Week Three Financial Exercises | |||||||||

Part 1 | |||||||||

Using the table below, describe the types of budgets. In your description, include: • The objective of the budget • How the budget assists an organization in managing its financial activities • What types of data need to be included in that specific budget | |||||||||

Type of Budget | Description | ||||||||

Cash Flow | |||||||||

Operating | |||||||||

Sales | |||||||||

Static | |||||||||

Financial | |||||||||

Week Three Financial Exercises | |||||||||||

Part 2 | |||||||||||

Complete the following problems using the following ratios: | |||||||||||

Sales level at which operating income is zero | |||||||||||

o If sales above breakeven, then profit | |||||||||||

o If sales below breakeven, then loss | |||||||||||

o Fixed expenses = total contribution margin | |||||||||||

Total sales = total expenses | |||||||||||

Break Even Point: Unit Sold = Fixed expenses + Operating Income / Contribution Margin per unit | |||||||||||

Break Even Point: Sales $ = Fixed expenses + Operating Income / Contribution Margin Ratio | |||||||||||

(1) | Calculate the break even number of units if the fixed expenses are $7,000 and the contribution margin is $14 per unit. | ||||||||||

Answer: | |||||||||||

(2) | Calculate the break even sales dollars if the fixed expenses are $7,000 and the contribution ratio is 40%. | ||||||||||

Answer: | |||||||||||

(3) | Calculate the break even number of units with a target profit of $120,000 if the fixed expenses are $15,000 and the contribution margin is $60 per unit. | ||||||||||

Answer: | |||||||||||

Week Three Financial Exercises | ||||||||||

Part 3 | ||||||||||

Complete the following problems: | ||||||||||

(1) | How much will you have saved after 6 years by contributing $1,200 at the end of each year if you expect to earn 11% on the investment? | |||||||||

Answer: | ||||||||||

(2) | A business owner plans to deposit his annual profits in an investment account earning a 9% annual return. If the owner starts with their first deposit today for $22,000 and expects to make the same profit for the next 7 years, how much will be saved for retirement at that point? | |||||||||

Answer: | ||||||||||

(3) | An investor plans to invest $500 a year and expects to get a 10.5% return. If the investor makes these contributions at the end of the next 20 years, what is the present value of this investment today? | |||||||||

Answer: | ||||||||||

(4) | What is the present value (PV) of a 12-year lease arrangement with an interest rate of 7.5 percent that requires annual payments of $4,250 per year with the first payment being due now? | |||||||||

Answer: | ||||||||||

(5) | A recent college graduate hopes to have $200,000 saved in their retirement account 25 years from now by contributing $150 per month in a 401(k) plan. The goal is to earn 10% annually on the monthly contribution. Will they have the $200,000 at the end of the 25 years? | |||||||||

Answer: | ||||||||||

Field of study:

Date Due:

Thursday, August 29, 2019