Cash Budgeting Helen Bowers, owne of Helen's Fashion Designs is planning to the firm of parts of 2014 and 2015
May 2014 $180,000
June $180,000
July $360,000
August $540,000
September $720,000
October $360,000
November $360,000
December $90,000
January 2015 $180,000
Estimate regarding payments obtained from the credit deprtment are as gollows: collected within the month of sale, 10%, collected month following the sale 75%, collected the second month following the sale 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials:
May 2014 $90,000
June $90,000
July $126,000
August $882,000
September $306,000
October $234,000
November $162,000
December $90,000
General and admisnistrative salaries are approimately $27,000 a month. Lease payments uner long-term leases are $9,000 a month. Depreciation charges are $36,000 a month. Miscellaneous expenses are $2700 a month. Income tax payments of $63,000 are due in September and December. A progress payment of $180,000 on a new design studio must be paid in Ovtober. Cash on hand on July 1 will be $132,000, and minimum cash balance of $90,000 should be maintained throughout the cash budget pariod.
a. Prepare a monthly cash budget for the last 6 months of 2014
b. Prepare a monthly estimates of the required financing of excess funds-that is the amount of money bowers will need to borrow or will have available to invest.
c. Now suppose receipts from sales come in uniformly during the month (that is cash receipts come in at the rate of 1/30 each day) but all outflows must be paid on the 5th. Will this affect the cash budget? That is will the cash budget you prepared be vaild under these assupmtions? No calculations are required although if you prefer you can use calculations to illustrate the effects.