The controller of Dash Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:
|
March |
April |
May |
| Sales |
$118,000 |
|
$142,000 |
|
$188,000 |
|
| Manufacturing costs |
50,000 |
|
61,000 |
|
68,000 |
|
| Selling and administrative expenses |
34,000 |
|
38,000 |
|
41,000 |
|
| Capital expenditures |
_ |
|
_ |
|
45,000 |
|
The company expects to sell about 15% of its merchandise for cash. Of sales on account, 70% are expected to be collected in full in the month following the sale and the remainder the following month. Depreciation, insurance, and property tax expense represent $9,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in July, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 85% are expected to be paid in the month in which they are incurred and the balance in the following month.
Current assets as of March 1 include cash of $45,000, marketable securities of $64,000, and accounts receivable of $131,200 ($103,000 from February sales and $28,200 from January sales). Sales on account for January and February were $94,000 and $103,000, respectively. Current liabilities as of March 1 include a $59,000, 12%, 90-day note payable due May 20 and $9,000 of accounts payable incurred in February for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $3,500 in dividends will be received in March. An estimated income tax payment of $17,000 will be made in April. Dash Shoes' regular quarterly dividend of $9,000 is expected to be declared in April and paid in May. Management desires to maintain a minimum cash balance of $35,000.