Tyva produces a undyed cloth sandals. These come in two different styles standard and deluxe. The deluxe sells for $195. 00 and the Standard for $120.
00. The purpose of this brief is to review the May actual statements and determine the June budgeted cash flow. To identify and understand the ending cash balance of Tyva (Datar & Schoenbeck, 2013). Review the product sales mix, comparison of the monthly budget statements for significant changes. Finally, a recommendation will be given on how the net income can be improved based on the analysis.AnalysisBased on the June cash budget, what are the relevant items that could impact the ending cash balance? The Cash Inflow would come from the May Sales from customers at 38% collected ($307,000), June sales from customers of $495,000 budgeted accounts receivable.
A significant amount of cash is carried over to the following month based on these current terms. The Cash Outflow would come from Materials purchased. The finished goods inventory is budgeted to increase from 600 to 650 on the Deluxe and 250 to 400 units of the Standard in order to meet the budgeted units sold which increases inventory by $11,600.Based on the June budgeted income statement, could the product sales mix (i. e.
, sandals) significantly impact the company’s budgeted net income? Why or why not? Yes, the Deluxe is budget to sell 3000 units versus the 2000 units of the Standard style. The Deluxe model has a $52. 11 gross margin per unit compared to the $27. 10 gross margin of the Standard. If more standards were sold than are budget the budget revenue would decreases. Are there any significant account changes to be expected between May’s Actual and Junes Budgeted?There are three significant account changes to be expected from May’s Actual and June’s budgeted.
The first and most significant would be the Retained Earnings is $110,536 higher in June from a Cash Flow In from Sales (Net income minus dividends). The next would be $15,000 cash dividends are to be paid. Finally taxes of $10, 800 for May are to be paid in June. Recommendations The statement of cash flows explains the change during the period in cash and cash equivalents. Cash includes currency on hand and demand deposits.
Cash equivalents are short-term, highly liquid investments that are readily convertible to cash (Flight. 2006).Because of this there are two recommendations for Tyva. The first recommendation would be to change the Sales on Account terms to increase the amount of cash available for the same budget month. Providing discounts to customers that pay within 30 days would help support on time payment and additional operating cash flow for the current and following month. The second recommendation would be change their Accounts Payable terms to net 60 and pay half in the first month and the second installment in the following month.
This will decrease the month-over-month Cash Outflow.
