Acc10707 Garden Supply Company Answers Assessment Answer
- A garden supply company has the following business transaction estimates relating to the third quarter of 2018.
Credit Sales 160960
Cash Sales 122104
Receipts from Accounts Receivable 97546
Wages 60080
Office Furniture 12109
Prepayments 4722
Administrative Expense 18818
Depreciation on Office Furniture 1454
Depreciation on PPE 35000
Provision for doubtful debts 1454
Receipt of Loan 20000
Credit Purchases 85450
Payments of Accounts Payable 69110
Accrued Wages and other expenses 9854
Prepayments - Other 1597
The cash balance at 1 July 2018 was $106826.
Required
Prepare a cash budget for the quarter ending 30 September 2018. Note that 1 mark will be deducted for each incorrect posting to the cash budget.
- The garden supply company is considering introducing various aged trees to their product range in 2019. They have provided the following information relating to its planned activities.
I year old 2 years old 3 years old
Sales mix 245,000 125,000 75,000
Selling price $15 $25 $40
Variable cost/unit 10 16 25
Total fixed cost = $351,900
Required
- Calculate the contribution margin, sales mix and weighted average cost margin for each product. Also calculate the break-even point in total units and units per product based on the 2019 data.
- Management is concerned about competition for some of its trees, and wants to alter its sales mix of trees. The total number of trees forecast to be sold remains as per question 2a. This initiative would increase annual fixed costs by $60 000 and alter the sales mix to 40 percent for 1 year old trees, 30 per cent for 2 years old trees and 30 per cent for 3 years old trees . On the available data, would you recommend the initiative Show workings.
- The garden supply company is also considering buying a small truck which costs $126 500 and is expected to earn annual net cash inflows of $63 400, $57 400, $47 000 and $39 900, before it wears out sufficiently to be unreliable and must be sold for an estimated $17 400.
Required
- If funds can earn 5 per cent, what is the small trucks NPV
- If funds earn 8 per cent, what is the small trucks NPV
- Advise management on your recommendation regarding purchase of the small truck subsequent to your NPV calculations.
- What advice would you give management if the required payback period was two years
Show calculations for a, b and d.
Answer:
<td>
|
Garden Supply Company | ||
|
For the quarter ending 30-September-2018 | ||
|
Particulars |
|
Amount |
|
| ||
|
Cash balance 01-July-2018 |
$106,826 | |
|
Receipts | ||
|
Cash Sales |
$122,104 | |
|
Receipts from Accounts Receivable |
$97,546 | |
|
Receipt of Loan |
$20,000 |
$239,650 |
|
| ||
|
Payments | ||
|
Wages |
-$60,080 | |
|
Office Furniture |
-$12,109 | |
|
Prepayments |
-$4,722 | |
|
Administrative Expense |
-$18,818 | |
|
Payments of Accounts Payable |
-$69,110 | |
|
Prepayments - Other |
-$1,597 |
-$166,436 |
|
| ||
|
Cash balance 30-September-2018 |
$180,040 | |
Solution
|
Particulars |
1 year old |
2 years old |
3 years old |
|
Selling price |
$15 |
$25 |
$40 |
|
Variable cost/unit |
10 |
16 |
25 |
|
Contribution margin |
$5 |
$9 |
$15 |
Sales mix = 245,000:125,000:75,000
= 0.55:0.28:0.17
|
Particulars |
1 year old |
2 years old |
3 years old |
|
Sales mix (a) |
0.55 |
0.28 |
0.17 |
|
Contribution margin (b) |
$5 |
$9 |
$15 |
|
Weighted average contribution margin for each product (a x b) |
$2.75 |
$2.53 |
$2.53 |
Total weighted average contribution margin = $2.75 + $2.53 + $2.53
= $7.81
Total contribution margin = (245,000 + 125,000 + 75,000) x $7.81
= 445,000 x $7.81
= $3,475,000
Total profit = Total contribution margin – Fixed assets
= $3,475,000 - $351,900
= $3,123,100
Weighted average cost margin for each product = Total profit / Total sales
= $3,123,100 / 445,000
= $7.02
Break-even point (in units) = Fixed costs / 7.81
= 351900 / 7.81
= 45,058
Break-even point (in units) product wise
= (Fixed costs / Total weighted average contribution margin) x (Sales / total sales)
1 year old = (351900 / 7.81) x (245000 / 445000)
= 24,807
2 years old = (351900 / 7.81) x (125000 / 445000)
= 12,657
3 years old = (351900 / 7.81) x (75000 / 445000)
= 7,594
(b)
Total profit = Total contribution margin – Fixed assets
= $3,475,000 - $351,900
= $3,123,100
New sales mix for 1 year old = 40% x 445000
= 178000
New sales mix for 2 years old = 30% x 445000
= 133500
New sales mix 3 years old = 30% x 445000
= 133500
New fixed cost = Old fixed cost + additional costs
= 351900 + 60000
= $411,900
|
Particulars |
1 year old |
2 years old |
3 years old |
|
Sales mix (a) |
178,000 |
133,500 |
133,500 |
|
Contribution margin (b) |
$5 |
$9 |
$15 |
|
Total contribution margin (a x b) |
$890,000 |
$1,201,500 |
$2,002,500 |
Total contribution margin = $890,000 + $1,201,500 + $2,002,500
= $4,094,000
Total profit = Total contribution margin – Fixed costs
= $4,094,000 - $411,900
= $3,682,100
Increase in profit due to change in sales mix = $3,682,100 - $3,123,100
= $559,000
Change in sales mix leads to increase in profit. Therefore, management should accept this new initiative.
