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The treasurer of Calico Dreams Company has accumulated the following budget information for the first two months of the coming fiscal year:
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.
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