Juan's Taco Company has restaurants infive college towns. Juan wants to expand into Austin and College Station andneeds a bank loan to do this. Mr. Bryan, the banker, will finance constructionif Juan can present an acceptable three-month financial plan for Januarythrough March. Following are actual and forecasted sales figures:
Actual Forecast Additional Information
November$120,000 January$190,000 April forecast $230,000
December$140,000 February $210,000
March$230,000
Of Juan's sales, 30 percent are forcash and the remaining 70 percent are on credit. Of credit sales, 40 percent are paidin the month after sale and 60 percent are paid in the second month after the sale.Materials cost 20 percent of sales and are paid for in cash. Labor expense is50 percent of sales and is also paid in the month of sales. Selling andadministrative expense is 5 percent of sales and is also paid in the month of sales. Overheadexpense is $12,000 in cash per month; depreciation expense is $25,000 permonth. Taxes of $20,000 and dividends of $16,000 will be paid in March.Cash at the beginning of January is $70,000, and the minimum desired cashbalance is $65,000.
For January, February, and March, prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowings and repayments.