Homework
mararohith918
BuildingaModel-MarvelRenovations1.xlsxBuild a Model
| Input Data | |||||||||
| Collections during month of sale | 20% 1461: Assumed constant: Do not change. |
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| Collections during month after sale | 60% 1461: This is a formula: do not change. |
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| Collections during second month after sale | 25% 1461: For problem e: Allow this to change to reflect slower collections. |
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| Lease payments | $7,000 | ||||||||
| Target cash balance | $30,000 | ||||||||
| General and administrative salaries | $25,000 | ||||||||
| Depreciation charges | $8,000 | ||||||||
| Income tax payments (Sep & Dec) | $30,000 | ||||||||
| Miscellaneous expenses | $5,000 | ||||||||
| New office suite payment (Oct) | $95,000 | ||||||||
| Cash on hand July 1 | $70,000 | ||||||||
| Sales, labor, and RM adjustment factor | 0% | ||||||||
| a. Prepare a monthly cash budget for the last six months of the year. | |||||||||
| May | June | July | August | September | October | November | December | January | |
| Original sales estimates | $75,000 | $115,000 | $145,000 | $125,000 | $120,000 | $95,000 | $75,000 | $55,000 | $45,000 |
| Original labor and raw mat. estimates | $80,000 | $75,000 | $105,000 | $85,000 | $65,000 | $70,000 | $30,000 | $35,000 | |
| Forecasted Sales | |||||||||
| Sales (gross) | |||||||||
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1461: Original sales estimate times 1 plus the sales adjustment factor. |
1461: Original sales estimate times 1 plus the sales adjustment factor. |
1461: Original sales estimate times 1 plus the sales adjustment factor. |
1461: Original sales estimate times 1 plus the sales adjustment factor. |
1461: Original sales estimate times 1 plus the sales adjustment factor. |
1461: Original sales estimate times 1 plus the sales adjustment factor. |
1461: Original sales estimate times 1 plus the sales adjustment factor. |
1461: Original sales estimate times 1 plus the sales adjustment factor. |
1461: Original sales estimate times 1 plus the sales adjustment factor. | Collections |
| During month of sale | |||||||||
| During 1st month after sale | |||||||||
| During 2nd month after sale | |||||||||
| Total collections | |||||||||
| Purchases | |||||||||
| Labor and raw materials | |||||||||
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Michael C. Ehrhardt: Original labor and RM estimates times 1 plus the sales adjustment factor. | Payments for labor and raw materials | ||||||||
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1461: Payments this month are for last months Labor and raw materials. | Payments | ||||||||
| Payments for labor and raw materials | |||||||||
| General and administrative salaries | |||||||||
| Lease payments | |||||||||
| Miscellaneous expenses | |||||||||
| Income tax payments | |||||||||
| Design studio payment | |||||||||
| Total payments | |||||||||
| Net Cash Flows | |||||||||
| Cash on hand at start of forecast period | |||||||||
| Net cash flow (NCF): Total collections – Total payments | |||||||||
| Cumulative NCF: Prior month cumulative + this month's NCF | |||||||||
| Cash Surplus (or Loan Requirement) | |||||||||
| Target cash balance | |||||||||
| Surplus cash or loan needed: Cum NCF – Target cash | |||||||||
| Max. Loan | |||||||||
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1461: Use Excels MIN function for row 54 with a minus sign in front. | b. Prepare an estimate of the required financing (or excess funds)—that is, the amount of money | ||||||||
| Marvel’s Renovations will need to borrow (or will have available to invest)—for each month during that period. | |||||||||
| e. If its customers began to pay late, this would slow down collections and thus increase the required loan amount. Also, if sales dropped off, this would have an effect on the required loan. Do a sensitivity analysis that shows the effects of these two factors on the max loan requirement. Assume the purchases of labor and raw material also vary by the sales adjustment factor. | |||||||||
| Answer: | |||||||||
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1461: Put the max loan for the base case hear. |
Note: When the percent collected during the second month after sale is changed, the percent for collections during month after sale is automatically changed so that 100% of sales are collected during the three-month period.
