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(b)

Cash sales to exporters lead to 5% 40% drop in sales across products.


Oct.

Unit production and


sales
- Chairs
- Tables
- Cabinets
- Total revenuea
- Cash sales:
(25%+35%)/
95% of revenue
- Credit card
sales: 35% /95%
of rev.
- Exporter sales:
40% of rev. in
2003; all cash
in 2004
- Bad debts: 3%
of export sales
- Cash sales
discounts: 5% of
cash sales
- Cred. card fees:
3% of credit
card sales

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

900
975
950
1,000
1,167
1,155
1,171
175
188
201
196
232
238
245
90
102
95
107
118
117
123
$499,500 $547,800 $541,900 $569,000 $654,600 $655,800 $676,100

1,176
247
120
$673,500

$124,875 $136,950 $135,475 $359,368 $413,432 $414,189 $427,011

$425,368

$174,825 $191,730 $189,665 $209,632 $241,168 $241,611 $249,089

$248,132

$199,800 $219,120 $216,760

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$17,968

$20,672

$20,709

$21,351

$21,268

$6,289

$7,235

$7,248

$7,473

$7,444

June
Unit production
and sales
- Chairs
- Tables
- Cabinets
- Total revenuea
- Cash sales:
(25%+35%)/
95% of revenue
- Credit card
sales: 35%/95%
of rev.
- Exporter sales:
40% of rev. in
2003; all cash
in 2004
- Bad debts: 3%
of export sales
- Cash sales
discounts: 5%
of cash sales
- Cred. card fees:
3% of credit
card sales

July

Aug.

Sept.

Oct.

Nov.

Dec.

Total

1,180
1,170
1,175
1,198
1,195
1,183
1,168
250
237
248
238
243
239
250
123
121
119
124
123
123
117
$682,400 $665,100 $672,400 $677,000 $679,100 $673,100 $669,200 $7,947,300

$430,989 $420,063 $424,674 $427,579 $428,905 $425,116 $422,653 $5,019,347


$251,411 $245,037 $247,726 $249,421 $250,195 $247,984 $246,547 $2,927,953

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$21,549

$21,003

$21,234

$21,379

$21,445 $21,256

$21,133

$250,967

$7,542

$7,351

$7,432

$7,483

$7,396

$87,839

$7,506

a Chair price is $200, table price is $900, and cabinet price is $1,800.

$7,440

Carpenter and helper hours


- Required carpenter hoursb
- Carpentersc
- Helpers: 1.5 number of
carpenters
- Carpenter regular hours:
172 per carpenter
- Carpenter overtime hours
- 5% of regular carpenter hrs,
must be > overtime hoursc
- Helper regular hours:
172 per helper
- Helper overtime hours

Dec.

Carpenter and helper hours


- Required carpenter hoursb
- Carpentersc

July
Aug. Sept. Oct. Nov. Dec.
1,786.5 1,8041,818.21,823.51,808.7 1,794.2
11
11
11
11
11
11

- Helpers: 1.5 number of


carpenters
- Carpenter regular hours:
172 per carpenter
- Carpenter overtime hours
- 5% of regular carpenter hrs,
must be > overtime hoursc
- Helper regular hours:
172 per helper
- Helper overtime hours

Jan. Feb. Mar. Apr. May June


1,5321,754.8 1,7591,818.91,807.9 1,835
9
9
10
10
11
11
11

14

14

17

17

1,548 1,720 1,720 1,892 1,892


0 34.8
39
0
0

1,892
0

77.4

17

15

94.6

2,408 2,580 2,580 2,924 2,924


0 52.2 58.5
0
0

2,924
0

17

86

17

94.6

17

86

15

17

94.6

17

17

1,892 1,892 1,892 1,892 1,892 1,892


0
0
0
0
0
0
94.6

94.6

94.6

94.6

94.6

94.6

2,924 2,924 2,924 2,924 2,924 2,924


0
0
0
0
0
0

b Carpenter hours for chairs, tables, and cabinets are 0.4, 2.5, and 6, respectively.
c Add new carpenters if projected monthly overtime exceeds 5% of total regular carpenter hours

available.

