending balance 4) It is assumed that May was a cash balance before financing of $ 30,000 How would you respond about the new policy fr minimum cash balance? Cash balance = $ 30,000 Ending balance in cash = $ 10,000

EXERCISE SOLUTION 7.2 SHOPPING BUDGET

Comercial del Sur S.A
to December 31, 2002 JANUARY Cost of Sales (+) Inventory Final (-) Inventory Initial
$ $ $ $ 70,000 105,000 (52,000) 123,000

FEBRUARY
$ $ $ $ 70,000 120,000 (105,000) 85,000

SHOPPING

STATE OF RESULTS
Comercial del Sur S.A
to December 31, 2002 JANUARY $ 140,000 $ (70,000) $ 70,000 $ (15,000) $ (14,000) $ 41,000 FEBRUARY $ 140,000 $ (70,000) $ 70,000 $ (15,000) $ (14,000) $ 41,000

Sales (-) Cost of sales (=) Utility gross in sales (-) Fixed Expenses (-) Other variable costs (=) Utility in operations

Sales Charge 1er month 2do month % charged after the transaction 60% 40%

COLLECTION SCHEDULE
Comercial del Sur S.A
to December 31, 2002 SALES 36,000 80,000 140,000 140,000 160,000 556,000 JANUARY FEBRUARY MARCH $ 36,000 $ 48,000 $ 32,000 $ 84,000 $ 56,000 $ 84,000 $ 84,000 $ 116,000 $ 140,000

November December January February March TOTAL

$ $ $ $ $ $

SCHEDULE OF PAYMENT A SUPPLIERS

Comercial del Sur S.A
to December 31, 2002 SHOPPING $ 45,000 $ 123,000 $ 85,000 $ 110,000 $ 363,000 JANUARY $ 45,000 FEBRUARY $ 123,000

December January February March TOTAL

45,000 $

123,000

BUDGET OF FLOW OF CASH

Comercial del Sur S.A
to December 31, 2002 JANUARY FEBRERO $ 10,000 $ 25,000 $ $ $ $ $ $ $ $ 84,000 $ 94,000 $ (45,000) (10,000) (14,000) 25,000 (15,000) 10,000 116,000 141,000

Beginning Cash Balance (+) Cash Check Customer Billing (=) Available Cash (-) Cash Outputs Payments to suppliers Fixed Expense Variable Expenses (=) Inputs - Outputs Surplus or missing (=) FINAL BALANCE IN BOX

$ (123,000) $ (10,000) $ (14,000) $ (6,000) $ 16,000 $ 10,000

loan Loan Payment Interest Payment

20,000

NOTE: Loan multiple of 5 = (-) Dficit=

$ $ $

20,000 (6,000) 14,000

data from the company:

10,000

$ $

52,000 45,000

ansaction, 40% to the second month after sales

TOTAL 140,000 TOTAL 140,000 TOTAL 160,000

TOTAL $ 200,000

$ $ $ $

70,000 70,000 80,000 100,000

urred.

variables 2002: $ $ $ $

14,000 14,000 16,000 20,000

2002: $ $ $ 105,000 120,000 150,000

2002: $ $ $ $ 52,000 EJE 105,000 120,000 150,000

your procedure

e before interest and ending balance you respond about the new policy from the general direction of the

N 7.2 ET

.A

2 MARCH
$ $ $ $ 80,000 150,000 (120,000) 110,000 $

APRIL
100,000

100,000

TS

.A

2 MARCH 160,000 (80,000) 80,000 (15,000) (16,000) 49,000 APRIL 200,000 (100,000) 100,000 (15,000) (20,000) 65,000

$ $ $ $ $ $

$ $ $ $ $ $

DULE

.A

2 APRIL MAY

$ $ $

56,000 96,000 152,000

$ $

64,000 64,000

SUPPLIERS

.A

2 MARCH APRIL

$ $

85,000 $ 85,000 $ 110,000 110,000

CASH

.A

2 MARCH APRIL $ 14,000 $ 10,000 $ $ $ $ $ $ $ $ 140,000 $ 154,000 $ (85,000) (10,000) (16,000) 43,000 (33,000) 10,000 152,000 162,000

