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    Marsh Answers

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    Vhertot
    The document provides financial information for Marsh Corporation over a 3 month period including projected sales, production needs, cash payments and receipts, cash flow, pro forma income statement and balance sheet. It shows that while cash flow was positive in January and February, March had negative cash flow of $134,630 due to higher production costs and the company took out a $47,380 loan to cover expenses. The financial reports help Marsh Corporation plan for seasonal fluctuations in production and sales.

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    Marsh Answers

    Uploaded by

    Vhertot
    159 views6 pages
    The document provides financial information for Marsh Corporation over a 3 month period including projected sales, production needs, cash payments and receipts, cash flow, pro forma income statement and balance sheet. It shows that while cash flow was positive in January and February, March had negative cash flow of $134,630 due to higher production costs and the company took out a $47,380 loan to cover expenses. The financial reports help Marsh Corporation plan for seasonal fluctuations in production and sales.

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    The document provides financial information for Marsh Corporation over a 3 month period including projected sales, production needs, cash payments and receipts, cash flow, pro forma income statement and balance sheet. It shows that while cash flow was positive in January and February, March had negative cash flow of $134,630 due to higher production costs and the company took out a $47,380 loan to cover expenses. The financial reports help Marsh Corporation plan for seasonal fluctuations in production and sales.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    159 views6 pages

    Marsh Answers

    Uploaded by

    Vhertot
    The document provides financial information for Marsh Corporation over a 3 month period including projected sales, production needs, cash payments and receipts, cash flow, pro forma income statement and balance sheet. It shows that while cash flow was positive in January and February, March had negative cash flow of $134,630 due to higher production costs and the company took out a $47,380 loan to cover expenses. The financial reports help Marsh Corporation plan for seasonal fluctuations in production and sales.

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    of 6

    CP 4-2.

    Solution:
    Marsh Corporation
    Forecasting with Seasonal Production
    Dec. Jan. Feb. Mar.
    Projected 1,500,000 1,700,000 1,200,000 1,400,000
    Unit Sales
    +Desired 2,900,000 2,600,000 3,400,000 4,500,000
    Ending
    Inventory
    (2 months
    supply)
    Beginni 2,600,000 2,900,000 2,600,000 3,400,000
    ng
    Inventor
    y
    Units to be 1,800,000 1,400,000 2,000,000 2,500,000
    Produced

    4-1
    CP 4-2. (Continued)
    Monthly Cash Payments
    Dec. Jan. Feb. Mar.
    Units to be
    produced 1,800,000 1,400,000 2,000,000 2,500,000
    Materials
    (from previous
    month) $ 93,600 $ 84,000 $ 120,000
    Labor ($20 per
    thousand
    units) $ 28,000 $ 40,000 $ 50,000
    Overhead ($10
    per thousand
    units) $ 14,000 $ 20,000 $ 25,000
    Selling & adm.
    expense (20%
    of sales) $ 52,700 $ 37,200 $ 43,400
    Interest $ 8,000
    Taxes (40%
    tax rate) $64,560*
    Dividends $48,420*
    Total
    Payments $188,300 $181,200 $359,380
    *See the pro forma income statement, which follows this material later on,
    for the development of these values.

    4-2
    CP 4-2. (Continued)
    Marsh Corporation
    Monthly Cash Receipts

    Nov. Dec. Jan. Feb. Mar.


    Sales $175,000 $232,500 $263,500 $186,000 $217,000
    Collection 87,500 116,250 131,750 93,000
    s (50% of
    Previous
    month)
    Collection 87,500 116,250 131,750
    s (50% of
    2 months
    earlier)
    Total $203,750 $248,000 $224,750
    Collection
    s

    Monthly Cash Flow


    January February March
    Cash Receipts $203,750 $248,000 $224,750
    Cash Payments 188,300 181,200 359,380
    Net Cash Flow 15,450 66,800 (134,630)

    4-3
    CP 4-2. (Continued)
    Marsh Corporation
    Cash Budget
    January February March
    Net Cash Flow $15,450 $66,800 $(134,630)
    Beginning Cash Balance 30,000 25,000 25,000
    Cumulative Cash Balance $45,450 $91,800 ($109,630)
    Loans and (Repayments) -0- -0- 47,380
    Cumulative Loans -0- -0- 47,380
    Marketable Securities 20,450 66,800 (87,250)
    Cumulative Marketable 20,450 87,250 -0-
    Securities
    Ending Cash Balance $25,000 $25,000 $25,000

    Marsh Corporation
    Pro Forma Income Statement
    Jan. Feb. Mar. Total
    Sales $263,500 $186,000 $217,000 $666,500
    Cost of Goods Sold 139,400 98,400 126,000 363,800
    Gross Profit 124,100 87,600 91,000 302,700
    Selling and Admin. 52,700 37,200 43,400 133,300
    Expense
    Interest Expense 2,667 2,667 2,666 8,000
    Net Profit Before Tax $ 68,733 $ 47,733 $ 44,934 $161,400
    Taxes 27,493 19,093 17,974 64,560
    Net Profit After Tax $ 41,240 $ 28,640 $ 26,960 $ 96,840
    Less: Common 48,420
    Dividends
    Increase in Retained $ 48,420
    Earnings

    4-4
    CP 4-2. (Continued)
    Marsh Corporation
    Cost of Goods Sold
    Unit Cost per thousand Unit cost per thousand
    before January 1st after January 1st
    Material........... $52 $60
    Labor............... 20 20
    Overhead.......... 10 10
    $82 $90
    Ending inventory as of December 31 was 2,900,000; therefore, sales for
    January and February had a cost of goods sold per thousand units of $82,
    and March sales reflect the increased cost of $90 per thousand units using
    FIFO inventory methods.
    Pro Forma Balance Sheet (March)
    Assets Liabilities &
    Stockholders' Equity
    Current Assets: Current Liabilities:
    Cash $ 25,000 Accounts Payable $ 150,000
    Accounts Receivable 310,000 Notes Payable 47,380
    Inventory 405,000 Long-Term Debt 400,000
    Plant & Equip: Net 800,000 Stockholders' Equity: 504,200
    Plan Common Stock
    Retained Earnings, 438,420
    Total Liabilities &
    Total Assets $1,540,000 Stockholders' Equity $1,540,000

    4-5
    CP 4-2. (Continued)

    Explanation of Changes in the Balance Sheet:


    Cash = ending cash balance from cash budget in March
    Accounts receivable = $217,000
    all of March sales 93,000
    plus 50% of Feb. $310,000
    sales

    Inventory = ending inventory in March of 4,500,000 units at $90 per


    thousand

    Plant and equipment did not change since we did not include depreciation.

    RE Old RE NI dividends
    $390,000 $96,840 $48, 240 $438, 420

    4-6

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