Financial Planning and Budget Analysis
Chapter 6 and 7 Problems
Please complete the following 8 exercises below in either Excel or a word document (but must be single
document). You must show your work where appropriate (leaving the calculations within Excel cells is
acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission
button.
Chapter 6 Exercise 2
2. Schedule of cash collections
Sugarland Company sells a single product and anticipates opening a new facility in Charlotte on May 1
of the current year. Expected sales during the first three months of activity are: May, $60,000; June,
$80,000; and July, $85,000. Thirty percent of all sales are for cash; the remaining 70% are on account.
Credit sales have the following collection pattern: Collected in the month of sale 60%
Collected in the month following sale 35 Uncollectible 5
SUGARLAND COMPANY
SCHEDULE OF CASH COLLECTIONS
FOR THE THREE MONTHS ENDED JULY 31, 20XX
May June July Total
May sales
Cash $18,000 $ 18,000
Credit
June sales
Cash
25,200 $14,700
24,000
39,900
24,000
Credit
July sales
Cash
33,600
$19,600
25,500
53,200
25,500
Credit 35,700 35,700
Total
budgeted
cash
collections
$43,200 $72,300
$80,800
$196,300

Computations May sales:
$60,000 X 30% = $18,000; ($60,000 X 70%) X 60% = $25,200; ($60,000 X 70%) X 35% =
$14,700
June sales:
$80,000 X 30% = $24,000; ($80,000 X 70%) X 60% = $33,600; ($80,000 X 70%) X 35% =
$19,600
July sales:
$85,000 X 30% = $25,500; ($85,000 X 70%) X 60% = $35,700
b. The remaining collectible accounts receivable are $20,825 (($85,000 X 70%) X 35%).
Chapter 6 Exercise 4
4. Production and cash-outlay computations
RPR, Inc., anticipates that 120,000 units of product K will be sold during May. Each unit of product K requires
four units of raw material A. Actual inventories as of May 1 and budgeted inventories as of May 31 follow.
1-May 31-May
Product K (Units) 55,000 60,000
Rate Materials A (Units) 40,000 37,000
Each unit of raw material A costs $8; RPR pays for all purchases in the month of acquisition. Invoices that
account for 80% of the cost of materials acquired will be paid within 10 days of receipt, entitling the company to
a 2% cash discount.
a. Determine the number of units of product K to be manufactured in May.
Number of units of Product K to be manufactured = 120000 + 60000 – 55000 = 125,000
b. Compute the May cash outlay for purchases of raw material A.
Cash outlay for purchases of raw material A :
= (125000 x 4) + 37000 – 40000
= 500000 + 37000 – 40000 = 497,000
= (497000 x $8 x .80 x .98) + (497000 x $8 x .20)
= 3,117,184 + 795,200
Total cash outlay for purchases = $ 3,912,384

Chapter 6 Exercise 5
5. Abbreviated cash budget; financing emphasis
An abbreviated cash budget for Big Chuck Enterprises follows.
Big Chuck wishes to maintain a $10,000 minimum cash balance at all times. Additional financing is available
(and retired) in $1,000 multiples at a 12% interest rate. Assume that borrowings take place at the beginning of the
month; retirements, in contrast, occur at the end of the month. Interest is paid at the time of repaying principal and
computed on the portion of principal repaid.
A. Find the unknowns in Big Chuck's abbreviated cash budget.
July ending cash balance = -4000 + 14000 = 10000
August interest payment = 4000 x .12 x 1/12= 40
August ending cash balance = 15000 – 4000 – 40 = 10960
September interest payment = 7000 x .12 =720
September ending cash balance = 17960 -7000 – 70 = 10890
B. Determine the outstanding loan balance as of September 30, after any repayments have been made.
Outstanding loan balance, September 30 = 14000 – 4000 – 7000 = $ 3,000
July August September
Beginning cash balance $10,000 $ ? $ ?
Add: Cash receipts 50,000 63,000 71,000
Deduct: Cash payments -64,000 -58,000 -64,000
Cash excess (deficiency) before financing ($4,000) $15,000 $17,960
Financing
Borrowing to maintain minimum balance 14,000 0 -0
Principal repayment 0 -4,000 -7,000
Interest payment 0 -40 -70
Ending cash balance $10,000 $10,960 $10,890

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