Bachrach Fertilizer Corp. had sales of $2 million in March and $2.2 million in April. Expected sales for the next three months are $2.4 million, $2.5 million, and $2.7 million.
Bachrach has a cash balance of $200,000 on May 1 and does not want its balance to dip below that level. Prepare a cash budget for May, June, and July given the following information:
1. Of total sales, 30 percent are for cash, 50 percent are collected in the month after the sale, and 20 percent are collected two months after the sale.
2. Bachrach has cash receipts from other sources of $100,000 per month.
3. The firm expects to purchase items for $2 million in each of the next three months. All purchases are paid for in cash.
4. Bachrach has fixed cash expenses of $150,000 per month and variable cash expenses equal to 5 percent of the previous month's sales.
5. Bachrach will pay a cash dividend of $300,000 in June.
6. The company must make a $250,000 loan payment in June.
7. Bachrach plans to acquire fixed assets worth $500,000 in July.
8. Bachrach must make a tax payment of $225,000 in June.