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(solution) 13-23. Estimate Sales Revenues Friendly Financial has $160


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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.

 

Required

 

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.

 

Required

 

a.

 

What production level next year will be required to meet the targets?

 

b.

 

Are there any issues that you believe you should bring to the attention of the executive staff?

 

c.

 

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

 

a.

 

Compute the total targeted production of the finished product for the coming year.

 

b.

 

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.

 

Required

 

a.

 

Estimate purchases (in units) for June and July.

 

b.

 

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

 

August

 

Estimated collections in August for credit sales in July

 

Estimated collections in August for credit sales prior to

 

July

 

Estimated write-offs in August for uncollectible credit

 

sales

 

Estimated provision for bad debts in August for credit

 

sales in August Required $180,0

 

00

 

$135,0

 

00

 

20%

 

75%

 

$

 

14,400

 

$

 

7,200

 

$

 

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:

 

April

 

May

 

June

 

July

 

August

 

Septem

 

ber 75

 

45

 

30

 

60

 

75

 

16

 

5 Required

 

a.

 

What are the expected revenues for S2BU for each month, April through September? Revenues are

 

recorded in the month of the occasion.

 

b.

 

What are the expected cash receipts for each month, April through July?

 


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