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Let’s Go Aero Travel Trailers: Incorporating the New Model of the Organization into the Teaching of Budgeting

• By: Sally Wright
• Publisher: Institute of Management Accountants
• Publication year: 2011
• Online pub date: May 08, 2017
• Discipline: Budgeting , Introductory Accounting
• DOI: https:// doi. org/10.4135/9781526427687
• Keywords: aluminum , budgeting , inventory , purchasing , sales , senior citizens , travel Show all Show less
• Contains: Content Partners | Teaching Notes Length: 2,473 words Region: Northern America Country: United States of America Industry: Manufacture of motor vehicles, trailers and semi-trailers Originally Published In: Wright , S . ( 2011 ). Let’s Go Aero travel trailers: Incorporating the new model of the organization into the teaching of budgeting . IMA Education Case Journal , 4 ( 1 ), Article 3. Organization: Let’s Go Aero Type: Direct case info Organization Size: Medium info Online ISBN: 9781526427687 Copyright: © 2011 IMA Educational Case Journal. All rights reserved. More information Less information

Teaching Notes

Supplementary resources.

Let’s Go Aero introduces students (undergraduates, MBAs, executive audiences) to budgeting. The setting is a manufacturer of aluminum trailers. The rich background material allows students to explore budgeting as a planning and coordinating tool. Preparation of multiple budget scenarios emphasizes the interdependency of the functional areas (marketing, purchasing, production, and accounting). The case identifies company policies for monthly inventory needs which are used, along with other projections, to prepare production, purchasing, and cash budgets. By preparing a series of budgets, students are introduced to the potential negative impacts of uneven sales and counter-productive reward schemes.

Let’s Go Aero Travel Trailers: Incorporating the New Model of the Organization into the Teaching of Budgeting

Introduction.

Let’s Go Aero manufactures travel trailers bought primarily by young families and retirees interested in a light, low-cost trailer that can easily be pulled by a mid-sized family car. The market for travel trailers has expanded nicely over the past few years due to the number of families seeking a relatively low-cost, outdoor vacation experience. But in the view of Let’s Go Aero’s president, Mark Newman, the real growth in the future is in the retiree market. Newman believes the vigorous health of the average retiree, coupled with the national trend toward a return to nature, will translate into continuing sales growth for Let’s Go. As Newman loves to say, “camping recently moved from number seven to number six on the list of top 10 leisure activities in the United States, and the baby boomers are getting older every day.”

The Retiree Market

Baby boomers (born between 1/1/46 and 12/31/64) carry a lot of consumer clout.

According to the National Opinion Research Center at the University of Chicago, 74% of boomers (aged 47–65) own their own home, 46% are satisfied with their financial situation, and 56% are married. The spending power of this demographic is likely to increase. People who are 50 years old and older are expected to inherit an estimated $14 to $20 trillion dollars during the next twenty years. Also, baby boomers make up a significant part of the total U.S. population. According to the U.S. Census Bureau, in 2006 baby boomers represented 26% of the populace. In that year there were just under 78 million boomers living in the United States, with the largest populations living in California, Texas, New York, Florida, and Pennsylvania.

Research indicates that for an organization to meet the needs of the senior market, including baby boomers, the following must be addressed:

• Independence and control,
• Intellectual stimulation and self-expression,
• Security and peace of mind,
• Quality and value.

Seniors respond to benefit-driven messages; to attract them, advertising has to communicate tangible benefits rather than features and amenities.

Marketing and Sales

The forecasted increase in Let’s Go’s sales can be seen in the company’s sales projections presented in Exhibit 1 (actual for the years 2005 through 2010 and projected for the years 2011 through 2015). Although the weather can have a significant impact on the travel trailer industry (i.e., hurricane season, flooding, and even droughts have had negative effects on the sales and rentals of travel trailers), Let’s Go’s management believes these problems will be mitigated in the future by global warming. All sales projections are done by Mark Newman in his role as Let’s Go’s president.

