Clarification of Question by
8134-ga
on
05 Jul 2005 17:19 PDT
To avoid any uncertainty regarding his business? financing needs at
the time when such needs may arise, Cyrus Brown wants to develop a
Cash Budget for his latest venture- Cyrus Brown Manufacturing (CBM).
He has estimated the following sales forecast for CBM over the next
nine months:
2004 sales forecast for CBM over the next nine months
March $250,000 April 275,000 May 320,000 June 450,000 July 575,000
August 700,000 September 825,000 October 350,000 November 285,000
He has also gathered the following collection estimates regarding the
forecast sales: Collection within the month of sale, 10%; collection
the month following sales, 65%, and collection the second month
following sales, 25%. Payments for direct manufacturing costs like raw
materials and labor are made during the month that follows the one in
which such costs have been incurred. These costs are estimated as
follows:
Collection estimates regarding the 2004 forecast sales
March $187,500 April 206,250 May 240,000 June 337,500
July 431,250 August 525,000 September 618,750 October 262,500
Administrative salaries will approximately amount to $35,000 a month;
lease payments around $15,000 a month; depreciation charges, 15,000 a
month; a one-time new plant investment in the amount of $95,000 is
expected to be incurred and paid in June; income tax payments
estimated to be around $ 55,000 will be due in both June and
September; and finally, miscellaneous costs are estimated to be around
$10,000 a month. Cash on hand on March 1 will be around $50,000; and a
minimum cash balance of $50,000 shall be on hand at all times.
a. Prepare a monthly cash budget for Cyrus Brown Manufacturing for the
nine month period, March through
