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13-23. Estimate Sales Revenues
Friendly Financial has $160 million in consumer loans with an average interest rate of 12.5 percent. The bank also
has $96 million in home equity loans with an average interest rate of 8 percent. Finally, the company owns $20
million in corporate securities with an average rate of 5 percent.
Managers at Friendly Financial estimate that next year its consumer loan portfolio will rise to $168 million and
the interest rate will fall to 10.5 percent. They also estimate that its home equity loans will fall to $80 million with
an average interest rate of 9 percent, and its corporate securities portfolio will increase to $25 million with an
average rate of 6 percent. Required
Estimate Friendly Financial?s revenues for the coming year. 13-24. Estimate Sales Revenues
Larson, Inc., manufactures backpacks. Last year, it sold 85,000 of its basic model for $25 per unit. The company
estimates that this volume represents a 20 percent share of the current market. The market is expected to
increase by 15 percent next year. Marketing specialists have determined that as a result of new competition, the
company?s market share will fall to 16 percent (of this larger market). Due to changes in prices, the new price for
the backpacks will be $22 per unit. This new price is expected to be in line with the competition and have no
effect on the volume estimates.
Estimate Larson?s sales revenues from this model of backpack for the coming year. 13-28. Estimate Production Levels: Capacity Constraints
Waterloo, Ltd. manufactures a component used in aircraft navigation systems. Demand has been strong and the
executive staff at Waterloo is planning for next year. Yesterday, you were called into a budgeting meeting where
production plans are being reviewed. You learn that the inventory policy at Waterloo is to hold one and one-half
months? worth of sales (to avoid issues with transportation disruptions). The sales budget for next year is 660,000
units, spread evenly over the year. Because of an unexpected increase in demand, inventory at the end of this year
is expected to be only 30,000 units. The capacity of the plant is 700,000 units annually.
What production level next year will be required to meet the targets?
Are there any issues that you believe you should bring to the attention of the executive staff?
Do you have any suggestions for the resolution of these issues? 13-29. Estimate Production and Materials Requirements.
The Casings Plant of Wyoming Machines makes plastics shells for the company?s calculators. (Each calculator
requires one shell.) For each of the next two years, Wyoming expects to sell 160,000 calculators. The beginning
finished goods inventory of shells at the Casings Plant is 20,000 units. However, the target ending finished goods
inventory for each year is 5,000 units.
Each unit (shell) requires 6 ounces of plastic. At the beginning of the year, 60,000 ounces of plastic are in
inventory. Management has set a target to have plastic on hand equal to two months? sales requirements. Sales
and production take place evenly throughout the year. Required
Compute the total targeted production of the finished product for the coming year.
Compute the required amount of plastic to be purchased for the coming year. 13-31. Estimate Purchases and Cash Disbursements.
Lakeside Components wishes to purchase parts in one month for sale in the next. On May 31, the company has
12,000 parts in stock, although sales for the next month (June) are estimated to total 12,900 parts. Total sales of
parts are expected to be 10,500 in July and 11,100 in August.
Parts are purchased at a wholesale price of $15. The supplier has a financing arrangement by which Lakeside
Components pays 60 percent of the purchase price in the month when the parts are delivered and 40 percent in
the following month. Lakeside purchased 15,000 parts in May.
Estimate purchases (in units) for June and July.
Estimate the cash required to make purchases in June and July. 13-32. Estimate Cash Disbursements.
Cascade, Ltd., a merchandising firm, is preparing its cash budget for March. The following information is available
concerning its inventories:
Inventories at beginning of March $ 378,750 Estimated purchases for March 1,485,000 Estimated cost of goods sold for March 1,518,750 Estimated payments in March for purchases in February 371,250 Estimated payments in March for purchases prior to February 67,500 Estimated payments in March for purchases in March 60% Required
What are the estimated cash disbursements in March? 13-33. Estimate Cash Collections.
Minot Corporation is preparing its cash budget for August. The following information is available concerning its
accounts receivable: Estimated credit sales for August
Actual credit sales for July
Estimated collections in August for credit sales in
Estimated collections in August for credit sales in July
Estimated collections in August for credit sales prior to
Estimated write-offs in August for uncollectible credit
Estimated provision for bad debts in August for credit
sales in August Required $180,0
6,300 What is the estimated amount of cash receipts from accounts receivable collections in August? 13-35. Estimate Cash Receipts.
Scare-2-B-U (S2BU) specializes in costumes for all occasions. The average price of each of its costumes is $240.
For each occasion, S2BU receives a 20 percent deposit two months before the occasion, 50 percent the month
before, and the remainder on the day the costume is delivered. Based on information at hand, managers at S2BU
expect to make costumes for the following number of occasions during the coming months:
What are the expected revenues for S2BU for each month, April through September? Revenues are
recorded in the month of the occasion.
What are the expected cash receipts for each month, April through July?
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