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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

$ 140.000
$ 140.000
$ 160.000
$ 200.000

Some balance sheet data at December 31, 2001:


Balance Sheet 2001:
CASH
CUSTOMERS

November sales
December sales
INVENTORY OF GOODS
SUPPLIERS (GOODS)

$ 10.000
$ 36.000
$ 80.000
$ 52.000
$ 45.000

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

Sales Charge:
1er month
2do month

% charged after the transaction


60%
40%

Sales 2002:
JANUARY

FEBRUARY
$ 140.000 $ 84.000

MARCH
TOTAL
$ 56.000

$ 140.000

FEBRUARY

MARCH
$ 140.000 $ 84.000

APRIL
TOTAL
$ 56.000

$ 140.000

MARCH

APRIL
$ 160.000 $ 96.000

MAY
TOTAL
$ 64.000

$ 160.000

APRIL

MAY
$ 200.000 $ 120.000

JUNE
TOTAL
$ 80.000

$ 200.000

b) The cost of sales is 50% of sales


COST OF SALES =

50%

SALES

Sales 2002:
JANUARY
FEBRUARY
MARCH
APRIL

$ 140.000
$ 140.000
$ 160.000
$ 200.000

Cost of Sales 2002:


JANUARY
FEBRUARY
MARCH
APRIL

$ 70.000
$ 70.000
$ 80.000
$ 100.000

c) Other variable costs are 10% of sales, you pay the same month in which they are incurred.
OTHER EXPENSES VAR =

10%

SALES

Sales 2002:
JANUARY
FEBRUARY
MARCH
APRIL

$ 140.000
$ 140.000
$ 160.000
$ 200.000

Other Expenses variables 2002:


$ 14.000
JANUARY
$ 14.000
FEBRUARY
$ 16.000
MARCH
$ 20.000
APRIL

d) The final inventory is 150% of what is required for sales the following month.
Inventory Final =

150%

Cost of Sales 2002:


JANUARY
FEBRUARY
MARCH
APRIL

SALES NEXT MONTH


Inventory Final 2002:
$ 70.000
$ 70.000
$ 80.000
$ 100.000

JANUARY
FEBRUARY
MARCH

$ 105.000
$ 120.000
$ 150.000

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

$ 52.000
$ 105.000
$ 120.000
$ 150.000

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 from the general direction of the
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

FEBRUARY

MARCH

APRIL

Cost of Sales
(+) Inventory Final
(-) Inventory Initial

$ 70.000
$ 105.000

$ (52.000)

$ 70.000
$ 120.000

$ (105.000)

$ 80.000
$ 150.000

$ (120.000)

$ 100.000

SHOPPING

$ 123.000

$ 85.000

$ 110.000

$ 100.000

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

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

FEBRUARY
$ 140.000

$ (70.000)

$ 70.000
$ (15.000)

$ (14.000)

$ 41.000

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

Sales Charge
1er month
2do month

% charged after the transaction


60%
40%

COLLECTION SCHEDULE
Comercial del Sur S.A
to December 31, 2002

November
December
January
February
March
TOTAL

SALES
$ 36.000
$ 80.000
$ 140.000

$ 140.000

$ 160.000

$ 556.000

JANUARY
FEBRUARY
MARCH
APRIL
$ 36.000
$ 48.000 $ 32.000
$ 84.000 $ 56.000
$ 84.000 $ 56.000
$ 96.000
$ 84.000 $ 116.000

$ 140.000

$ 152.000

MAY

$ 64.000
$ 64.000

SCHEDULE OF PAYMENT A SUPPLIERS


Comercial del Sur S.A
to December 31, 2002

December
January
February
March
TOTAL

SHOPPING
$ 45.000
$ 123.000

$ 85.000
$ 110.000

$ 363.000

JANUARY
$ 45.000

FEBRUARY

MARCH

APRIL

$ 123.000

$ 85.000
$ 110.000

$ 45.000 $ 123.000

$ 85.000 $ 110.000

BUDGET OF FLOW OF CASH


Comercial del Sur S.A
to December 31, 2002

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
loan
Loan Payment
Interest Payment

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

$ 20.000
$ (6.000)

$ 14.000

JANUARY
FEBRERO
MARCH
APRIL
$ 10.000 $ 25.000 $ 14.000 $ 10.000
$ 84.000 $ 116.000

$ 140.000

$ 152.000

$ 94.000 $ 141.000

$ 154.000

$ 162.000

$ (45.000)

$ (10.000)

$ (14.000)

$ 25.000
$ (15.000)

$ 10.000

$ (123.000)
$ (10.000)

$ (14.000)

$ (6.000)

$ 16.000
$ 10.000
$ 20.000

$ (85.000)

$ (10.000)

$ (16.000)

$ 43.000
$ (33.000)

$ 10.000
$ 20.000
$ 400

$ 12.600

$ (110.000)
$ (10.000)

$ (20.000)

$ 22.000
$ (12.000)

$ 10.000