To keep from losing sales, the company maintains finished goods inventory on hand at the end of each month equal to 300 trailers plus 20% of the next month’s sales. The finished goods inventory on December 31, 2010, was budgeted to be 1,000 trailers. Jim West, Let’s Go’s vice president of marketing and sales, would rather see a minimum finished goods inventory of no less than 1,500 trailers. Jim refuses to talk to Tom Sloan, Let’s Go’s production manager. Tom is always trying to get Jim to consider adopting flexible inventory levels, which Jim is certain would affect his yearly bonus. The vice president of sales and marketing is eligible for a 20% bonus based on sales. Unfortunately, Jim did not receive a bonus in 2010. Sales were up, but Mark refused to give Jim the bonus, although it was earned, due to the high number of customer complaints. Jim was really steamed when he heard “no bonus.” Didn’t Mark know those complaints were for poor quality? All of Jim’s efforts to grow sales and attract customers were, once again, destroyed by Tom Sloan and his production failures.

Trailer Production

Sheet aluminum represents the company’s single most expensive raw material. Each travel trailer requires 30 square yards of sheet aluminum. The wholesale cost of sheet aluminum varies dramatically according to the time of year. The cost per square yard can vary from $15 in the spring, when new construction tends to start, to $8 in December and January, when demand is lowest.

The use of aluminum in vehicles, including travel trailers, is increasing rapidly due to a heightened need for fuel efficient, environmentally friendly vehicles. Aluminum can provide a weight savings of up to 55% compared to an equivalent steel structure, improving gas mileage significantly. The aluminum industry and suppliers are dispersed across four-fifths of the country, yet they are largely concentrated in four regions: the Pacific Northwest, industrial Midwest, northeastern seaboard, and mid-South. Although this is a broad geographic presence, Let’s Go Aero will be affected by distribution costs.

Vicky Draper, Let’s Go’s vice president of purchasing and materials handling, is eager to implement just-in-time as a way of lowering Let’s Go’s aluminum cost. To offset the expense of distribution, Let’s Go is located in Pennsylvania. Vicky’s projected 20% bonus, recently announced by Mark and effective for year-end 2011, is based on her ability to lower total material cost. Initially enthusiastic about her job and ability to earn a significant bonus, Vicky has become discouraged and angry. She is unable to convince Let’s Go’s current aluminum supplier to sign a prime vendor contract, and her efforts to locate an alternative vendor, willing to accept the conditions of a just in-time contract, have similarly failed. She blames Tom Sloan. Let’s Go’s current aluminum vendor refuses to sign a just-in-time prime vendor contract due to Tom’s uneven production schedule and his refusal to pay on time. Tom has been seen reading the help wanted ads, and Vicky over heard him talking to an employment agency.

In keeping with the policy set by Tom as Let’s Go’s production manager, the amount of sheet aluminum on hand at the end of each month must be equal to one-half of the following month’s production needs for sheet aluminum. The raw materials inventory on December 31, 2010, was budgeted to be 39,000 square yards. The company does not keep track of work-in-process inventories.

Budgeted expenses for Aluminum and other materials, as well as wages, heat, light and power, equipment rental, equipment purchases, depreciation, and selling and administrative for the first six months of 2011 are given below.

Accounts for aluminum and other materials are paid in full during the month following their purchase. Accounts payable for aluminum and other materials purchased during December, 2010 totaled $850,000 combined. This amount will be paid in January, 2011.

Competition

All forms of vacation and leisure activities, including theme parks, beach or cabin rentals, health spas, resorts, and cruise vacations compete with Let’s Go Aero Travel Trailers for the consumer dollar. Other recreational purchases such as automobiles, snowmobiles, boats, and jet-skis are indirect competitors.

Travel trailer manufacturers such as Crossroads RV, Jayco, Coachman RV, and Scamp also offer a moderate-to low-priced travel trailer. Manufacturers that offer more diverse product lines such as high-end trailers with luxury accommodations could compete for the fairly affluent senior market.

