# Question: Refer to the information in Problem 6 35 Assume the following

Refer to the information in Problem 6-35. Assume the following: Animal Gear (AG) does not make any sales on credit.
In Problem 6-35
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Animal Gear accounts for direct materials using a FIFO cost flow assumption.
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AG sells only to the public and accepts cash and credit cards; 90% of its sales are to customers using credit cards, for which AG gets the cash right away, less a 2% transaction fee. Purchases of materials are on account. AG pays for half the purchases in the period of the purchase and the other half in the following period. At the end of March, AG owes suppliers \$ 8,000. AG plans to replace a machine in April at a net cash cost of \$ 13,000. Labor, other manufacturing costs, and nonmanufacturing costs are paid in cash in the month incurred except of course depreciation, which is not a cash flow. Depreciation is \$ 25,000 of the manufacturing cost and \$ 10,000 of the nonmanufacturing cost for April. AG currently has a \$ 2,000 loan at an annual interest rate of 24%. The interest is paid at the end of each month. If AG has more than \$ 10,000 cash at the end of April it will pay back the loan. AG owes \$ 5,000 in ­income taxes that need to be remitted in April. AG has cash of \$ 5,900 on hand at the end of March.

Required
1. Prepare a cash budget for April for Animal Gear.
2. Why do Animal Gear’s managers prepare a cash budget in addition to the revenue, expenses, and operating incomebudget?
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