Reference no: EM133187993

Questions -

Q1. Vertical Ladder Company (VLC) forecasts that its sales for January through April will be $60,000, $70,000, $90,000, and $80,000, respectively. All sales are made on credit, and past experience indicates that 30 percent of the sales will be collected in the month of the sale and that the remaining 70 percent will be collected the following month. Customers who pay in the month of the sale will take the 2 percent cash discount offered by VLC for paying early. VLC normally purchases and pays for raw materials, which cost 55 percent of the sales prices, one month prior to selling the finished products. Employees' wages represent 25 percent of the sales price, and rent is $3,000 per month. At the beginning of February, VLC expects to have $4,000 in cash, which is $1,000 greater than its target cash balance. Using the information provided, construct a cash budget for February and March.

Q2. Currently, it takes six days for Apsoft Corporation to receive, process, and deposit its customers' payments. If it sets up a lockbox collection system, Apsoft estimates collection float would be reduced to two days. Apsoft receives an average of $125,000 in payments per day. If Apsoft has an opportunity cost of 12 percent, what is the maximum monthly charge it should pay for the lockbox system?

Q3. Currently, it takes five days from the time customers mail payments until Shark Bait Rafts (SBR) deposits them. SBR would like to set up a lockbox collection system that would reduce this collection float by three days. If SBR receives an average of $2,500 in payments per day and its opportunity cost is 18 percent, how much should SBR be willing to pay each month for the lockbox system?