Coachman RV, a direct Let’s Go competitor, has become a leader in the recreational vehicle, motor home, and travel trailer industry through a commitment to quality and value based on excellence in engineering and attention to detail. Creative engineering, combined with high-accuracy analysis, reduced material costs at Coachman by more than 60% and labor costs by 78%.

Budget Preparation

To minimize company time lost on clerical work, Let’s Go’s accounting department prepares and distributes all budgets to the various departments every six months. Per Mark Newman, “Freeing departmental managers from the budgeting process allows them to concentrate on more pressing matters.” In keeping with the recently announced bonus plan for the vice president of purchasing and materials handling, Newman has instructed the accounting department to budget aluminum at $8 per square yard. The accounting manager recently received a 20% bonus for having prepared the budgets on time with little or no help from the other functional areas.

Let’s Go’s vice president of finance, Becky Newman, has requested an $800,000, 90 day loan from the bank at a yet to be determine interest rate. Since Let’s Go has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the six months ending June 30, 2011, to support the requested loan amount. The cash balance on January 1, 2011, is budgeted at $100,000 (the minimum cash balance required by Let’s Go’s board of directors).

Human Resources

To accomplish the company’s corporate strategic goals, Let’s Go Aero Travel Trailers encourages upward communication among all its employees, from senior management to line employees. Decision making, although not an entirely democratic process, is based on a team approach. Newman, as Let’s Go’s president, encourages managers to think in terms of the marketplace and to look at the business of travel trailers as a whole rather than as functional department successes and decisions. In fact, Newman is so committed to the idea of cooperative management and teamwork that he has hired three separate human resource consultants in the past six months to lead the company’s managers through team-building exercises.

• 1. Discuss the validity and reasonableness of Let’s Go’s sale projections.
• 2. Prepare production, purchasing, and cash budgets for Let’s Go for the first six months of 2011 using the formats below. (Hint: spreadsheet programs are wonderful!).

Discuss the advantages and disadvantages of the budgets you have prepared. Who in the company does the budget help and whom, potentially, does it hurt. Does the budget help or hurt the sales department? What about production and finance? How are the various functional areas affected and why?

• 3. Andy Baxter, newly hired by Let’s Go Aero from a competitor, suggests preparing the production budget assuming stable production. Prepare a second and third set of production, purchasing, and cash budgets. Hold production to a constant 3,000 trailers per month for the second set of budgets, and 3,500 trailers per month for the third set of budgets. The format for the purchasing and cash budgets should remain as presented in question 2. Use the following approach for the production budget.

Discuss the advantages and disadvantages of the second and third sets of production, purchasing, and cash budgets you have prepared. Who within the company do these budgets help and whom, potentially do they hurt? Do these budgets help or hurt the sales department? What about production and finance? How are the various functional areas affected, and why?

• 4. What metric should Let’s Go use to measure the performance of each manager in this case? What bonus system would you suggest that incorporates these measures and also encourages the managers to work as a team?

The detail sales for 2010 (actual) and 2011 (projected) by month are as follows:

Actual sales in dollars for the last two months of 2010 and budgeted sales for the first six months of 2011 follow:

Past experience show that 25% of a month’s sales are collected in the month of sale, 10% in the month following the sale, and 60% in the second month following the sale. The remainder is uncollectible.

About IMA ®

IMA, the association of accountants and financial professionals in business, is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA ® (Certified Management Accountant) program, continuing education, networking, and advocacy of the highest ethical business practices. IMA has a global network of more than 80,000 members in 140 countries and 300 professional and student chapters. Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe, and Middle East/Africa. For more information about IMA, please visit www.imanet.org .

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

The case studies on Sage Business Cases are designed and optimized for online learning. Please refer to the online version of this case to fully experience any video, data embeds, spreadsheets, slides, or other resources that may be included.