$ (110,000) $ (10,000) $ (20,000) $ 22,000 $ (12,000) $ 10,000

$ $ $

20,000 400 12,600

EXERCISE 7.3
3) The company "Leader SA" presents its balance sheet at December 31, 2001 and calls for the preparation of the position budgeted for 2002:

BALANCE SHEET
At December 31, 2001 ASSETS CURRENT Cash Customers Finished Goods Inventory TOTAL CURRENT NO CURRENT Ground Building and Equipment Accumulated Depreciation TOTAL NON-CURRENT LIABILITIES SHORT TERM suppliers Notes payable TOTAL SHORT TERM LONG-TERM Obligations payable TOTAL LIABILITIES CAPITAL ACCOUNTANT Capital contributed Capital cattle TOTAL CAPITAL TOTAL ASSETS $ 100.000 TOTAL LIABILITIES + HERITAGE

$ $ $ $

2.000 15.000 5.000 22.000

$ $ $ $

43.000 40.000 5.000 78.000

It also provides the following information: 1) The sales budget is $ 90,000 budgeted Sales = $ 90.000

2)The materials budget required is equal to 25% of sales budget budgeted Sales = Required MP = Required MP = 3) The materials purchases budget is $ 32,000 $ 90.000 25% Ventas presupuestadas 22.500

2)The materials budget required is equal to 25% of sales budget budgeted Sales = Required MP = Required MP = 3) The materials purchases budget is $ 32,000 Purchase Materials = 4)The work budget is equal to 30% of budgeted sales budgeted Sales = Labor = Labor = $ 90.000 30% Ventas presupuestadas 27.000 $ 32.000 $ 90.000 25% Ventas presupuestadas 22.500

5) The budget of indirect manufacturing costs is 10% higher than the labor budgeted Sales = Labor = Labor= $ 90.000 30% budgeted Sales 27.000 Indirect manufacturing costs =10% > MO Indirect manufacturing costs $ = 2.700 (+MO) Indirect manufacturing costs $ = 29.700

6) The operating expense budget is $ 7000 Operating Expenses = $ Depreciation budgeted = Operating Expenses = $ 7.000 Con deprec $ 2.000 5.000 sin deprec

7) The desired ending inventory of finished goods is $ 4,600 Desired Ending Inventory of Finished Goods = $ 4.600

8) 85% of 2002 sales are charged in that period while 15% will be charged on the following collection: 2002 = 2003 = 85% 15% Sales Sales 2002 76.500 2003 13.500 TOTAL 90.000

budgeted Sales

90.000

9) The 2001 account customers will be charged in 2002 Account Customers 2001 = TOTAL 10) It will pay 80% of purchases of materials in 2002. The remaining 20% will be paid in the next period Payments: 2002 = 80% Purchase Materials

Account Customers 2001 = TOTAL 10) It will pay 80% of purchases of materials in 2002. The remaining 20% will be paid in the next period Payments: 2002 = 2003 = 80% 20% Purchase Materials Purchase Materials 2002 $ 25.600 2003 $ 6.400 TOTAL $ 32.000

Compra de Materiales

32.000

11)The budgeted depreciation is $ 2000 (corresponds to GIF) Depreciation budgeted = $ 12) It will borrow $ 15,000 short-term Short term loan = 13)They settled accounts payable 2001 pay Suppliers 2001 = $ $ 15.000 2.000

14) The minimum cash balance that must be maintained is $ 2000 Minimum cash balance = $ 2.000

PERFORM: Prepare the Statement of Financial Position budgeted for 2002

EXERCISE SOLUTION 7.3

CONCEPTUAL FRAMEWORK

STATEMENT Sales (-) Cost of Sales

COST OF SALES BUDGETED Raw Material Used (+) Direct Labor

EXERCISE SOLUTION 7.3

CONCEPTUAL FRAMEWORK

STATEMENT Sales (-) Cost of Sales (=)Gross profit on sales (-) Operating Expenses (=) Operating Income

COST OF SALES BUDGETED

Raw Material Used (+) Direct Labor (+) Manufacturing expenses (=)COST OF PRODUCTION (+) Opening Stock of Finished Good (=) Finished Goods Available (-) Finished Goods Ending Inventor (=) COST OF SALES

