ACC10707 Session 2, 2020 Assessment 3
Business Analysis and Interpretation
1. An Enterprises has the following business transaction estimates relating to the final quarter of 2020.
$ $ $
October November December
Credit Sales 105600 112000 138000
Cash Sales 21200 26420 31200
Receipts from Accounts Receivable `1. calculate calculate calculate
Wages 28200 28200 28200
Office Furniture 6000 7800 0
Prepayments 0 0 5275
Administrative Expense 10000 10000 11900
Depreciation on Office Furniture 2500 2500 2500
Receipt of Loan 0 100000 0
Credit Purchases 42000 42000 58000
Payments of Accounts Payable 2. calculate calculate calculate
Accrued Expenses 0 0 6700
Notes
1.Actual Receipts (money in) from Accounts Receivable are 70% of the previous
months Credit Sales and the balance of 30% owing is received in the following
month. For example if we had Credit Sales of $100000 in January we would
expect to receive 70% of that $100000 in February and the balance (30%) in
March.
Credit Sales for September 2020 were $80,000 as they were in August 2020.
Cash Sales were $16,500 in August 2020 and $18,000 in September of 2020.
2. Payment of Accounts Payable is paid 60% of purchases in the month of
purchase and the remaining 40% in the month following. Purchases in
September 2020 were $36,000.
3. The cash balance at 1 October 2020 was $52,890
Required
Prepare a cash budget month by month for the quarter ending 31 December 2020.
Note that marks will be deducted for each incorrect posting to the cash budget.
(15 Marks).
2. A bicycle company is considering a range of bicycle offerings to extend its current single range. A year 1 estimate of expanding their bicycle range is as follows:
Bicycle 1 Bicycle 2 Bicycle 3
Volume 1,600 1,600 800
Selling price $500 $1200 $900
Variable cost/unit $350 $620 $590
Fixed assembly costs $90,000 $136,000 $164,000
Additional information (further fixed costs)
Sales and Marketing $172,000
Administration $190,000
Occupancy & Rent $376,000
Required:
a. Calculate the weighted average contribution margin (WACM) per bike.
b. Determine the break-even level of bikes overall and per bike-type.
c. The company is concerned about the estimates around price volume and costs. The company is thinking about raising the price of Bicycle 1 by 15% with an impact of reducing sales volume by 10%. At the same time, the company would like to try decreasing the price of bicycle 2 by 15% with an increase in sales units of 20%.
What’s the likely impact on planned profits? Show workings. What do you advise?
Show all calculations (15 Marks).
3. A company owned exclusively by residents in the New South Wales coastal community
of Coffs Harbour is offered three projects for which the cash flows are as per the table
below in thousands of dollars. The directors work on 12 per cent as their RRR. Assume
all cash flows occur at the end of the relevant years. There are no salvage values factored
into the expected cash flows, and no salvage values are expected.
Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
A -900 300 260 300 220 140
B -800 180 180 240 260 260
C -820 500 120 120 120 380
Required:
a. Calculate the Accounting Rate of Return, Payback Period and Net Present Value for each project. Show workings.
b. Rank the projects and advise the directors which projects, if any, to accept. Give
your reasons.
Show all calculations (15 Marks).

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