# Problem Set 1 Essay

777 Words Jan 27th, 2009 4 Pages
20. Juan’s Taco Company has restaurants in five college towns. Juan wants to expand into Austin and College Station and needs a bank loan to do this. Mr.
Bryan, the banker, will finance construction if Juan can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures:

Actual Forecast Information
November \$120,000 January \$190,000 April forecast \$230,000
December 140,000 February 210,000 March 230,000

Of Juan’s sales, 30 percent are for cash and the remaining 70 percent are on credit. Of credit sales, 40 percent are paid in the month after sale and 60 percent are paid in the second month after the sale. Materials cost 20
Exp. (5% of sales)
9,500
10,500
11,500
12,000
12,000
12,000
Taxes

20,000
Dividends

16,000
Total Cash Payments
\$154,500
\$169,500
\$220,500

Juan’s Taco Company Cash Budget

January
February
March
Total Cash Receipts
\$146,600
\$175,000
\$207,600
Total Cash Payments 154,500 169,500 220,500
Net Cash Flow
(7,900)
5,500
(12,900)
Beginning Cash Balance
70,000
65,000
67,600
Cumulative Cash Balance
62,100
70,500
54,700
Monthly Loan or (repayment)
2,900
(2,900)
10,300
Cumulative Loan Balance
2,900
-0-
10,300
Ending Cash Balance
\$ 65,000
\$ 67,600
\$ 65,000

2. Hazardous Toys Company produces boomerangs that sell for \$8 each and have a variable cost of \$7.50. Fixed costs are \$15,000.
a. Compute the break-even point in units.
b. Find the sales (in units) needed to earn a profit of \$25,000.

The Break-Even formula is: Fixed Cost / (Selling Price - Variable Cost) So answer to a): \$15,000 / (8.00 - 7.50) = 15,000 / .50 = 30,000 units Now to factor in a targeted profit the formula is: (Fixed Cost + Desired profit) / (Selling Price - Variable Cost) So answer to b): (15,000 + 25,000) / (8.00 - 7.50) = (40,000) / (.50) = 80,000 units

3. City Farm Insurance has collection centers across the country to speed up
collections.

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