Terrel Manufacturing Expects Stable Sales Through the Summer Months of June

question 143

Essay

Terrel Manufacturing expects stable sales through the summer months of June, July, and August of $500,000 per month. The firm will make purchases of $350,000 per month during these months. Wages and salaries are estimated at $60,000 per month plus 7 percent of sales. The firm must make a principal and interest payment on an outstanding loan in June of $100,000. The firm plans a purchase of a fixed asset costing $75,000 in July. The second quarter tax payment of $20,000 is also due in June. All sales are for cash.
(a) Construct a cash budget for June, July, and August, assuming the firm has a
beginning cash balance of $100,000 in June.
(b) The sales projections may not be accurate due to the lack of experience by a
newly-hired sales manager. If the sales manager believes the most optimistic
and pessimistic estimates of sales are $600,000 and $400,000, respectively, what
are the monthly net cash flows and required financing or excess cash balances?

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Definitions:

Team Building

Activities and initiatives designed to improve interpersonal relations and cohesion among team members.

Medical Inoculation

A method of protecting individuals from diseases by introducing a small amount of the disease-causing agent to stimulate the immune system.

Quick Jump-Start

An action or strategy aimed at quickly initiating progress or triggering a significant change in a project or situation.

Team Norms

Informal guidelines and shared expectations developed by members of a team that influence individual behavior and facilitate group functioning.