BUS 180 Practice Exam

Instructions

Based on assumptions below, make a projected P&L, balance sheet and statement of cash flows for 3 months. This w

After completing the budgeted financial statements, answer the questions below the balance sheet.

Rick's Razors
Assumptions
January Razor sales in units 2,500 Days Receivable based on current month's sa
Sale price of razor $ 4.00 Days Inventory based on next month's COGS
January Razor blade sales (packs of 5) in units 2,500
Sale price of 1 razor blade pack $ 1.95
Monthly unit sales growth rate for razors and blades 3%
Razor cost of goods sold as % of sale price 70%
Razor blade cost of goods sold as % of sale price 40%
Marketing expense as a % of total sales dollars 20%
Other Fixed Expenses 2,100

Activity for January

1 - Started the business with $6,000 cash that was contributed by the owner.
2 - Borrowed $4,500 and bought $4,500 of equipment.

Activity for Feburary

1 - Bought $1,000 of equipment with cash.
Jan Feb Mar
Units sold - razors 2500 2575 2652.25
Units sold - razor blades 2500 2575 2652.25

Jan Feb Mar

P&L Statement
Razor sales 10,000 10,300 10,609
Razor blade sales 4,875 5,021 5,172
Total sales 14,875 15,321 15,781
Razor cost of goods sold 7,000 7,210 7,426
Razor blade cost of goods sold 1,950 2,009 2,069
Total cost of goods sold 8,950 9,219 9,495
Gross profit 5,925 6,103 6,286
Marketing Expenses 2,975 3,064 3,156
Other expenses 2,100 2,100 2,100
Net Income 850 939 1,030
Statement of Cash Flows
Operating Activities
Net Income 850 939 1,030
Changes in Cur. Assets and Liabilites
Change in Accounts Receivable (2,479) (74) (77)
Change in Inventory (3,687) (111) (114)
Change in Accounts Payable 4,500 (4,500) -

Cash fllow from operations

Investing Activities
Change in Equipment (4,500) 3,500 1,000
Financing Activities
Change in Notes Payable
Change in Capital 6,000 - -
Net increase in cash 683 (246) 1,839
Cash--beginning of period 1,327 510 1,761
Cash--end of period 2,010 264 3,600

Balance Sheet
Assets
Cash 1,327 510 1,761
Accounts Receivable 2,479 2,554 2,630
Inventory 3,687 3,798 3,912
Equipment 4,500 1,000
Total 11,994 7,862 8,303
Liabilities and Owners Equity
Accounts Payable 4,500
Notes Payable
Capital 6,000 6,000 6,000
Retained Earnings 850 1,789 2,818
Total 11,350 7,789 8,818

Based on the budgeted financial statements above, answer the following questions.
You need to change some of your assumptions to answer most of the questions. After answering each question

1 -Which change would results in more cash at the end of March…increase monthly unit sales growth rate from 3% to 4% or i
Increase the sale price of razor blades from 4 to 4,25
2 -What is the net income or loss in February when the razor blade cost of goods sold for all months is increased from 40% to
130
3 - What would the cash balance at the end of February be if days receivable was changed from 5 days to 10 days for all mont
367
4 - What is the cash balance at the end of January if initial razor and razor blade unit sales each increase from 2,000 to 2,500?
2010
5 - In words, give the equation for calculating breakeven number of units.
Break even units = fixed cost/(selling price per unit - variable cost per unit)
sh flows for 3 months. This will serve as the budget.

ble based on current month's sales 5

ry based on next month's COGS 12

Apr
2731.8175 Note: Don't worry about rounding units sold of razors or blades.
2731.8175

Apr

10,927
5,327
16,254
7,649
2,131
9,780 Note: Remember to determine April's COGS so you can calculate March's Inventory.
 er answering each question except #5, remember to return the assumption value to the original value.

growth rate from 3% to 4% or increase the sale price of razor blades from $4.00 to $4.25?

months is increased from 40% to 45%?

m 5 days to 10 days for all months?

h increase from 2,000 to 2,500?