Case Three

CHEFS TOOLKIT INC.

Cash Budgeting

Case Explanation: cash budgeting

History: Jefferys, invention of Pasta server

Production: data
Marketing: data
Financial Implication: data
Data: Composition of Canadian Households;
Balance sheet(July 15, 1994)
Jefferys Personal balance sheet (July 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
M r. P eter
Jeffery

M r. Dale Reid
Private Investor

President of

Chefs Toolkit
Inc.

Obtain funds to start manufacturing and

marketing a new pasta server.

Case Summary
Sell

Produce

Chefs Toolkit Inc.

Pasta Server

Chef or Housewife

Objectives

Produce projected income

statements, balance sheets,
and cash flow statement up
to July 31, 1995.
Obtain fund from Dale Reid.

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

Preparation of the Cash Budget for Chefs Toolkit

Inc.
Production Schedule

Cash Budget

Pro-forma income statement

Pro-forma balance sheet

Analyses

Background of Chefs Toolkit Inc. ()

CVs of Peter and Sally Jeffery ()
Invention: Pasta Server ()
Production()
Marketing()
Financial Status()
Budgeting()

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Financial Status()

Dale Reid: invest $85,000 for 50 percent of

ownership.()
Jefferys: 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: July 31, 1995

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Monthly production schedule(

)

Beginning Inventory Total

+Production
-Sales
-Promotion
End Inventory 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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Pro-forma income statement

Reports on profitability of business

Revenues

minus

Expenses

equals

Net income

If expenses >
revenue = net
loss

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Pro-forma balance sheet

Reports the entitys assets, liabilities, and owners

equity as of a specific date
Balance

Assets

Sheet
Liabilities
Equity

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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 Jeffery 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.

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