Mayfield Company expects to have a cash balance of $46,000 on January 1, 2010. These are the relevant monthly budget data for the first two months of 2010.
1. Collections from customers: January $89,600, February $165,600.
2. Payments to suppliers: January $59,600, February $94,600.
3. Wages: January $30,000, February $40,000. Wages are paid in the month they are incurred.
4. Administrative expenses: January $21,000, February $28,000. These costs include depreciation of $1,000 per month. All other costs are paid as incurred.
5. Selling expenses: January $15,044, February $20,044. These costs are exclusive of depreciation. They are paid as incurred.
6. Sales of short-term investments in January are expected to realize $12,000 in cash. Mayfield has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000.