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Total cash disbursements for S&A expenses of the original budget & Scenerio 4...11LIST OF CHARTSFigure 1.. Total cash disbursements for S&A expenses of the original budget & Scenerio 4..

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TRƯỜNG ĐẠI HỌC KINH TẾ – ĐẠI HỌC ĐÀ NẴNG

KHOA: KẾ TOÁN

-

-GROUP ASSIGNMENT

MANAGERIAL ACCOUNTING

GROUP 11 - 47K06.1

Phan Thi Quynh Trung Ngo Thi Van

Da Nang, 2023

Table of Contents

I Introduce: 4

II Cash Budget Analysis: 4

1 Cash collections analysis: 5

2 Cash disbursements analysis: 5

3 Financing Analysis: 7

II Analyse the change of the master budget in each scenerio: 8

1 Discounting prices by 20 percent, which in turn increases sales volume per month by 10 percent 8

2 Increasing the marketing budget by 10 percent per month, which in turn generates an additional 20 percent in sales revenue 9

3 Offering suppliers a one-month trade credit 11

4 Reducing rental/property related costs by 15 percent per month 12

LIST OF TABLES

Table 1 Cash budget 2

Table 2 Cash collection 3

Table 3 Cash disbursements for merchandise purchases 3

Table 4 Cash disbursements for selling and administrative expenses 5

Table 5 Cash budget in scenerio 1 6

Table 6 Total cash collection of the original budget & Scenerio 1 6

Table 7 Cash budget in scenerio 2 7

Table 8 Cash Budget in scenerio 3 9

Table 9 Ending cash balance of the original budget & Scenerio 3 9

Table 10 Cash Budget in scenerio 4 10

Table 11 Total cash disbursements for S&A expenses of the original budget & Scenerio 4 11

LIST OF CHARTS Figure 1 Ending cash balance of the original budget & Scenario 1 8

Figure 2 Total cash collection of the original budget & Scenerio 2 9

Figure 3 Ending cash balance of the original budget & Scenario 2 10

Figure 4 Ending cash balance of the original budget & Scenario 3 11

Figure 5 Total cash disbursements for S&A expenses of the original budget & Scenerio 4 12

Figure 6 Ending cash balance of the original budget and scenerio 4 13

2

GROUP EVALUATION FORM

attitude, Participation, Contributions, etc )

Evaluation by group (max 100%)

Tran Thi Ngoc Tran

(Leader)

- Introduce about company

- Analysis cash disbursements for S&A expenses and equipment purchase

- Scenario 3 & 4

-Serious, responsible, and effectively allocating specific tasks to each team member

- Closely monitoring the progress of the team's work, ensuring that the team's project is on schedule

- Successfully completing tasks

100%

Phan Thi Quynh Trung - Cash collections

analysis

- Scenario 2

- Do Word

- A serious and responsible attitude when working on group projects

- Accomplishing assigned tasks correctly

- Adhering to the team's set deadlines

100%

Ngo Thi Van - Cash

disbursements analysis

- Financing analysis

- Scenario 1

- A serious and responsible attitude when working on group projects

- Accomplishing assigned tasks correctly

- Adhering to the team's set deadlines

100%

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I Introduce:

- Company name: TCF Company

- Items: T-Shirts

- Slogan: Trendy-Confident-Fashion

- Trading company specializes in providing high quality and diverse t-shirts From simple round necks to unique prints, we constantly adapt our collections

to match the latest trends and satisfy our customers' needs

- TCF company, a start-up business, is in need of master budget for the coming year

- Preparing a cash budget helps the company predict and manage the amount of cash it will collect and spend in a certain period of time, through analyzing expected sources of revenue and expenses

II Cash Budget Analysis:

- After discussion and evaluation, our company has agreed to present the budget estimate for next year as follows:

Unit: £

Table 1 Cash budget

- Cash Budget includes 4 main parts:

- Cash collections: are all cash inflows primarily from sales (except borrowing) expected during the budgeting period

- Cash expenditure part: is all planned cash payments for the budgeting period (purchase of goods, equipment, )

- The amount of excess money (Cash collections is more than Cash disbursements) or shortage (Cash collections is less than Cash disbursements)

