BUSN 5200 Homework Assignment for Week 5



Question 1. Prepare a budget for this year for the
Administrative Department at Tom’s Toyota Company based on the following

Last Year Forecasting
Assumption Budget for this

Salaries $60,000 2%
increase ___________

Stationary $
900 1% decrease ___________

Telephone $
2,500 3% increase ___________

Electricity $
1,200 2.5% increase ___________

Office Rent $10,000
2% increase ___________

Depreciation $
4,000 no change ___________

Total: $78,600

Question 2. Define a “Static Budget.”

Question 3. Define a “Flexible Budget.”

Question 4. Define the term “Zero-based Budgeting.”

Question 5. Define “Period Budgets.”

Question 6. Define “Rolling Budgets.”

Question 7. Big Bob’s Discount Appliances expects sales of
$5,000, $5,000, and $10,000 during April, May, and June (big sale in June). To
build business, Big Bob lets all customers buy on credit, and all do so. In the
past, 50% of Big Bob’s sales have been collected during the month of sale, 40%
are collected the following month, and 10% the month after that. If this trend
continues, what will be Big Bob’s total cash collections in the month of June?

Question 8. Little Louie’s expects to have $100 in cash on
hand at the beginning of June, and the company’s target cash balance is $100.
Net cash flow for June is minus $300. Assuming that Little Louie’s borrows to
meet short term cash needs and pays back as soon as surplus cash is available,
what will be the company’s ending cash balance after financing at the end of

Question 9. Ma & Pa Kettle’s Chili Company has begun
selling a new chili recipe and they want you to help them with next year’s
budgeted financial statements. Using the worksheet below, complete Ma &
Pa’s forecast and answer the questions which follow.


To begin with, Ma & Pa are sure sales will grow 50% next
year. Assume that is true. Then assume that COGS, Current Assets, and Current
Liabilities all vary directly with Sales (that means if sales grows a certain
percentage, then the account in question will grow by that same percentage).
Assume that fixed expenses will remain unchanged and that $1,000 worth of new
Fixed Assets will be obtained next year. Lastly, the current dividend policy
will be continued next year.

Ma & Pa Kettle Chili Company, Inc.

Financial Forecast


This year for next year

Sales $10,000 ________

COGS 4,000 ________

Gross Profit
6,000 ________

Fixed Expenses 3,000 ________

Before Tax Profit
3,000 ________

Tax @ 33.3333%
1,000 ________

Net Profit
$2,000 ________

$0 ________

Current Assets $25,000 ________

Net Fixed Assets
15,000 ________

Total Assets
$40,000 ________

Current Liabilities $17,000 ________

Long term debt 3,000 ________

Common Stock 7,000 ________

Retained Earnings
13,000 ________

Total Liabs & Eq $40,000 ________

Amount need to balance the balance sheet ________

(Projected total assets minus projected

total liabilities & equity *)

* If this number is XXXXX it means Ma & Pa need
additional external funding to finance their projected asset growth. If this
number is XXXXX it means Ma & Pa have programmed too much financing for the
amount of assets they project.


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