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Schedule of expected cash disbursements for selling and administrative expenses .... Schedule of expected cash collections Comment: Sales will change when the price or sales volume chang

THE UNIVERSITY OF DANANG

UNIVERSITY OF ECONOMICS

- -

REPORT MANAGEMENT ACCOUNTING

Instructor : Ha Phuoc Vu Class : 47K06.1 Group : 6 Member's name : Nguyen Thi Hoang Ngoc

Tong Thi Kim Ngan

Ho Thi Yen Nhi Hoang Thi Phuong Nhi

Da Nang, 2023

Management Accounting

47K06.1 Group 6 – 2

TABLE OF CONTENTS

I CASH BUDGET 3

1 Schedule of expected cash collections 3

2 Merchandise purchases budget 4

3 Schedule of expected cash disbursements for merchandise purchases 6

4 Schedule of expected cash disbursements for selling and administrative expenses 6

5 Cash budget 7

II SCENERIOS & ANALYSE 10

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

1.1 Cash collection 10

1.2 Merchandise purchase 10

1.3 Total cash disbursements for selling and administrative expenses 10

1.4 Cash budget 11

2 Increasing the marketing budget by 10 percent per month, which in turn generates an additional 20 percent in sales revenue 11

2.1 Cash collection 11

2.2 Merchandise purchase 12

2.3 Total cash disbursements for selling and administrative expenses 12

2.4 Cash budget 13

3 Offering suppliers a one - month trade credit 14

4 Reducing rental/property - related costs by 15 percent per month 14

4.1 Cash collection 14

4.2 Merchandise purchase 14

4.3 Total cash disbursements for selling and administrative expenses 15

4.4 Cash budget 15

Management Accounting

47K06.1 Group 6 – 3

I CASH BUDGET

1 Schedule of expected cash collections

Comment: Sales will change when the price or sales volume changes, so the sales budget is calculated by multiplying the budget unit sales by the sales price

Comment: At the expected collection schedule, sales are 70% cash and 30% credit

Comment: The first month of credit sales taken from is the raw data table from Receivable Accounts

Management Accounting

47K06.1 Group 6 – 4

Comment: In addition, all credit sales of the following months are calculated as Sales minus cash sales For example, in February, subtract January's cash sales from January's sales (£27,104 = £90,345 £63,242) –

Comment: Total Cash collections consist of collections on credit sales plus collections on cash sales made in the current budget period

2 Merchandise purchases budget

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Management Accounting

47K06.1 Group 6 – 5

Comment: The first row in the merchandise purchases budget contains the budgeted cost of goods sold, which is 40% of sales from the cash collection

Comment: The budgeted cost of goods sold for the second month is £34,580 and each month’s ending inventory should equal 20% of the following month’s cost of goods sold, the desired ending inventory for the first month is £6,916

Comment: The total needs for the first month are determined by adding together the budgeted cost of goods sold of £36,138 for the month and the desired ending inventory

Management Accounting

47K06.1 Group 6 – 6

Comment: Total needs for the first month was 43,054 However, the company already has more inventory than it needs, this month's inventory balance will be added

to the desired ending inventory of the same month to calculate the beginning inventory balance of February

3 Schedule of expected cash disbursements for merchandise purchases

Comment: One - half of a month’s inventory purchases is paid for in the month

of purchase; the other half is paid in the following month

4 Schedule of expected cash disbursements for selling and administrative expenses

Comment: In the beginning, we have Salaries and wages is £12,000, Marketing expense is £4,000, Rental cost is £8,000, and Other expense is £1,000; the figures are almost the same over the months this year

Comment: About Marketing expense, during March, the company outsourced an advertisement project for £1,580 cash, so Marketing expense is £5580 (£1,580+£4,000) During November, the company outsourced a company for an advertisement project for £4,500 cash, so Marketing expense is £8,500

Management Accounting

47K06.1 Group 6 – 7

(£4,500+£4,000) This number can add up to eliminating more costs for new product advertising, if there are industry events, promotions or advertising campaigns scheduled for March or November, that may contribute to increased marketing costs,

or it may be a strategic time to invest more in marketing for a variety of reasons

Comment: About Machine, during February, the company purchased a new computer for £3,700 cash During April, the company purchased a TV for £2,000 cash During July, the company purchases an A/C for £1,000 cash During August, the company outsouces a company for the maintenance service for £2,100 cash Purchasing this machine increases the unit's costs

Comment: In conclusion, cash disbursements for selling and administrative expenses are all the expenses we are listed

5 Cash budget

Comment: A monthly cash budget will help a company avoid cash shortages during periods when a company encounters a large number of expenses The cash budget begins by entering an initial cash balance for January of £18,000

Management Accounting

47K06.1 Group 6 – 8

Comment: The £79,442 in cash collections are added to the beginning balance to arrive at the total cash available of £97,442