Exhibit 1: Actual and Projected Sales in Number of Trailers

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Travel Space Budget

INTRODUCTION The year is 2021. Travel-Space Trailers manufactures teardrop-style travel trailers bought primarily by young families and retirees interested in a light, low-cost trailer that can easily be pulled by a mid- sized family car. The market for travel trailers has expanded nicely over the past few years because of the number of families seeking a relatively low-cost, outdoor vacation experience. Due to the COVID-19 virus, sales of travel trailers “exploded” in 2020 with dealership sales as much as 170% higher than the prior year. But in the view of Travel-Space Trailers’ president, Shane Moynihan, the real growth in the future is the retiree market.

Shane, the second president of Travel-Space Trailers, took over leadership of the family business from his father Paul Moynihan, who retired six years ago and owns the company. Paul prefers to take a hands-off approach in his role as owner, as he trusts his son Shane to handle the business. Shane grew up hanging out at the factory and worked several different jobs. He also worked for Travel-Space Trailers every summer during college. He was a mediocre student at Central State University (CSU), where he earned a bachelor’s degree in management.

Shane believes that the vigorous health of the average retiree, coupled with the national trend toward a return to nature, will translate into continuing sales growth for Travel-Space Trailers. As Shane loves to say, “Camping recently moved from number seven to number six on the list of top 10 leisure activities in the United States, and the retiree market continues growing every day.”

THE RETIREE MARKET The retiree market carries a lot of consumer clout, and the spending power of this demographic is likely to increase. People who are 50 years old and older are expected to inherit an estimated $14 to $20 trillion dollars during the next 20 years. Retirees also make up a significant part of the total U.S. population. According to the U.S. Census Bureau, in 2017 retirees represented 47.8 million individuals and 14.9% of the populace. Florida has the highest percentage of senior citizens, but California has the greatest number of people who are 65 years of age and older, followed by Florida, New York, Pennsylvania, and Texas.

IMA EDUCATIONAL CASE JOURNAL VOL. 14 , NO. 1 , ART. 1 , MARCH 2021 1

©2021 IMA

Travel-Space Trailers: A Budgeting Experience

Nicholas J. Fessler Gordon Ford College of Business Western Kentucky University

Christine A. Denison Debbie and Jerry Ivy College of Business Iowa State University

ISSN 1940-204X

Research indicates that for an organization to meet the needs of the senior market, the following must be addressed:

1. Independence and control, 2. Intellectual stimulation and self-expression, 3. Security and peace of mind, and 4. Quality and value.

Seniors respond to benefit-driven messages; to attract them, advertising must communicate tangible benefits rather than features and amenities.

COMPETITION All forms of vacation and leisure activities, including theme parks, beach or cabin rentals, health spas, resorts, and cruise vacations, compete with Travel-Space Trailers for the consumer dollar. Other recreational purchases, such as automobiles, snowmobiles, boats, and jet-skis, are indirect competitors.

Travel trailer manufacturers such as Crossroads RV, Jayco, Coachman RV, and Camp also offer moderate-to-low-priced travel trailers. Manufacturers that offer more diverse product lines, such as high-end trailers with luxury accommodations, could compete for the affluent senior market.

Coachman RV, a direct Travel-Space Trailers competitor, has become a leader in the recreational vehicle, motor home, and travel trailer industry through a commitment to quality and value based on excellence in engineering and attention to detail. Creative engineering, combined with high-accuracy analysis, reduced material costs at Coachman RV by more than 60% and labor costs by 78%.

THE SALES FORECAST The forecasted increase in Travel-Space Trailers unit sales can be seen in the company’s sales projections. Exhibit 1 shows actual sales for the years 2015 through 2020 and projected sales for the years 2021 through 2025.1

Although weather, such as hurricanes, flooding, and droughts, can have a significant effect on the travel trailer industry), Travel-Space Trailers’ management believes these problems will be mitigated in the future by global warming. All sales projections are made by Shane as Travel-Space Trailers’ president.

FORECASTED INVENTORY LEVELS A love of travel can sometimes lead to love in real life. Nichole Volante’s love of the outdoors led her to a job as the administrative assistant for Shane. Two years later, the two were married. Despite Nichole’s lack of business education, Shane saw in Nichole an outstanding aptitude for sales and leadership, and he quickly made her the vice president of marketing and sales.

