Realty Company prepares monthly cash budgets. Provided next is a set of relevant data extracted from existing reports and the sub-budgets for the two months of September and October 2021.

All sales are on credit. Collections from accounts receivable normally have the following pattern:
60 per cent in the month of sale, 30 per cent in the month following the sale and 10 per cent in the second month following the sale. Fortunately, Realty Company does not have much trouble with bad debts.

Sales in June, July and August are $315000, $286000 and $322000 respectively. Direct material purchases are paid for in the month following the purchase. Purchases in August are $192000. Manufacturing overhead includes $14500 for depreciation expense, while marketing and administration expenses include an amount of $6000 for depreciation expenses. Realty Company expects to be able to repay the principal on a $150000 loan in October.

Required
(a) Prepare a schedule of receipts from the accounts receivable for the two months ending 31 October 2021.
(b) Prepare a cash budget for September and October 2021. The cash balance at 31 August 2021 is $12600.
(c) As part of its longer term plans, Realty Company is hoping to commence a product reinvention program for one of its core products. The project would require an initial cash commitment of $30000. Management is hoping to fund this from the cash flows of the business. Does this seem feasible?

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Credit sales Direct materials purchases Direct labour Manufacturing overhead Marketing and administration expenses Proceeds from sale of old equipment Cash payment for new IT equipment September $342 000 162 000 51 400 21 600 35 000 18 400 October $436 000 216000 55200 23 400 35 000 8200