Reference no: EM132305004
Business Analysis and Interpretation
Question 1. Student Enterprises has the following business transaction estimates relating to the second quarter of 2019.
|
$ |
$ |
$ |
|
|
|
|
|
APRIL |
MAY |
JUNE |
| Credit Sales |
100000 |
120000 |
140000 |
| Cash Sales |
25000 |
30000 |
35000 |
| Receipts from Accounts Receivable '1. |
calculate |
calculate |
calculate |
| Wages |
30000 |
30000 |
30000 |
| Office Furniture |
5000 |
7000 |
0 |
| Prepayments |
0 |
0 |
4250 |
| Administrative Expense |
12500 |
14000 |
14500 |
| Depreciation on Office Furniture |
4000 |
4000 |
4000 |
| Receipt of Loan |
0 |
120000 |
0 |
| Credit Purchases |
45000 |
47000 |
60000 |
| Payments of Accounts Payable 2. |
calculate |
calculate |
calculate |
| Accrued Expenses |
0 |
0 |
5600 |
Notes
1. Actual Receipts from Accounts Receivable are 70% of the previous months
Credit Sales and the balance of 30% owing is received in the following month.
Credit Sales for March 2019 were $90,000 as they were in February 2019.
Cash Sales were $20,000 in February 2019 and March of 2019.
2. Paymentof Accounts Payable is paid 60% of purchases in the month of purchase and the remaining 40% in the month following. Purchases in March 2019 were $40,000.
3 The cash balance at 1 April 2019 was $50 150.
Required
Prepare a cash budget month by month for the quarter ending 30 June 2019.
Note that marks will be deducted for each incorrect posting to the cash budget.
Question 2. Student Industries Pty Ltd sells IT equipment, specialising in printers and faxes. The following statement reflects the contribution margin of each activity, and overall profit levels.
|
Printers |
Faxes |
Total |
| Sales |
$3 096 000 |
$1,595,000 |
$4 691 000 |
| Less: Variable costs |
2 260 000 |
1 065 000 |
3 325 000 |
| Contribution margin Direct fixed costs |
836 000 |
530 000 |
1 366000 |
| Common fixed costs: |
415 000 |
355000 |
770 000 |
| utilities |
|
|
40 000 |
| Other administration |
|
|
162 000 |
| Profit |
|
|
$ 394 000 |
Required
a. Calculate the contribution margin ratios for each of the two areas of activity, and in total.
b. Using the total contribution margin ratio, calculate the level of sales required to break even by item and in total.
3. Student Industries Pty Ltd is considering buying a small industrial machine which costs $134 000 and is expected to earn annual net cash inflows of $58 600, $59 600, $54 600 and $43 700, before it wears out sufficiently to be unreliable and must be sold for an estimated $114 600.
Required
a. If funds earn 5 per cent, what is its NPV?
b. If funds earn 7 per cent, what is its NPV?
c. Advise management on your recommendation regarding purchase of the machine subsequent to your NPV calculations.
d. What advice would you give management if the required payback period was two years?
Show calculations for a, b and d.