Nichole was primarily concerned about maximizing sales volume. To keep from losing sales, Nichole directed the company to maintain finished goods inventory on hand at the end of each month equal to a specified percentage of the next month’s sale. Exhibit 2 shows the formula, and the budgeted finished goods inventory on December 31, 2020.

IMA EDUCATIONAL CASE JOURNAL VOL. 14 , NO. 1 , ART. 1 , MARCH 2021 2

1 Exhibits are included in the Excel file provided with the case.

Brent Sloan, Travel-Space Trailers’ production manager, disagrees with Nichole and is always trying to get her to consider adopting flexible inventory levels. Brent, a grizzled veteran, has been a production manager for more than 20 years in three different industries. Nichole refuses to talk to Brent, as she is certain his suggestion would negatively affect her yearly bonus of up to 20% based on sales. Nichole received the entire 20% in 2020 as sales were up. Adding fuel to the proverbial fire, Shane refused to give Brent his bonus due to the high number of customer complaints about product quality, even though Brent felt it was earned because actual trailer production met or exceeded the budgeted production amount for the year, which was supposed to be the criteria for earning his bonus. Brent has started browsing employment websites.

MATERIALS PURCHASES Sheet aluminum represents the company’s single most expensive raw material. Exhibit 3 shows the specific amount of aluminum required for each trailer and costs per square yard. The wholesale cost of sheet aluminum varies dramatically according to the time of year. The cost per square yard can vary from season to season, as new construction tends to start in the spring, and in December and January, travel and, therefore, demand is lowest (see Exhibit 3).

The use of aluminum in vehicles, including travel trailers, is increasing rapidly due to a heightened need for fuel-efficient, environmentally friendly vehicles. Aluminum can provide a weight savings of up to 55% compared to an equivalent steel structure, improving gas mileage significantly. The aluminum industry and suppliers are dispersed across 80% of the country, yet they are largely concentrated in four regions: the Pacific Northwest, the industrial Midwest, the Northeastern Seaboard, and the mid-South. Although this is a broad geographic presence, Travel-Space Trailers will be affected by distribution costs.

Jazmine Caple is Travel-Space Trailers’ recently hired vice president of purchasing and materials handling. Jazmine is eager to implement a just-in-time (JIT) inventory system as a way of lowering Travel-Space Trailers’ aluminum cost. To offset the expense of distribution, Travel-Space Trailers is in Pennsylvania. Shane told Jazmine when she was hired that she would receive a bonus based on her ability to lower total material cost. Assuming the success of Jazmine’s efforts, Shane has instructed the Accounting department to budget aluminum for a specific dollar amount per square yard (see Exhibit 4).

Initially enthusiastic about her job and ability to earn a significant bonus, Jazmine has since become discouraged and angry. She is unable to convince Travel-Space Trailers’ current aluminum suppliers to sign a prime vendor contract, and her efforts to locate an alternative vendor willing to accept the conditions of a JIT contract have similarly failed. She blames Brent. Travel-Space Trailers’ current aluminum vendor refuses to sign a JIT prime vendor contract due to Brent’s uneven production schedule.

But Jazmine is also frustrated with the Accounting department, which does not seem to be able to consistently pay vendors in a timely manner, and potential vendors are aware of this reputation. Jazmine’s frustrations are giving her second thoughts about having accepted what once appeared to be an exciting employment opportunity.

IMA EDUCATIONAL CASE JOURNAL VOL. 14 , NO. 1 , ART. 1 , MARCH 2021 3

In keeping with the policy set by Brent, the amount of aluminum on hand at the end of each month must be equal to a specific percentage of the following month’s production needs for sheet aluminum (see Exhibit 5). The budgeted amount of raw materials inventory on December 31, 2020, appears in Exhibit 5. The company does not keep track of work-in-process inventories.