- Financing: is the borrowings, payables and interest expected to occur during the budgeting period (In this Cash Budget, it is assumed that all loans are borrowed on the first day of the loan period and that the loans will be repaid at the end of the quarter)

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Our company assumes the following:

1 Cash collections analysis:

We assume the sales quantity and selling price are 9.5 per unit (raw data sheet)

We choose the method of collecting 70% in cash and 30% on credit We have Cash sales as 30% of revenue, and the remaining 70% is Credit sales This month's total cash collection will be equal to this month's cash collection plus last month's credit card collection At the beginning of the year, we had a customer receivable balance of 16.200, so Total cash collection in January£ will equal the opening customer receivable balance of 16.200 plus Cash sales£

in January In the remaining months, there is no opening balance, so Total cash collection will be equal to this month's Cash sales plus last month's Credit sales

Unit: £

Table 2 Cash collection

2 Cash disbursements analysis:

a Cash disbursements for merchandise purchases:

Unit: £

Table 3 Cash disbursements for merchandise purchases

We estimate monthly cost of goods sold (COGS) to be 40% of the month's revenue, and ending inventory to be 20% of the following month's COGS Then, the total number of goods needed in the period will be equal to the sum

of Budgeted COGS and Desired ending inventory, the quantity needed to buy

in the period will be equal to the number of goods needed in the period minus the total inventory at the beginning of the period Particularly in January, Our company will need 43.054, with opening inventory of 48.800 this means£ £ our company does not need to buy more goods i.e Cash disbursement for purchase is 0

In fact, the ending inventory of January will increase by 5.740, making the£ real ending balance 12.662 and will be transferred to the beginning inventory£

of the following month At the end of the year, the company buys more and more goods, causing the Cash disbursement for purchase to gradually increase

Unit: £

My company chooses to pay 50% of the purchase within the period and 50% the following month The opening balance of accounts payable is 24.000 In£ January, there was no request to purchase additional goods during the period,

so Total cash disbursements for purchases was only 24.000 February does£ not have a 50% payment of January, so February's Total cash disbursements for purchases will be 50% February purchases of 14.398 The following£ months were similar, in general Total cash disbursements for purchases increased because the amount of goods required to purchase increased Total

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cash disbursements for purchases of December only pay 50% of December purchases, the remaining 50% will be paid the following year

b Cash disbursements for selling and administrative expenses:

Next year the company expects cash disbursements for selling and administrative expenses as follows:

Unit: £

Table 4 Cash disbursements for selling and administrative expenses Monthly expenses are budgeted £35.000 per month including:

- Rental cost: £8.000

- Marketing expenses: £4.000

- Salary: £12.000

- Depreciation (non-cash expenses): £10.000

- Other expense: £1.000

As we assume, in March and October the company outsources two advertisement projects costing £1.580 cash and £4.500 cash respectively This advertising is aimed at achieving marketing objectives, so we add the advertising costs to the marketing costs in March and October and get new marketing costs of £5.580 and £8.500 respectively

Let's say other costs and maintenance services for equipments are for selling and administrative, so we will include the maintenance services costs incurred

in May of £2.100 in other costs with the total other costs incurred born in May is £3.100

Therefore, Total cash disbursements for S&A expenses is equal to the total of the above expenses except depreciation (non-cash expenses)

c Cash disbursements for equipment purchase:

To serve the company's operations, we plan to:

- Purchases a new computer for £3.700 cash in February

- Purchases a TV for £2.000 cash in March

- Purchases an A/C for £1.000 cash in July

3 Financing Analysis:

- The company intends to maintain a minimum cash balance each month of

£18.000, the company has an agreement with a local bank that allows the company to borrow in increments of £1.000 at the beginning of each month, 3% interest rate and pay interest Quarterly According to estimates, in the past

12 months the company maintained a cash balance greater than 18.000, so£ the company will not borrow money for the next year As for the £50.000 loans last year, the company will pay both principal and interest the month it has enough money to pay In February, the company's money was above the minimum level and enough to repay the loan, assuming the loan of £50.000 was borrowed from the beginning of December last year, the interest rate is 3% for 3 months

- So in February, the total financial costs the company had to pay were £50.000 loans principal and 1.500 interest It is forecast that the cash flow in the£ company is increasing

1 Discounting prices by 20 percent, which in turn increases sales volume per month by 10 percent.

In this context, we have a new cash budget as follows:

