Question - The treasurer of Calico Dreams Company has accumulated the following budget information for the first two months of the coming fiscal year:
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March
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April
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|
Sales.
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$450,000
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$520,000
|
|
Manufacturing costs
|
290,000
|
350,000
|
|
Selling and administrative expenses
|
41,400
|
46,400
|
|
Capital additions
|
250,000
|
-
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The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are collected in full in the month of the sale, and the remainder in the month following the sale. One-fourth of the manufacturing costs are paid in the month in which they are incurred, and the other three-fourths in the following month. Depreciation, insurance, and property taxes represent $6,400 of the monthly selling and administrative expenses. Insurance is paid in February, and property taxes are paid yearly in September. A $40,000 installment on income taxes is to be paid in April. Of the remainder of the selling and administrative expenses, one-half are to be paid in the month in which they are incurred and the balance in the following month. Capital additions of $250,000 are paid in March.
Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current liabilities as of March 1 are accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for operating expenses). Management desires to maintain a minimum cash balance of $25,000.
Prepare a monthly cash budget for March and April.