Miguel Vasquez decided to start a business that would require the purchase of assets at a total cost of $200,000. He started his business with a cash investment of $50,000 and on January 1, 20A, took out a long-term loan from the bank in the amount of $150,000. The terms of the note stipulated that interest 2% (monthly) would be paid at the end of each month, and a payment of $30,000, to be applied toward the principal, would be payable at the end of each quarterly period. The proceeds of the loan were used to purchase equipment. The company would produce a product with the following budgeted revenues and expenses, based on an expected monthly production volume of 5,000 units:

Other information includes the following:
(a) Expected sales total $360,000 for January, $450,000 for February, $480,000 for March, and $600,000 for April.
(b) All sales are on credit, with terms 2/10, net 30 days. Collection of accounts receivable are expected to be in the following pattern:
30% collected in the month of the sale (of which 80% will take the discount)
30% collected in the month after the sale
38% collected two months after the sale
2% uncollected
(c) A direct materials inventory of $2,000 is be maintained at all times.
(d) To meet fluctuations in customer demand, a finished goods inventory equal to 100 units plus 10% of the expected demand for the following month (in units) will have to be maintained.
(e) All direct material purchases are expected to be incurred uniformly throughout the month with payments being made in the month of purchase.
(f) Wages payable at the end of each month are expected to average $7,500.
(g) A minimum cash balance of $15,000 is to be maintained at all times.
Required:
Prepare a cash budget for the first quarterly period ending on March 31. Include any supporting schedules and/or budgets that are appropriate and indicate what financing (if any) may be required.

Transcribed Image Text:

$ 150.00 Selling price per unit. Manufacturing costs per unit: $ 20.00 30.00 Direct labor Variable factory overhead: Utilities 2 5.00 6.00 4.00 Supplies 15.00 Indirect labor. Fixed factory overhead: Factory rent $10.00 Depreciation on machinery Total manufacturing cost per unit 15.0025,00 $ 90.00 Selling and administrative costs: Sales commissions per unit of product sold... Bad debt expense per unit of product sold Office equipment rentals per month... Equipment depreciation per month. $8.00 3.00 12,000.00 5,000.00