Unit: £

Table 5 Cash budget in scenerio 1 Assuming we find a supplier with a cheaper price, we reduce the price by 20% and increase the sales volume by 10% Monthly sales decreased compared to the beginning, so total cash collection decreased

Unit: £

Table 6 Total cash collection of the original budget & Scenerio 1 From my view point, revenue decreases so COGS also decreases and the total value of goods purchased during the period will also decrease Therefore, Cash

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disbursement for purchase will decrease The number of products sold increased but the revenue and Cash disbursement for purchase decreased due to the decrease in product price Besides, the amount of purchases paid later is also reduced The company is buying goods at a lower price than the original price

Schedule of expected cash disbursements for S&A expenses is not affected, recording reduced prices and increased sales volume

Although it increased revenue and reduced selling prices, it did not have a strong impact on the company's minimum monthly cash flow Every month the company has cash greater than 18.000 and no loans appear Ending cash£ balance decreases compared to the beginning because the cash source from revenue decreases Reducing selling prices reduces the company's cash source even though revenue increases

Figure 1.Ending cash balance of the original budget & Scenario 1

2 Increasing the marketing budget by 10 percent per month, which in turn generates an additional 20 percent in sales revenue

Assuming we increase our marketing budget by 10% each month, we get the following new cash budget:

Unit: £

Table 7 Cash budget in scenerio 2

In this way, our products will be recognized and accessed by more people, the number of products sold will increase, and our total revenue will increase by 20% each month Monthly quantity and revenue increase, so Total cash collection increases

Figure 2 Total cash collection of the original budget & Scenerio 2 When marketing expense increases by 10% each month, salaries and wages, rental cost, machine (Depreciation) and other costs remain unchanged, then Total cash disbursements for selling and administrative expenses increase by an

10

amount equal to the percentage increase in marketing expense to Total cash disbursements increased

Total cash collection increases, resulting in an increase in Total cash available The amount of money in the company increased compared to the initial level

In conclusion, when marketing budget is increased, revenue will increase, the amount of money in the company will increase and the company can focus on financial management more effectively Therefore, the company should implement a policy of increasing marketing budget

Figure 3 Ending cash balance of the original budget & Scenario 2

3 Offering suppliers a one-month trade credit.

Initially, we planned that when purchasing goods from suppliers, we would pay 50% in the month of purchase and the rest would be paid in the following month If in the context of offering suppliers a one-month trade credit, we have

a new cash budget table as follows:

Unit: £

Table 8 Cash Budget in scenerio 3

Then the company's amount at the end of each month increases compared to the original estimate:

Unit: £

Table 9 Ending cash balance of the original budget & Scenerio 3

Figure 4 Ending cash balance of the original budget & Scenario 3 When there is a debt opportunity in a month, the company can focus on managing its finances more carefully This may include planning spending and managing financial resources effectively, to ensure the ability to repay debt on time

The ability to owe one month helps the company create flexibility in managing cash flow In case the company encounters temporary financial difficulties, the company can delay debt payments for 1 month, thereby reducing financial pressure during that period

When a supplier allows a company to owe a month, this can create a positive collaborative environment between the two parties Suppliers can have confidence in the company's ability to pay, and the company can build long-term relationships with suppliers based on their reliability and trust Therefore, the company should implement this policy

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4 Reducing rental/property related costs by 15 percent per month

When rental costs decrease by 15%, we have a new cash budget as follows:

Unit: £

Table 10 Cash Budget in scenerio 4 Instead of the rental cost being £8.000 a month, in this scenario the rental cost will be reduced by 15%, which is £6.800, leading to a decrease in Total cash disbursements for S&A expenses

Unit: £

Table 11 Total cash disbursements for S&A expenses of the original budget &

Scenerio 4

Figure 5 Total cash disbursements for S&A expenses of the original budget &

Scenerio 4

In general, although rental costs have been reduced, the ending cash balance has not changed significantly In the first 4 months there was almost no change,

in the following months the amount at the end of the period increased more than the ending cash balance of the original budget So in Scenerio 4, the company should consider implementing it

Figure 6 Ending cash balance of the original budget and scenerio 4

Conclusion:

All 4 have their own advantages and disadvantages In context 1, the company's cash flow at the end of each month is lower than the initial estimate In context

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