Problem:
Cyrus Brown Manufacturing has estimated the following sales forecast over next 9 mo.:
March-$100,000;
April-$275,000;
May-$320,000;
June-$450,000;
July-$700,000;
August-$700,000;
September-$825,000;
October-$500,000;
November-$115,000.
Collection estimates regarding the forecast sales:
payment collection within the month of sale=25%;
payment collection the month following sales=55%;
payment collection the second month following sales=20%.
Payments for direct manufacturing costs like raw materials are made during the month that follows the one in which such costs have been incurred as follows:
March-$187,500;
April-$206,250;
May-$375,000;
June-$337,500;
July-$431,25o;
August-$640,000;
September-$395,000;
October-$425,000.
Additional financial info:
Administration salaries will approximately amount to $35,000 a month;
lease payments around $15,000 a month;
Depreciation-$15,000 a month;
a one-time plant investment amount of $95,000 is expected to be incurred and paid in June;
Income tax payments estimated to be around $55,000 will be due in June and September;
miscellaneous $10,000 a month.
Cash on hand March 1st will be around $50,000 and a minimum cash balance of $50,000 shall be on hand at all times. Show all work, formulas and calculations. Based on information:
1) will the company need any outside financing;
2) what is the minimum line of credit will CBM need?
3)what is CBM's cash position during the budget period?Is there any concerns for the family in this regard?If you were a bank manager would you want CBM as your client? Why or Why not?