| 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
