$30.00 finance help
please see attachment
1. Lapps Inc. makes a gift product that sells best during the holiday season. Retailers stock up in the fall so Lapps’ sales are largest in October and November and drop dramatically in December. The firm expects the following revenue pattern for the second half of this year ($000). The third quarter figures are actual results while the fourth quarter is a projection.
Jul Aug Sep Oct Nov Dec
Revenue $5,500 $6,000 $7,500 $8,000 $9,500 $4,000
Historically, Lapps collects its receivables according to the following pattern.
Months after sale 1 2 3
% collected 60% 20% 9%
The firm offers a 2% prompt payment discount, which is taken by about half of the customers that pay in the first month.
Lapps receives inventory one month in advance of sales. The cost of material is 40% of revenue. Invoices are paid 45 days after receipt of material.
The firm uses temporary labor to meet its seasonal production needs so payroll can be estimated at 35% of the current month’s sales.
Other expenses are a constant $1.8 million per month. A $0.7 million tax payment is scheduled for November and an expansion project will require cash of $0.5 million in October and $0.8 million in December. Lapps also has a $6 million short-term loan outstanding at the end of September. Monthly interest is 1% of the previous month end balance.
Prepare Lapps’ cash budget for the fourth quarter.
2 - Blue & Noble is a small law firm that does all of its business through billings (no cash sales). Historically the firm has collected 40% of its revenue in the month of billing, 50% during the first month after billing and 8% during the second month after billing. Two percent typically remains uncollectable. Revenue projections for the coming year are $47,500 for January and $50,000 for February. Cash receipts of $50,600 are expected in March. What revenues are the projected for March?