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Case Three
CHEFS TOOLKIT INC.
Cash Budgeting

Case Explanation: cash budgeting


History: J efferys, invention of Pasta server
Production: data
Marketing: data
Financial Implication: data
Data: Composition of Canadian Households;
Balance sheet(J uly 15, 1994)
J efferys Personal balance sheet (J uly 15, 1994)
Production Schedule in Unit
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Study Questions
Q1What is the Case? (1)event?(2)Companies?(3)Persons?(4)Time? What
is the problem?(5)Why is the problem?(6)Possible Solutions?
Q2Analyses (1) Background of Chefs Toolkit Inc.
? (2) CV of managers? (3)What is the invention? (4)Company Size-up:
production, marketing, and financial status?
Q3Budgeting(monthly sales : 10,000; 5,000; 30,000): production
schedule, cash budget, Pro-forma income statement, Pro-forma balance
sheet
Q4How can the firm avoid loss? Break even calculation?
Q5: How much money do the firm need for financing? Should Dale Raid
invest? What are his risks?
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Case Summary
Mr. Dale Reid
Private Investor
Mr. Peter
J effery
President of
Chefs Toolkit
Inc.
Obtain funds to start manufacturing and
marketing a new pasta server.

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Case Summary
Produce
Sell
Pasta Server Chefs Toolkit Inc. Chef or Housewife

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Objectives
Produce projected income
statements, balance sheets,
and cash flow statement up
to J uly 31, 1995.
Obtain fund fromDale Reid.

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Why Budget?
If you know where you are going,
youre more likely to get there.
Plan
Perform
Evaluate
Report

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Preparation of the Budget for a Manufacturing
Organization

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Preparation of the Cash Budget for Chefs Toolkit
Inc.
Production Schedule
Cash Budget
Pro-forma income statement Pro-forma balance sheet


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Analyses
Background of Chefs Toolkit Inc. ()
CVs of Peter and Sally J effery ()
Invention: Pasta Server ()
Production()
Marketing()
Financial Status()
Budgeting()
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Financial Status()
Dale Reid: invest $85,000 for 50 percent of
ownership.()
J efferys: can not invest any more personal
funds.
Monthly Sales(): 10,000 unit,
5,000 unit, 30,000 units.
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Budgeting()
Prepare a monthly production schedule
Prepare a monthly cash budget
Prepare income statement
Prepare balance sheets
Fiscal year-end: J uly 31, 1995
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Monthly production schedule(
)
Beginning I nventory Total
+Production
-Sales
-Promotion
End I nventory Total
-Home
Warehouse

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Direct Material Budget
Units x Direct Materials costx
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The Cash Budget
The Cash Budget is a projection of the cash
an organization will receive and the cash it
will pay out.
Shall we consider the depreciation?
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Cash Budgets
Cash Receipts
-Cash Disbursements
Change in Cash
+Beginning Cash
Net Cash Flow
Required Financing:
Beginning
- Net Cash Flow
Financing Shortfall

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Reports on profitability of business
Revenues
minus
Expenses
Net income
equals
If expenses >
revenue = net
loss


Pro-forma income statement

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Reports the entitys assets, liabilities, and owners
equity as of a specific date
Balance Sheet
Equity
Liabilities
Assets

Pro-forma balance sheet

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Do it using Excel
Monthly Sales: 5,000 unit
Monthly Sales: 30,000 units
a larger production mold.
- Capital cost: $62,000, payable in three
monthly installments.;
- Double production capacity;
- $0.35 per unit costs
- Depreciation: $0.062 per unit
- Inventory: $0.848 per unit
How can the firm avoid loss?
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Break-even Calculations (

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What Happened
The J effery received $75,000 in
financing from Dale Reid.
Product Sales in the first two years
were below the 10,000 unit level.
The firm filed for bankruptcy.