20x0 20x1 December January February March 1st Term Paper

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20x0 20x1 December January February March 1st quarter a) Sales budget Total sales 400,000 440,000 484,000 532,400 1,456,400 Cash sales 100,000 110,000 121,000 133,100 364,100 Sales on account 300,000 330,000 363,000 399,300 1,092,300 20x0 20x1 b) Cash receipts budget December January February March 1st quarter Cash sales 110,000 121,000 133,100 364,100 Cash collections from credit sales made during current month 33,000 36,300 39,930 109,230 Cash collections from credit sales made during previous month 270,000 297,000 326,700 893,700 Total cash receipts 413,000 454,300 499,730 1,367,030

20x0 20x1 c) Purchases budget December January February March 1st quarter Budgeted cost of goods sold 280,000 308,000 338,800 372,680 1,019,480 Add: Desired ending inventory 154,000 169,400 186,340 186,340 1,995,560 Total goods needed 434,000 477,400 525,140 559,020 3,015,040 Less: expected beginning inventory (140,000) (154,000) (169,400) (186,340) (509,740) Purchases 294,000 323,400 355,740 372,680 2,505,300 20x0 20x1 d) Cash disbursement budget December January February March 1st quarter Inventory purchases Cash payments from purchases during the current month 129,360 142,296 149,072 420,728 Cash payments from purchases during the preceding month 176,400 194,040 213,444 583,884 Total cash payments for inventory purchases 305,760 336,336 362,516 1,004,612 Other expenses Sales salaries 21,000 21,000 21,000 63,000 Advertising and production 16,000 16,000 16,000 48,000 Administrative salaries 21,000 21,000 21,000 63,000 Interest on bonds 15,000 0-0-15,000 Property taxes 0-5,400 0-5,400 Sales commissions 4,400 4,840 5,324 14,564 Total cash payments for other purchases 77,400 68,240 63,324 208,964 Total cash disbursements 383,160 404,576 425,840 1,213,576

20x0 20x1 e) Summary cash budget December January February March 1st quarter Cash receipts 413,000 454,300 499,730 1,367,030 Less: Cash disbursements (383,160) (404,576) (425,840) (1,213,576) Changes in cash balance during period due to operations 29,840 49,724 73,890 153,454 Sale of marketable securities (1/2/x1) 15,000 0-0-15,000 Proceeds from bank loan (1/2/x1) 100,000 0-0 100,000 Purchase of equipment (125,000) 0-0 (125,000) Repayment of bank loan (3/31/x1) 0 (100,000) (100,000) Interest in bank loan 0 (2,500) (2,500) Payment of dividends 0 (50,000) (50,000)

Change in cash balance during 1st quarter

Cash balance 1/1/x1 29,000 Cash balance 3/31/x1 38,954 f) Analysis of short-term financial needs Projected cash balance of December 31, 20x0 29,000 Less: Minimum cash balance 19,000 Cash available for equipment purchases 10,000 Projected proceeds from sale of marketable securities 15,000 Cash available 25,000 Less: Cost of investment in equipment (125,000) Required short-term-borrowing 100,000 g, h) Income statement Revenues Sales revenue 1,456,400 Proceeds from marketable securities 15,000 Bank loan 100,000 Total 1,571,400 Costs and expenses Total cash disbursements 1,213,576 Purchase of equipment 125,000 Repayment of bank loan (3/31/x1) 100,000 Interest in bank loan 2,500 Depreciation 75,000 Total 1,516,076 Profit 55,324 Payment of dividends 50,000 Retained earnings 5,324 I) Balance sheet Cash 38,954 Accounts receivable 326,700 Marketable securities 0 Inventory 186,340 Buildings and equipment 676,000 Total assets 1,227,994 Accounts payable 223,608 Bond interest payable 5,000 Property taxes payable 900 Bonds payable 300,000 Common stock 500,000 Retained earnings (cummulated) 198,486 Total liabilities and stockholders' equity 1,227,994

In order to analyze Atlantico's budgeting policy, a brief look on the theoretic basics of budgeting might prove useful.

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Budgeting is a very important tool in the hand of a manager, since it allows him / her to effectively control their business by allowing them to take informed decisions based on accurate and reliable management information. One of the advantages is that a comparison may be made between the actual performance of a company and the budgeted performance.

Another advantage budgeting is that is confers managers increased control on the business, based on variance analysis. Noticing unfavorable variances may trigger certain responses, which have the capacity to solve the already existing problems and to prevent future ones from appearing. For instance, if costs are too high, waste may be cut out or an expensive supplier might be changed. Should the sales be too low, a supplementary effort in advertising, promotion or sales could prove useful.….....

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