Problem: Prepare a cash budget for Rotor Products, Inc. for the second quarter of 2006, based on the following. All are for cash:
Total Sales
March 2006 (actual) 425,000
April 2006 330,000
May, 2006 420,000
June, 2006 450,000
The company estimates its purchases at 60 percent of next month's sales, and payments for those purchases are budgeted to lag the purchase by 1 month.
Various disbursements have been estimated as follows:
April May June
Wages and salaries 220,000 190,000 190,000
Rent 14,000 14,000 14,000
Other Expenses 5,000 6,000 7,000
In addition, a tax payment of 55,000 is due on April 15. The company's projected cash balance at the beginning of April is 60,000 and the company desires to maintain a balance of 50,000 at the end of each month.