Problem Set 2

757 words, 4 pages

Intro Sample...

Exp. (5% of sales) Overhead Taxes Dividends Total Cash Payments*
January $38,000 95,000 9,500 12,000 $154,500
February $42,000 105,000 10,500 12,000 $169,500
$46,000 115,000 11,500 12,000 20,000 16,000 $220,500
*The $25,000 of depreciation is excluded because it is not a cash expense.
Table 4
Cash Budget
Total Cash Receipts Total Cash Payments Net Cash Flow Beginning Cash Balance Cumulative Cash Balance Monthly Loan or (repayment) Cumulative Loan Balance Ending Cash Balance
January $146,600 154,500 (7,900) 70,000 62,100 2,900 2,900 $ 65,000
February $175,000 169,500 5,500 65,000 70,500 (2,900) -0- $ 67,600
220,500 (12,900)
$ 65,000

5-2. Hazardous Toys Company produces boomerangs that sell for $8 each and have a variable cost of $7.50. Fixed costs are $15,000.a. Compute the break-even point in units. b. Find the sales (in units) needed to earn a profit of $25,000.
Table 5
Total Fixed Costs ÷ (Selling Price - Variable Cost) = Break-even sales
$15,000 Break-even ÷ ($8 Per Unit -
.. 50
$7.50) Variable Cost = 30,000 Units
($25,000 Profit +

$15,000) Break-even ÷ ($8 Per Unit -
.. 50
$7.50) Variable Cost = 80,000 Units


7-3. City Farm Insurance has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers so checks written by City Farm take longer to clear the bank. Collection time has been reduced by two and disbursement time increased by one day because of these policies. Excess funds are being invested in short-term instruments yielding 12 percent per annum. a. If City Farm has $5 million per day in collections and $3 million per day in disbursements, how many dollars has the cash management system freed up? b. How much can City Farm earn in dollars per year on short-term investments made possible by the freed-up cash?
Table 6
a. $5,000,000 daily colle View More »

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