Cash inflows
- From 3 months previous:
17% of export sales
- From 2 months previous:
50% of export sales
- From 1 month previous: 30% of
export sales + 97% of credit
card sales
- From current month:
95% of cash sales
- Interest on cash balance: 3%/yr if
previous mo. Ending bal. .> $50,000
- Total cash inflows

Jan.

Feb.

Mar.

Apr.

$33,966 $37,250 $36,849

May

June

$0

$0

$0

249,003 203,343 233,933 234,362 241,617

240,688

341,400 392,760 393,480 405,660 404,100

409,440

109,560 108,380

1
68
1,03
90
1,160
0
51
9
2
0
$733,929 $741,884 $664,952 $641,054 $646,616 $651,287

Cash inflows
July
Aug.
Sept.
Oct.
Nov.
Dec.
- From 3 months previous:
17% of export sales
$0
$0
$0
$0
$0
$0
- From 2 months previous:
50% of export sales
0
0
0
0
0
0
- From 1 month previous: 30% of
export sales + 97% of credit
card sales
243,868 237,686 240,295 241,938 242,689 240,545
- From current month:
95% of cash sales
399,060 403,440 406,200 407,460 403,860 401,520
- Interest on cash balance: 3%/yr if
previous mo. Ending bal. .> $50,000
1,421
1,173
1,424
1,684
1,575
1,840
- Total cash inflows
$644,349 $642,299 $647,918 $651,083 $648,124 $643,904

Cash outflows
Jan.
Feb.
Mar.
Apr.
May
June
- Carpenter wages:
$24 per regular hr.;
$36 per overtime hr.
$37,152 $42,533 $42,684 $45,408 $45,408 $45,408
- Helper wages:
$14 per regular hr.;
$21 per overtime hr.
33,712 37,216 37,349 40,936 40,936
40,936
- Supplies, etc.:
$5 per carpenter hr.
7,660
8,774
8,795
9,095
9,040
9,175
- Flexible support costs:
$20 per carpenter hr.
30,640 35,096 35,180 36,378 36,158
36,700
- Maintenance costs:
$15 per carpenter hr.
22,980 26,322 26,385 27,284 27,119
27,525
- Wood costs:
$30 per unit of woodd 125,190 143,790 144,420 149,280 148,560 150,750
- Factory rent:
$150,000 per quarter
150,000
0
0 150,000
0
0
- Capacity-related costs:
$40,000 per month
40,000 40,000 40,000 40,000 40,000
40,000
- Administrative
salaries:
$25,000 per month
25,000 25,000 25,000 25,000 25,000
25,000
- Selling costs:
$30,000 per month
30,000 30,000 30,000 30,000 30,000
30,000
- Advertising
expenditures:
$50,000 per mo.
50,000 50,000 50,000 50,000 50,000
50,000
e
42,185 48,515 48,590 50,095 49,895
50,555
- Shipping costs
- Flex. selling costs: 6%
of product list prices
34,140 39,276 39,348 40,566 40,410
40,944
- Interest on line of
credit: 10%/yr based
on last months balance
0
0
0
0
0
0
- Mach. purch.: $5,000
no. of carpenters (Jan.
45,000
0
0
0
0
0
and July)
- Total cash outflows
$673,659 $526,522 $527,751 $694,041 $542,525 $546,993

Cash outflows
July
Aug.
Sept.
Oct.
Nov.
Dec.
- Carpenter wages:
$24 per regular hr.;
$36 per overtime hr.
$45,408 $45,408 $45,408 $45,408 $45,408 $45,408
- Helper wages:
$14 per regular hr.;
$21 per overtime hr.
40,936 40,936 40,936 40,936 40,936 40,936
- Supplies, etc.:
$5 per carpenter hr.
8,933
9,020
9,091
9,118
9,044
8,971
- Flexible support costs:
$20 per carpenter hr.
35,730 36,080 36,364 36,470 36,174 35,884
- Maintenance costs:
$15 per carpenter hr.
26,798 27,060 27,273 27,353 27,131 26,913
- Wood costs:
$30 per unit of woodd 146,430 148,320 148,860 149,520 148,200 147,690
- Factory rent:
$150,000 per quarter
150,000
0
0 150,000
0
0
- Capacity-related costs:
$40,000 per month
40,000 40,000 40,000 40,000 40,000 40,000
- Administrative
salaries:
$25,000 per month
25,000 25,000 25,000 25,000 25,000 25,000
- Selling costs:
$30,000 per month
30,000 30,000 30,000 30,000 30,000 30,000
- Advertising
expenditures:
$50,000 per mo.
50,000 50,000 50,000 50,000 50,000 50,000
e
49,290 49,810 50,180 50,325 49,885 49,565
- Shipping costs
- Flex. selling costs: 6%
of product list prices
39,906 40,344 40,620 40,746 40,386 40,152
- Interest on line of
credit: 10%/yr based on
last months balance
0
0
0
0
0
0
- Mach. purch.: $5,000
no. of carpenters (Jan.
55,000
0
0
0
0
0
and July)
- Total cash outflows
$743,430 $541,978 $543,732 $694,875 $542,163 $540,519
d Units of wood: chairs are $1, tables $8; and cabinets $15

