Question

1A)

Weller Company's budgeted unit sales for the upcoming fiscal year are provided below:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Budgeted unit sales	15,000	16,000	14,000	13,000

The company’s variable selling and administrative expense per unit is $2.50. Fixed selling and administrative expenses include advertising expenses of $8,000 per quarter, executive salaries of $35,000 per quarter, and depreciation of $20,000 per quarter. In addition, the company will make insurance payments of $5,000 in the first quarter and $5,000 in the third quarter. Finally, property taxes of $8,000 will be paid in the second quarter.

Required:

Prepare the company’s selling and administrative expense budget for the upcoming fiscal year. (Round "Per Unit" answers to 2 decimal places.)

B)

Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:

	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Total cash receipts	$	180,000	$	330,000	$	210,000	$	230,000
Total cash disbursements	$	260,000	$	230,000	$	220,000	$	240,000

The company’s beginning cash balance for the upcoming fiscal year will be $20,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded.

Required:

Prepare the company’s cash budget for the upcoming fiscal year. (Repayments, and interest, should be indicated by a minus sign.)

Answer 1

Solution

Question 1A

WELLER COMPANY
SELLING AND ADMINISTRATIVE EXPENSE BUDGET
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Budgeted Unit sales	15000	16000	14000	13000	58000
variable Selling and Administrative expenses per unit	$                   2.50	$                   2.50	$                  2.50	$                 2.50	$                  2.50
variable Selling and Administrative expenses	$         37,500.00	$        40,000.00	$        35,000.00	$       32,500.00	$     145,000.00
Fixed Selling and Administrative expenses
Advertising Expense	$           8,000.00	$           8,000.00	$          8,000.00	$         8,000.00	$        32,000.00
Executive Salaries	$         35,000.00	$        35,000.00	$        35,000.00	$       35,000.00	$     140,000.00
Depreciation	$         20,000.00	$        20,000.00	$        20,000.00	$       20,000.00	$        80,000.00
Insurance	$           5,000.00		$          5,000.00		$        10,000.00
Property taxes		$           8,000.00			$          8,000.00
Total Fixed Selling and Administrative expenses	$         68,000.00	$        71,000.00	$        68,000.00	$       63,000.00	$     270,000.00
Total Selling and Administrative expenses	$      105,500.00	$      111,000.00	$     103,000.00	$       95,500.00	$     415,000.00
Less: Non cash expense (deprectaion)	$         20,000.00	$        20,000.00	$        20,000.00	$       20,000.00	$        80,000.00
Cash Disbursement for selling and administrative expenses	$         85,500.00	$        91,000.00	$        83,000.00	$       75,500.00	$     335,000.00

Question B

Garden Depot
Cash budget
	Q1	Q2	Q3	Q4	Year
Beginning Cash balance	$     20,000.00	$       10,000.00	$      35,800.00	$     25,800.00	$           20,000.00
Total cash receipt	$ 180,000.00	$     330,000.00	$   210,000.00	$   230,000.00	$        950,000.00
Total cash available	$ 200,000.00	$     340,000.00	$   245,800.00	$   255,800.00	$        970,000.00
Less: Total cash disbursement	$ 260,000.00	$     230,000.00	$   220,000.00	$   240,000.00	$        950,000.00
Excess of cash available over disbursement	$ (60,000.00)	$     110,000.00	$      25,800.00	$     15,800.00	$           20,000.00
Financing:
Borrowings	$     70,000.00				$           70,000.00
Repayments	$                    -	$     (70,000.00)	$                     -	$                     -	$        (70,000.00)
Interest	$                    -	$       (4,200.00)	$                     -	$                     -	$           (4,200.00)
Total financing	$     70,000.00	$     (74,200.00)	$                     -	$                     -	$           (4,200.00)
Ending cash balance	$     10,000.00	$       35,800.00	$      25,800.00	$     15,800.00	$           15,800.00

.Loan is taken at the beginning of the quarter and paid at the end of second . This means Loan of 70000 is taken at beginning of Q1 and repaid at End of Q2 so 2 Quarters interest will be paid on $70000.

.

Beginning cash of Quarter 1 is the beginning cash of Year.