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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 NẴNGKHOA: KẾ TOÁN

-GROUP ASSIGNMENTMANAGERIAL ACCOUNTING

GROUP 11 - 47K06.1

Phan Thi Quynh TrungNgo Thi Van

Da Nang, 2023

Table of Contents

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 CHARTSFigure 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

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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 teammember.

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

- Successfully completing tasks

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

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

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

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

II Cash Budget Analysis:

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

the budgeting period (In this Cash Budget, it is assumed that all loans areborrowed on the first day of the loan period and that the loans will be repaid atthe 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 haveCash sales as 30% of revenue, and the remaining 70% is Credit sales Thismonth's total cash collection will be equal to this month's cash collection pluslast month's credit card collection At the beginning of the year, we had acustomer 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 cashcollection will be equal to this month's Cash sales plus last month's Creditsales.

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'srevenue, 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 sumof Budgeted COGS and Desired ending inventory, the quantity needed to buyin the period will be equal to the number of goods needed in the period minusthe total inventory at the beginning of the period Particularly in January, Ourcompany 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 forpurchase 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 andmore goods, causing the Cash disbursement for purchase to graduallyincrease.

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 disbursementsfor purchases will be 50% February purchases of 14.398 The following£months were similar, in general Total cash disbursements for purchasesincreased because the amount of goods required to purchase increased Total

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cash disbursements for purchases of December only pay 50% of Decemberpurchases, 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 andadministrative expenses as follows:

Unit: £

Table 4 Cash disbursements for selling and administrative expensesMonthly 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 twoadvertisement projects costing £1.580 cash and £4.500 cash respectively Thisadvertising is aimed at achieving marketing objectives, so we add theadvertising costs to the marketing costs in March and October and get newmarketing costs of £5.580 and £8.500 respectively.

Let's say other costs and maintenance services for equipments are for sellingand administrative, so we will include the maintenance services costs incurredin May of £2.100 in other costs with the total other costs incurred born inMay is £3.100.

Therefore, Total cash disbursements for S&A expenses is equal to the total ofthe 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 thecompany 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 past12 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 £50.000loans last year, the company will pay both principal and interest the month ithas enough money to pay In February, the company's money was above theminimum level and enough to repay the loan, assuming the loan of £50.000was borrowed from the beginning of December last year, the interest rate is3% for 3 months.

- So in February, the total financial costs the company had to pay were £50.000loans 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 tothe beginning, so total cash collection decreased.

Unit: £

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

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disbursement for purchase will decrease The number of products soldincreased but the revenue and Cash disbursement for purchase decreased due tothe decrease in product price Besides, the amount of purchases paid later isalso reduced The company is buying goods at a lower price than the originalprice.

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 astrong impact on the company's minimum monthly cash flow Every month thecompany has cash greater than 18.000 and no loans appear Ending cash£balance decreases compared to the beginning because the cash source fromrevenue decreases Reducing selling prices reduces the company's cash sourceeven 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 thefollowing new cash budget:

Unit: £

Table 7 Cash budget in scenerio 2

In this way, our products will be recognized and accessed by more people, thenumber of products sold will increase, and our total revenue will increase by20% each month Monthly quantity and revenue increase, so Total cashcollection increases.

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

10

amount equal to the percentage increase in marketing expense to Total cashdisbursements 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, theamount of money in the company will increase and the company can focus onfinancial management more effectively Therefore, the company shouldimplement 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 pay50% in the month of purchase and the rest would be paid in the followingmonth If in the context of offering suppliers a one-month trade credit, we havea 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 tothe 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 onmanaging its finances more carefully This may include planning spending andmanaging financial resources effectively, to ensure the ability to repay debt ontime.

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

When a supplier allows a company to owe a month, this can create a positivecollaborative environment between the two parties Suppliers can haveconfidence 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 costwill be reduced by 15%, which is £6.800, leading to a decrease in Total cashdisbursements 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 balancehas 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 morethan the ending cash balance of the original budget So in Scenerio 4, thecompany should consider implementing it.

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

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

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2, it shows that when increasing marketing costs by 10%, the company's cashflow at the end of each month increases significantly compared to othercontexts Therefore, our company will apply this policy of increasingmarketing costs next year.