ueblo Enterprises Inc., expects sales of $110,000 during each of the next 3 months. It will make monthly purchases of $60,000 during this time. Wages and salaries are $10,000 per month plus 5 % of sales. Pueblo expects to make a tax payment of $30,000 in the next month and a $20,000 purchase of fixed assets in the second month and to receive $10,000 in cash from the sale of an asset in the third month. All sales and purchases are for cash. Beginning cash and the minimum cash balance are assumed to be zero.
a) Construct a cash budget for the next 3 months.
b) Pueblo Inc., is unsure of the sales levels, but all other figures are certain. If the most pessimistic sales figure is $80,000 and the most optimistic is $150,000 per month, what are the monthly minimum and maximum ending cash balances that the firm can expect for the three months.