Problem
|
October
|
November
|
December
|
|
Sales
|
960,000
|
870,000
|
850,000
|
|
Direct Materials
|
123,000
|
119,000
|
125,000
|
|
Direct Labor
|
90,000
|
85,000
|
96,000
|
|
Variable Overhead
|
65,600
|
62,400
|
68,000
|
|
Fixed Overhead
|
140,000
|
140,000
|
140,000
|
|
Selling and Admin Costs
|
312,000
|
310,000
|
315,000
|
|
Fixed Loan Payments
|
140,000
|
140,000
|
140,000
|
Sales were $770,000 in August and $840,000 in September. Material usage was $115,000 in August and $118,000 in September. All sales are on account, and accounts receivable is historically collected 15% in the month of sale, 65% in the month following sales, and the remainder two months after the sale. Materials are paid for 40% in the month used and 60% the following month. All other expenses are paid in the month incurred. The cash balance was $35,000 at the beginning of October, and management wants to determine if the company will have enough cash to pay a year-end bonus.
Prepare a three-month cash budget, including a schedule for cash collections and material payments.