Problem:
Donna and Sherman Terrel are preparing a budget for 2010. Donna is a systems analyst with an airplane manufacturer, and Sherman is working on a master's degree in educational psychology. The Terrels do not have any children or other dependents. Donna estimates her salary will be about $45,600 in 2010; Sherman expects to work only during the summer months, doing painting and remodeling work for a building contractor. He anticipates an income from those activities of $3000 a month in June, July, and August. Sherman does have a scholarship that pays his tuition and also provides $3,600 a year of which $2400 is payable in February and $1200 is payable in October. The Terrels don't expect to have any other income in 2010.
Donna and Sherman have listed their expected total expenses in 2010 as follows:
Housing (rent) $8,640
Transportation 6,000
Food (includes dining out) 8,100
Utilities 3,000
Payroll taxes:
Donna
13,200
Sherman
1,500
Insurance:
Life - payable in May
720
Auto - payable in January
1,800
Leisure and entertainment:
Vacation in May
1,800
Clothing 1,800
Others $3,900
Total Expenses $50,460
The Terrels will begin 2010 with about $1,000 in liquid assets, and they prefer not to draw this balance below $600 at any time during the year.