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Question 1 a) Cash Budget of the Landscaping Business

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Added on  2020-04-01

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The abstract is typically a short summary of the contents of the document.] Question 1 a) Cash Budget of the Landscaping Business for the three months ending September 2018: July August September Opening balance $26,500 -$74,000 $61,800 Add: Cash Receipts Fees $1,40,000 $1,60,000 $2,00,000 Proceeds from sale of surplus non-current assets $1,00,000 Total cash available $1,66,500 $1,86,000 $2,61,800 Less: Cash payments Salaries and wages $70,000 $70,000 Supplies $8,500 $9,200 $12,000 New

Question 1 a) Cash Budget of the Landscaping Business

   Added on 2020-04-01

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Business Analysis andInterpretation[Type the abstract of the document here. The abstract is typically a short summary of the contentsof the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.]
Question 1 a) Cash Budget of the Landscaping Business_1
Question 1a) Cash Budget of the Landscaping Business for the three months ending September 2018:July AugustSeptemberOpening balance$26,500-$74,000$61,800Add: Cash ReceiptsFees$1,40,000$1,60,000$2,00,000Proceeds from sale of surplus non-current assets$1,00,000Total cash available$1,66,500$1,86,000$2,61,800Less: Cash paymentsSalaries and wages$70,000$70,000$70,000Supplies$8,500$9,200$12,000New Equipment$1,20,000Purchase of plants$42,000$45,000$61,000Total payments$2,40,500$1,24,200$1,43,000Closing cash balance-$74,000$61,800$1,18,800b) If the owners of the business did not buy the equipment, instead opted to lease it under a rental of $10000, the cash budget would change.Cash Budget for the rental alternativeJuly AugustSeptemberOpening balance$26,500$36,000$1,61,800Add: Cash ReceiptsFees$1,40,000$1,60,000$2,00,000Proceeds from sale of surplus non-current assets$1,00,000Total cash available$1,66,500$2,96,000$3,61,800Less: Cash paymentsSalaries and wages$70,000$70,000$70,000Supplies$8,500$9,200$12,000Monthly rental of equipment$10,000$10,000$10,000
Question 1 a) Cash Budget of the Landscaping Business_2
Purchase of plants$42,000$45,000$61,000Total payments$1,30,500$1,34,200$1,53,000Closing cash balance$36,000$1,61,800$2,08,800From the above cash budget we see that the closing cash balance has changed as a result of change in the alternative of renting the equipment instead of buying. If the company decides to buy the equipment, the cash balance in July would be negative as the payment is being made in July. The cash balance for other two months is positive. However, if the company decides to lease the equipment, the closing cash balance for July will become positive. Henceit is recommended that the company should lease the equipment to have a positive cash balance for all the three months.It is very important for a business to have a positive cash balance for a business to run its operations smoothly. A negative cash balance may arise the need of loan from a bank which will have its own costs in the form of interest [ CITATION Ros12 \l 16393 ]. Another reason for having a cash balance is with respect to the banks. The banks need to be compensated for the banking services provided by them. Thus, a business must always ensure a positive cash balance to finance its operations. Question 2a) Break-even point for each product and the total break even points is calculated below:Break-even point = fixed costs / contribution margin per unitFixed costs = $402,800Contribution margin1 year old2 year old3 year oldTotalSelling price$20$28$45$93Variable cost per unit$12$18$27$57Contribution margin per unit$8$10$18$36Break-even point in total units
Question 1 a) Cash Budget of the Landscaping Business_3

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