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Chapter 22: Q3RQ (page 1228)
How is benchmarking beneficial?
Benchmarking is a road map of how the business entity will achieve performance goals.
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Using sensitivity analysis in budgeting
Refer to the Victors schedule of cash receipts from customers that you prepared in Short Exercise S22-15. Now assume that Victors’s sales are collected as follows:
40% in the month of the sale
20% in the month after the sale
39% two months after the sale
1% never collected
Prepare a revised schedule of cash receipts for January and February
What is a master budget?
Using sensitivity analysis in budgeting Riverbed Sporting Goods Store has the following sales budget:
Suppose June sales are expected to be \(81,000 rather than \)65,000. Revise Riverbed’s sales budget.
Preparing a financial budget—schedule of cash receipts and schedule of cash payments
Agua Cool is a distributor of bottled water. For each of the items, compute the amount of cash receipts or payments Agua Cool will budget for September. The solution to one item may depend on the answer to an earlier item.
a. Management expects to sell equipment that cost \(14,000 at a gain of \)7,000. Accumulated depreciation on this equipment is \(5,000.
b. Management expects to sell 7,100 cases of water in August and 9,000 cases in September. Each case sells for \)14. Cash sales average 20% of total sales, and credit sales make up the rest. Three-fourths of credit sales are collected in the month of the sale, with the balance collected the following month.
c. The company pays rent and property taxes of $4,500 each month. Commissions and other selling expenses average 30% of sales. Agua Cool pays one-half of commissions and other selling expenses in the month incurred, with the balance paid the following month.
What is the formula used to determine the number of units to be produced?
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