Budgeted expenses for aluminum and other materials, as well as wages, heat, light and power, equipment rental, equipment purchases, depreciation, and selling and administrative for the first six months of 2021 are provided in Exhibit 6.

Accounts for aluminum and other materials are paid in full the month following their purchase. Accounts payable for aluminum and other materials purchased during December 2020 are described in Exhibit 7. These amounts will be paid in January 2021.

BUDGET PREPARATION To minimize company time lost on clerical work, Travel-Space Trailers’ Accounting department prepares and distributes all budgets to the various departments every six months. Shane said, “Freeing departmental managers from the budgeting process allows them to concentrate on more pressing matters.” The accounting manager, Paola Rodriguez, recently received a 20% bonus for having prepared the budgets on time with little or no help from the other functional areas. Paola played competitive golf during college and is known around the company for her “golf mornings,” when she arrives at the office late due to her need to practice and keep her game sharp.

Careful analysis of the budget that Paola prepared will reveal that she increased the average budgeted selling price per trailer in May; she wonders if any of her colleagues will notice. Paola is also responsible for the other accounting activities of Travel-Space Trailers, including accounts payable and accounts receivable.

CASH Travel-Space Trailers’ vice president of finance is Trey Jernigan, a fraternity brother of Shane’s while at CSU. Trey has requested a short-term loan from the bank at a yet-to-be-determined interest rate (see Exhibit 8). Since Travel-Space Trailers has had trouble paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the six months ending June 30, 2021, to support the requested loan amount. The cash balance on January 1, 2021, is budgeted at the minimum cash balance required by Travel-Space Trailers’ board of directors (see Exhibit 8).

HUMAN RESOURCES To accomplish the company’s corporate strategic goals, Travel-Space Trailers encourages upward communication among all its employees, from senior management to line employees. Decision making, although not an entirely democratic process, is based on a team approach. As Travel-Space Trailers’ president, Shane encourages managers to think in terms of the marketplace and to look at the business of travel trailers as a whole rather than as functional department successes and decisions. In fact, Shane is so committed to the idea of cooperative management and teamwork that he has hired three separate human resource consultants in the past six months to lead the company’s managers through team-building exercises.

IMA EDUCATIONAL CASE JOURNAL VOL. 14 , NO. 1 , ART. 1 , MARCH 2021 4

ADDITIONAL INFORMATION Unit sales for 2020 (actual) and 2021 (projected) by month are in Exhibit 9.

Actual sales in dollars for the last two months of 2020 and budgeted sales in dollars for the first six months of 2021 are in EXHIBIT 10. Experience shows the pattern of sales collection (see Exhibit 11).

Shane plans to replace all rented equipment with owned equipment over the next three years. Equipment rental expense dropped from March to April due to the acquisition of owned equipment and the fact that equipment rental agreements are adjusted quarterly. The replacement of rental with owned equipment will also increase depreciation expense on the income statement starting in April.

Yun Li, an intern newly hired by Travel-Space Trailers, suggests preparing the production budget assuming stable production (see Exhibit 12).

YOUR ROLE Owner Paul is aware that Travel-Space Trailers is experiencing difficulties, and he has hired you, an independent consultant, to investigate. Write a letter to Paul explaining your recommendations. Paul is not likely to respond to lots of raw numbers, so develop and include in your letter data visualizations that will convince him to intervene and make the changes that you recommend.

EXHIBITS If your instructor has provided you with alternative data values, be sure to use the alternative data.

