Use The Exhibits In The Excel File To Prepare A S ✓ Solved

Use The Exhibits In The Excel File To Prepare A S

Read the case 2. Use the exhibits in the Excel file to prepare a six-month budget. Use the blanks tab in the Excel file to prepare:

• Sales budget
• Production budget (note: ending inventory should be 300 units + 20% of next month’s sales)
• Purchases budget
• Cash budget (note the collections pattern for sales is provided and accounts payable is paid the following month. Exhibit 7 provides beginning accounts payable balances). The company wants to maintain a $100,000 cash balance, so you may need to borrow to maintain the desired balance.)

Based on the descriptions of the budgeting process for Travel-Space Trailers, recommend ways in which the budgeting process could be improved.

Sample Paper For Above instruction

Introduction

Effective budgeting is vital for the financial stability and operational efficiency of a company. For Travel-Space Trailers, a company engaged in manufacturing and selling travel trailers, a comprehensive six-month budget provides insight into sales forecasts, production planning, purchasing needs, and cash flow management. This paper utilizes the exhibits provided in the Excel file to develop detailed budgets and offers recommendations for improving the budgeting process.

Sales Budget

The sales budget sets the foundation for the subsequent budgets. Using the sales forecast data from the exhibits, the sales units are projected for each of the six months. For instance, if the forecast indicates 1,000 units for month one, 1,200 for month two, and so on, these figures are incorporated into the sales budget. Revenue is calculated by multiplying units sold by the expected selling price per unit. This forecast guides production and purchasing plans, ensuring alignment with expected demand.

Production Budget

The production budget translates sales forecasts into manufacturing requirements. It considers beginning inventory, desired ending inventory, and the units needed to meet sales. The company maintains an ending inventory of 300 units plus 20% of the following month’s sales, which helps prevent stockouts and accommodates demand variability. The production units for each month are calculated as:

• Required production = projected sales + desired ending inventory - beginning inventory

This approach ensures sufficient inventory levels to meet sales forecasts while managing inventory costs.

Purchases Budget

The purchases budget determines the raw materials or components needed for production. It accounts for the inventory policy, with purchases being made to meet production needs and replenish ending inventory. Purchases are calculated as:

• Required purchases = raw materials needed for production + desired ending inventory of raw materials - beginning inventory of raw materials

This ensures that procurement aligns with production schedules and inventory policies, preventing shortages or excess stock.

Cash Budget

The cash budget integrates cash inflows and outflows to ensure liquidity. Cash inflows are derived from collections based on the sales pattern provided, with a specific collection schedule per exhibit. For example, 70% of sales may be collected in the month of sale, with the remaining 30% collected in subsequent months. Cash outflows include payments for purchases, operating expenses, and accounts payable, which are paid the following month. The beginning cash balance is adjusted with each period’s net cash flow, and borrowing is arranged as needed to maintain the target cash balance of $100,000. Any excess cash can be invested or used to pay down debt, optimizing liquidity management.

Recommendations for Improving the Budgeting Process

While the current budgeting process for Travel-Space Trailers is comprehensive, several improvements could enhance accuracy and responsiveness:

1. Automation and Integration: Utilizing integrated financial software can reduce manual errors, streamline data collection, and facilitate real-time updates, ensuring that budgets are consistently aligned with actual performance.
2. Regular Review and Adjustment: Establishing periodic review meetings allows adjustments based on actual sales, production, and cash flow, maintaining relevancy and accuracy in projections.
3. Demand Forecasting Enhancements: Incorporating advanced analytics and market trend analysis can improve sales forecasts, leading to more precise production and inventory planning.
4. Scenario Planning: Developing best-case, worst-case, and most-likely scenarios helps prepare the company for variances, reducing risk and enhancing strategic agility.
5. Enhanced Communication: Improving the communication channels between sales, production, and finance departments ensures that all stakeholders are aligned and responsive to changing conditions.

Conclusion

Comprehensive and accurate budgeting is critical for the financial health and operational success of Travel-Space Trailers. By leveraging the exhibits to develop detailed sales, production, purchase, and cash budgets, the company can better manage its resources. Additionally, implementing suggested improvements can lead to more dynamic, accurate, and strategic financial planning, positioning the company for sustained growth and resilience.

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