# Answered Essay: The following information relates to a landscaping business. At 30 June 2018, it had a bank balance of \$26 500. Provided b

The following information relates to a landscaping business. At 30 June 2018, it had a bank balance of \$26 500. Provided below are estimates for receipts and payments for the three months ending 30 September 2018. a. Prepare a monthly cash budget for the three months ending 30 September 2018. b. The owners were wondering what the effect would be on the cash position if they did not buy the new equipment, but instead took advantage of a new rental arrangement. The equivalent equipment would cost \$10 000 per month under the rental arrangement. Redraft the cash budget to show the impact of the rental alternative. Based on the information available, should they lease or buy the equipment? The landscaping business plans to introduce various aged trees to their product range in 2018. They have provided the following information relating to its planned activities. Required a. Calculate the break-even point in total units and units per product based on the 2018 data. b. Calculate the before tax profit (loss) that would be achieved in 2018 based on the above data. This calculation relates to the information from question 2 only. c. Management is concerned about competition for some of its trees, and wants to increase its sales of 3 years old trees relative to 1 year old trees. This initiative would increase annual fixed costs by \$50 000 and alter the sales mix to 30 per cent for 2 years old trees, 30 per cent for 3 years old trees and 40 per cent for 1 year old trees. On the available data, would you recommend the initiative? Show workings.

 1) LandScaping Business Cash Budget July Aug Sept Beginning Bal. \$26,500 -\$74,000 -\$38,200 Add: Budgeted Cash Receipts: Fees \$140,000 \$160,000 \$200,000 Proceeds from Sale of Non current assets \$100,000 Total Cash Available for Use \$166,500 \$86,000 \$161,800 Less: Cash Disbursements Salaries and wages \$70,000 \$70,000 \$70,000 Supplies \$8,500 \$9,200 \$12,000 New equipment \$120,000 Purchase of plants \$42,000 \$45,000 \$61,000 Total Disbursements \$240,500 \$124,200 \$143,000 Budgeted Ending Cash Balance -\$74,000 -\$38,200 \$18,800 b) LandScaping Business Cash Budget July Aug Sept Beginning Bal. \$26,500 \$36,000 \$61,800 Add: Budgeted Cash Receipts: Fees \$140,000 \$160,000 \$200,000 Proceeds from Sale of Non current assets \$100,000 Total Cash Available for Use \$166,500 \$196,000 \$261,800 Less: Cash Disbursements Salaries and wages \$70,000 \$70,000 \$70,000 Supplies \$8,500 \$9,200 \$12,000 Rent \$10,000 \$10,000 \$10,000 Purchase of plants \$42,000 \$45,000 \$61,000 Total Disbursements \$130,500 \$134,200 \$153,000 Budgeted Ending Cash Balance \$36,000 \$61,800 \$108,800
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