Question:
Juan's Taco Company has restauraunts in five college towns. Juan wants to expand into Austin and College Station and needs a bank loan to do this. Mr. Bryan, the banker, will finance construction if Juan can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures:
Actual & Forecast
November $120,000
December $140,000
January $190,000
Februry $210,000
March $230,000
April $230,000
Of Juan's sales, 30% are cash and the remaining 70% are credit. Of credit sales, 40% are paid in the month after sale, and 60% are paid in the second month after the sale. Materials cost 20% of sales and are paid for in cash. Labor is 50% of sales and is also paid in the month of sales. Selling and administrative expense is 5% of sales and is also paid the month of sales. Overhead expense is $12,000 and dividends of $16,000 will be paid in March. Cash at the beginning of January is $70,000 and the minimum desired cash balance is $65,000.
For January, February and March, prepare a schedule of monthly cash reciepts, mothly cash payments, and a complete monthly cash budget with borrowings and repayments.