Solution 3
Cost of small truck = $126,500.00
Salvage value of truck = $17,400.00
|
Year |
Cash flows |
Present Value Factor @ 5% |
Present Value of cash flows |
|
0 |
-$126,500.00 |
1.00000 |
-$126,500.00 |
|
1 |
$63,400.00 |
0.95238 |
$60,380.95 |
|
2 |
$57,400.00 |
0.90703 |
$52,063.49 |
|
3 |
$47,000.00 |
0.86384 |
$40,600.37 |
|
4 |
$57,300.00 (39900 + 17400) |
0.82270 |
$47,140.85 |
|
|
$73,685.66 |
NPV = $73,685.66
|
Year |
Cash flows |
Present Value Factor @ 8% |
Present Value of cash flows |
|
0 |
-$126,500.00 |
1.00000 |
-$126,500.00 |
|
1 |
$63,400.00 |
0.92593 |
$58,703.70 |
|
2 |
$57,400.00 |
0.85734 |
$49,211.25 |
|
3 |
$47,000.00 |
0.79383 |
$37,310.12 |
|
4 |
$57,300.00 |
0.73503 |
$42,117.21 |
|
|
$60,842.28 |
NPV = $60,842.28
NPV is positive in both of above cases. Therefore, management should purchase trucks in both of above cases.
(d)
|
Year |
Cash flows |
Cumulative Cash flows |
|
0 |
-$126,500.00 |
-$126,500.00 |
|
1 |
$63,400.00 |
-$63,100.00 |
|
2 |
$57,400.00 |
-$5,700.00 |
|
3 |
$47,000.00 |
$41,300.00 |
|
4 |
$57,300.00 |
$98,600.00 |
Payback period = 2 + (5700 / 47000)
= 2.12 years
Actual payback period is 2.12 years whereas requirement is to have payback period of maximum 2 years. Therefore, based on this criteria, management should not purchase truck.
Buy Acc10707 Garden Supply Company Answers Assessment Answers Online
Talk to our expert to get the help with Acc10707 Garden Supply Company Answers Assessment Answers from Assignment Hippo Experts to complete your assessment on time and boost your grades now
The main aim/motive of the finance assignment help services is to get connect with a greater number of students, and effectively help, and support them in getting completing their assignments the students also get find this a wonderful opportunity where they could effectively learn more about their topics, as the experts also have the best team members with them in which all the members effectively support each other to get complete their diploma assignment help Australia. They complete the assessments of the students in an appropriate manner and deliver them back to the students before the due date of the assignment so that the students could timely submit this, and can score higher marks. The experts of the assignment help services at www.assignmenthippo.com are so much skilled, capable, talented, and experienced in their field and use our best and free Citation Generator and cite your writing assignments, so, for this, they can effectively write the best economics assignment help services.
Get Online Support for Acc10707 Garden Supply Company Answers Assessment Answer Assignment Help Online
Want to order fresh copy of the Sample Acc10707 Garden Supply Company Answers Assessment Answers? online or do you need the old solutions for Sample Acc10707 Garden Supply Company Answers Assessment Answer, contact our customer support or talk to us to get the answers of it.
Assignment Help Australia
Want to order fresh copy of the Acc10707 Garden Supply Company Answers Assessment Answers? online or do you need the old solutions for Sample Acc10707 Garden Supply Company Answers Assessment Answer, contact our customer support or talk to us to get the answers of it.
