Mini-Case Study: Winter Woolies Manufacturing & Entrepreneurial Finance Finance Assignment Help

Assignment Task

Mini-Case Study: Winter Woolies Manufacturing
Winter Woolies Manufacturing (WWM) has a seasonal sales pattern, with high sales in the second quarter of the year. It also experiences a minor sales peak in December due to a special contract with a customer in the northern hemisphere. It is the beginning of January 2019. The sales pattern for the coming eight months, together with the sales for the past quarter, is shown in the table below:
R R
October 100 000 April 150 000
November 120 000 May 200 000
December 180 000 June 240 000
January 150 000 July 162 000
February 120 000 August 120 000
March 140 000 WWM’s terms of sale are 2/30 net 60. Its actual experience of collections is that 30% of customers take the discount, 60% pay in 60 days and 10% pay in 90 days. Bad debts have never exceeded 0.2 % of sales.
Production costs, equal 60% of expected sales, consist of labour (25% of expected sales) and direct materials (35% of expected sales). Labour is paid in the same month as the labour expense is incurred. Materials are paid for in the second month following purchase.
Office salaries of R30 000 are paid for in the month they are incurred. Depreciation on non-current assets is R5 000 per month. Other expenses, expected to remain at R22 000 per month for the whole year, are paid in the month following that in which they are incurred.
The firm’s term loan, which at the end of December 2018 stood at R300 000 attracts interest at a fixed rate of 16% per annum, calculated quarterly. The loan, which is being repaid in equal quarterly instalments, has six years to run.
In May the firm will be buying a new computer, for R15 000. WWM estimates its second provisional tax payment, due in February will be R20 000. Its next payment, expected to be R23 000, will be at the end of August. The firm’s tax rate is 30%. The opening balance on the bank account shows R5 000.
Your mother, the owner of WWM, is getting worried that with the recent growth in the firm, cash may run out in the near future. She asks you to prepare a cash budget through to the end of August 2019.
While you are in her office, the production manager, Ignatius Mailula, drops in. He has come to complain about the difficulty of running a factory that produces seasonally. He says he has to let staff go in the quiet periods and has difficulty finding experienced people for the busy months. He wants to switch from seasonal production, where goods are made to order, to level production, where the manufacturing for the anticipated sales for the coming year are spread evenly across the year.
You immediately point out that this may have cash flow implications, but Ignatius, not having any financial knowledge, cannot understand what you are getting at. Your mother therefore asks you to redo the cash budget for the eight-month period based on the assumption of level production and compare it to the seasonal production results.
Dear EFN Student
With reference to the above case study:
You are required to work in groups of no more than 6 people.
Show all workings as you answer the question. Include an introduction and conclusion based on the facts given and your findings.
Hand in your group submission on 19 October 2021 in class.
This assignment requires involvement from all members of the group. A participation form must be attached to your assignment as well as a declaration of anti-plagiarism.
 

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