COST OF SALES BUDGETED

El Lder S.A
to December 31, 2002 Raw Material Used (+) Direct Labor (+) Manufacturing expenses (=) COST OF PRODUCTION (+) Inventory Initial Finished Products (=) Finished Goods Available (-) Inventory Final of finished products (=) COST OF SALES $ $ $ $ $ $ $ $ 22.500 27.000 29.700 79.200 5.000 84.200 (4.600) 79.600

STATEMENT
El Lder S.A
to December 31, 2002 Sales (-) Cost of Sales (=) Gross profit on sales (-) Operating Expenses (=) Operating Income $ 90.000 $ (79.600) $ 10.400 $ (7.000) $ 3.400

CASH FLOW BUDGET

El Lder S.A
to December 31, 2002 TICKETS Deferred revenues Collections of Cts x charge last year (2001) loan TOTAL ENTRIES $ $ $ $ 2002 76.500 15.000 15.000 106.500

to December 31, 2002 TICKETS Deferred revenues Collections of Cts x charge last year (2001) loan TOTAL ENTRIES DEPARTURES Payments purchase of materials Accounts payable payment year (2001) Salaries Manufacturing expenses Operating Expenses TOTAL OUTPUT (=) DIFFERENCE (+) Initial Balance (=) Surplus or missing (+) Funding (=) BALANCE AL 31/12/2002 $ 25.600 $ 30.000 $ 27.000 $ 29.700 $ 5.000 $ 117.300 $ (10.800) $ 2.000 $ (8.800) $ 10.800 $ 2.000 $ $ $ $ 2002 76.500 15.000 15.000 106.500

BALANCE SHEET BUDGETED

El Lder S.A
Al 31 de Diciembre de 2002 ASSETS CURRENT cash customers Final Inventory of RM Final Inventory of Pro. Fin. TOTAL CURRENT NO CURRENT ground Building and Equipment Accumulated Depreciation TOTAL NON-CURRENT LIABILITIES SHORT TERM suppliers Notes payable TOTAL SHORT TERM LONG-TERM Obligations payable TOTAL LIABILITIES CAPITAL ACCOUNTANT Capital contributed Capital cattle TOTAL CAPITAL TOTAL ASSETS $ 105.600 TOTAL LIABILITIES + HERITAGE

$ $ $ $ $ $ $ $ $

2.000 13.500 9.500 4.600 29.600 43.000 40.000 (7.000) 76.000

d calls for the preparation of the statement of financial

ABILITIES HORT TERM ppliers otes payable TOTAL SHORT TERM

$ $ $

30.000 5.000 35.000

ONG-TERM bligations payable TOTAL LIABILITIES

$ $

5.000 40.000

APITAL ACCOUNTANT apital contributed

$ $ $

40.000 20.000 60.000

apital cattle TOTAL CAPITAL

OTAL LIABILITIES + HERITAGE

$ 100.000

uestadas

uestadas

uestadas

acturing costs =10% > MO acturing costs $ = 2.700 (+MO) acturing costs $ = 29.700

4.600

following

2003 13.500

TOTAL 90.000

aid in the next period

aid in the next period

2003 6.400

TOTAL $ 32.000

OST OF SALES BUDGETED

aw Material Used ) Direct Labor

OST OF SALES BUDGETED

aw Material Used ) Direct Labor ) Manufacturing expenses )COST OF PRODUCTION ) Opening Stock of Finished Goods ) Finished Goods Available ) Finished Goods Ending Inventory ) COST OF SALES

TED

$ $ $ $ $ $ $ $

22.500 27.000 29.700 79.200 5.000 84.200 (4.600) 79.600

90.000 (79.600) 10.400 (7.000) 3.400

$ $ $ $

2002 76.500 15.000 15.000 106.500

$ $ $ $

2002 76.500 15.000 15.000 106.500

$ 25.600 $ 30.000 $ 27.000 $ 29.700 $ 5.000 $ 117.300 $ (10.800) $ 2.000 $ (8.800) $ 10.800 $ 2.000

ETED

ABILITIES HORT TERM ppliers otes payable TOTAL SHORT TERM

$ $ $

6.400 30.800 37.200

ONG-TERM bligations payable TOTAL LIABILITIES

$ $

5.000 42.200

APITAL ACCOUNTANT apital contributed

$ $ $

40.000 23.400 63.400

apital cattle TOTAL CAPITAL

OTAL LIABILITIES + HERITAGE

$ 105.600