Comment: The total disbursements are £49,000 and the total cash available is

£97.442 , there is an excess of £48.442 Because it shows that the company's available capital exceeds the amount needed for disbursement, there will be a surplus This surplus can be used by the company for many different purposes such as investment, savings or future spending

Management Accounting

47K06.1 Group 6 – 9

Comment: Because management wants to maintain a minimum cash balance of

£16,000 , the company does not need to borrow more

Comment: In February the company used £50,000 to repayment

Management Accounting

47K06.1 Group 6 – 10

II SCENERIOS & ANALYSE

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

1.1 Cash collection

Comment: The change of Sales is M, and P, Q and Sales in requirement 1 are all 100%

P x Q = Sales Q = Sales / P (1) ⇒

In requirement 2.1: 0.8P x 1.1 Q = M% Sales

From (1) 0.8P X (1.1 Sales) / P = M% Sales ⇒

→ M = 88

 From there it can be seen that P decreases by 20%, Q increases by 10%, making sales decrease by 12%

Comment: Sales decreased by 12%, so cash sales and credit sales both decreased by 12% Total cash sales each month also decreased by 12%

1.2 Merchandise purchase

Comment: We can see clearly, when P decreases by 20%, Q increases by 10%, resulting in a decrease in sales, causing the estimated cost of goods sold and additional ending inventory to change, so the total needs also changes accordingly (£43,054  £37,888)

1.3 Total cash disbursements for selling and administrative expenses

Management Accounting

47K06.1 Group 6 – 11

Does not change total cash disbursements for selling and administrative expenses

1.4 Cash budget

Comment: As assessed above, the total cash collection decreases every month,

so the total cash available also decreases

 If we only look at the increase in Sales volume and quickly judge that this is a good solution, it can lead to the wrong decision, because Sales volume increases but Price decreases to a larger level, Sales are lower So it can be judged that this is a disadvantageous option and should not be implemented

2 Increasing the marketing budget by 10 percent per month, which in

turn generates an additional 20 percent in sales revenue

2.1 Cash collection

Revenue increases by 20%:

Comment: When revenue increases by 20%, it's important to understand the impact on different components of sales, especially Cash sales, Credit sales, and Total cash collection

If revenue is increasing by 20%, it suggests that there is an overall increase in sales, and this could include both Cash and Credit sales Cash and Credit sales increase proportionally with the overall Sales, by 20%

As revenue increases, the total cash collection will depend on the timing of cash versus credit sales and the speed at which customers make payments for credit sales, and it increase by 20% too

Management Accounting

47K06.1 Group 6 – 12

Comment: In summary, an increase in revenue by 20% suggests a general growth in sales The specific impact on cash sales, credit sales, and total cash collection will depend on the company's business model, payment terms, and how quickly customers pay their credit invoices

2.2 Merchandise purchase

Revenue increases by 20%

If revenue increases by 20%, and assuming a consistent gross profit margin, the budgeted COGS would also increase by 20%

The desired ending inventory is added to the budgeted COGS to determine the total needs, will increase by 20%

Less beginning inventory: The beginning inventory is subtracted from total needs to calculate the required purchases, it will decrease, expect January Required purchases represent the amount of inventory that needs to be purchased to meet the increased demand and maintain the desired ending inventory level, will increase too

Cash disbursement for purchase will increase by 20%, except January 2.3 Total cash disbursemen for selling and administrative expenses ts

Management Accounting

47K06.1 Group 6 – 13

Comment: Normally Marketing expense is £4,000, but in this case increase by 10%, it will become £4,400 Increased cost lead to Total cash disbursements for selling and administrative expenses increase £400

2.4 Cash budget

Comment: The increase in additional collection fees exceeds the total increase

in product purchase administrative cash allocated to sales and expenses Therefore, the cash surplus is greater than requirement 1 Businesses will need to borrow less money to maintain a minimum cash balance of £18,000

Management Accounting

47K06.1 Group 6 – 14

3 Offering suppliers a one - month trade credit

Comment: Suppose the company buys first and pays later, with payment the following month after purchase With this buy now pay later method, the company's cash will change significantly Specifically, it will increase the company's costs and decrease revenue and profits

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

4.1 Cash collection

Reducing rent/property related expenses by 15% per month does not change cash collection

4.2 Merchandise purchase

Reducing rent/property related expenses by 15% per month does not change merchandise purchase

Management Accounting

47K06.1 Group 6 – 15

4.3 Total cash disbursements for selling and administrative expenses

Comment: Costs related to rent decreased by 15% per month, specifically reduced from £8000 to £6800 per month Thereby reducing the total amount of cash disbursed for sales and management expenses each month by a small amount

4.4 Cash budget

Comment: Reducing rent/property related expenses by 15% per month causes selling and administrative expenses to decrease, leading to a decrease in total cash disbursements, thereby increasing the situation of excess (deficiency) of cash and Finally, the ending cash balance increases

 Thereby, we see that the business has reduced costs (rental costs) but sales are not affected This is the way businesses should choose to help increase company profits