e Packaging and shipping costs: chairs are $15, tables are $65, and cabinets are $135.

Cash flow analysis


- Opening cash
- Net cash flow:
Cash inflows
cash outflows
- Cash before
financing
- Opening line-of
credit
- Line-of-credit
increase
- Line-of-credit
payment
- Line of credit
closing balance
- Ending cash:
$50,000 min.

Dec.

Jan.
Feb.
Mar.
Apr.
May
$50,000 $110,270 $325,632 $462,833 $409,846

June
$513,938

60,270

215,362

137,201

52,987

104,091

104,294

110,270

325,632

462,833

409,846

513,938

618,232

50,000

110,270

325,632

462,833

409,846

513,938

618,232

Cash flow analysis July


Aug.
Sept.
Oct.
Nov.
Dec.
- Opening cash
$618,232 $519,151 $619,471 $723,658 $679,865 $785,826
- Net cash flow:
Cash inflows
cash outflows
99,081 100,321 104,186 43,792 105,961 103,385
- Cash before
financing
519,151 619,471 723,658 679,865 785,826 889,211
- Opening line-of
credit
0
0
0
0
0
0
- Line-of-credit
increase
0
0
0
0
0
0
- Line-of-credit
payment
0
0
0
0
0
0
- Line of credit
closing balance
0
0
0
0
0
0
- Ending cash:
$50,000 min.
519,151 619,471 723,658 679,865 785,826 889,211

Judds Reproductions
Projected Income Statement
for the Year Ended December 31, 2004
Cash Sales to Exporters
Revenue
Chairs
Tables
Cabinets

$2,787,600
2,576,700
2,583,000

Flexible resource expenses


Carpenters
Helpers
Maintenance
Flexible support
Selling
Shipping
Supplies
Wood
Contribution margin
Capacity-related resource expenses
Administrative staff
a
Depreciation
Factory rent
Selling
Other factory
Other expenses
Advertising costs
Bad debts
Cash sales discounts
Credit card fees
Net interest charges
Before tax income
a

531,041
476,701
320,141
426,854
476,838
588,890
106,714
1,751,010
300,000
46,000
600,000
360,000
480,000
600,000
0
250,967
87,839
13,047

Depreciation:
Machinery, Jan. 1, 2004
Purchases: $45,000 in January and $55,000 in July
Depreciation expense: 10% of year-end balance
Machinery, Dec. 31, 2004

Based on profitability, this change is not desirable.

$360,000
100,000
(46,000)
$414,000

$7,947,300

4,678,189
$3,269,111

1,786,000

925,759
$557,352

Judds Reproductions
Projected Balance Sheet
December 31, 2004
Cash Sales to Exporters
Cash
Accounts
receivablea
Machinery and
equipmentb
Total assets

$889,211
239,151

Bank
loan

414,000

Owners
equity

$1,542,362

Total liabilities and


owners equity

$1,542,362

$1,542,362

$0

Accounts receivable, December 31, 2004 balance = $239,151 = 97% of Dec.


credit card sales + 97%, 67%, and 17% of Dec., Nov., and Oct. export sales,
respectively.

Machinery, Jan. 1, 2004


Purchases: $45,000 in January and
$55,000 in July
Depreciation expense: 10% of year-end
balance
Machinery, Dec. 31, 2004

$360,000
100,000
(46,000)
$414,000