IMA EDUCATIONAL CASE JOURNAL VOL. 14 , NO. 1 , ART. 1 , MARCH 2021 5

Actual Sales 2015 2016 2017 2018 2019 2020

13,765 14,880 15,991 17,809 19,634 23,322

Projected Sales 2021 2022 2023 2024 2025

28,000 33,600 40,320 48,384 58,060

EXHIBIT 1. ACTUAL AND PROJECTED SALES IN NUMBER OF TRAILERS

Budget: December 31, 2020 1,000 trailers

Current finished goods 300 trailers *plus*

Inventory formula + 20% of the next month's sales

EXHIBIT 2. FINISHED GOODS INVENTORY

IMA EDUCATIONAL CASE JOURNAL VOL. 14 , NO. 1 , ART. 1 , MARCH 2021 6

$8.00 cost per square yard

EXHIBIT 4. SHEET ALUMINUM BUDGETED COST

Sheet aluminum on hand at the end of each month 50.0% of the following month's production needs

Raw materials inventory budget December 31, 2020 39,000 square yards

EXHIBIT 5. RAW MATERIALS INVENTORY

January February March

Aluminum $816,000 $1,056,000 $888,000

Other materials 54,000 264,000 222,000

Wages 624,000 1,008,000 1,104,000

Heat, light, & power 130,000 195,000 220,000

Equipment rental 390,000 390,000 390,000

Equipment purchases 300,000 300,000 300,000

Depreciation 250,000 250,000 250,000

Selling & admin 400,000 400,000 400,000

April May June

Aluminum $552,000 $336,000 $240,000

Other materials 138,000 84,000 90,000

Wages 672,000 432,000 240,000

Heat, light, & power 135,000 110,000 110,000

Equipment rental 340,000 340,000 340,000

Depreciation 275,000 275,000 275,000

EXHIBIT 6. BUDGETED EXPENSES FOR THE FIRST SIX MONTHS 2021

Trailer requirements 30.0 square yards

Cost per square yard in the Spring Current finished goods $15.00

Cost per square yard in December/January $8.00

EXHIBIT 3. SHEET ALUMINUM V

IMA EDUCATIONAL CASE JOURNAL VOL. 14 , NO. 1 , ART. 1 , MARCH 2021 7

Requested loan amount $800,000

Loan duration (in days) 90

Mininum cash balance required by directors $100,000

EXHIBIT 8. BANK LOAN DETAILS / MINIMUM CASH BALANCE REQUIRED

2020 Actual 2021 Projected

January 1,983 2,500

February 3,218 4,000

March 3,981 5,000

April 3,240 3,000

May 1,755 2,000

June 901 1,000

July 763 1,000

August 611 1,000

September 1,622 2,000

October 1,678 2,000

November 1,439 2,000

December 2,131 2,500

Total Trailers 23,322 28,000

EXHIBIT 9. ACTUAL 2020 AND PROJECTED 2021 SALES

A/P: Aluminum $700,000

A/P: Other materials $150,000

EXHIBIT 7. ACCOUNTS PAYABLE FOR ALUMINUM AND OTHER MATERIALS PURCHASED DURING DECEMBER 2020

IMA EDUCATIONAL CASE JOURNAL VOL. 14 , NO. 1 , ART. 1 , MARCH 2021 8

November 2020 (actual) $1,439,000

December 2020 (actual) $2,131,000

January 2021 (budgeted) $2,500,000

February 2021 (budgeted) $4,000,000

March 2021 (budgeted) $5,000,000

April 2021 (budgeted) $3,000,000

May 2021 (budgeted) $2,200,000

June 2021 (budgeted) $1,100,000

EXHIBIT 10. ACTUAL AND BUDGETED SALES

Of a month's sales collected in:

Month of sale 25%

Month following sale 10%

Second month following sale 60%

- The remainder is uncollectible -

EXHIBIT 11. ACCOUNTS RECEIVABLE COLLECTION SCHEDULE

First suggested level 3,000

Second suggested level 3,500

EXHIBIT 12. SUGGESTED CONSTANT PRODUCTION LEVELS

ABOUT IMA® (INSTITUTE OF MANAGEMENT ACCOUNTANTS)

IMA®, the association of accountants and financial professionals in business, is a global professional association focused exclusively on advancing the management accounting profession. IMA supports the profession through research, teaching cases, the CMA® (Certified Management Accountant) program, continuing education, networking and advocacy of the highest ethical business practices. IMA has a global network of more than 140,000 members in 140 countries and 300 professional and student chapters. For more information, please visit www.imanet.org.

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