Red Chili Corporation currently doing forecasting on companys fund requirement for the first quarter of 2023. Below
Question:
Red Chili Corporation currently doing forecasting on company’s fund requirement for the first quarter of 2023. Below are the company’s actual and forecast sales.
ACTUAL SALES | RM | FORECASTED SALES | RM |
October 2022 | 400,000 | January 2023 | 460,000 |
November 2022 | 450,000 | February 2023 | 480,000 |
December 2022 | 470,000 | March 2023 | 400,000 |
April 2023 | 420,000 |
Additional information:
i. From total sales, 40 percent will be collected in the month of sales and 60 percent will be collected equally in two months after sales.
ii. Purchase of material will be 50 percent of the month of sales and will be paid in the month of purchase.
iii. Wages of company’s worker estimated to be 8 percent of the month sales.
iv. Interest on company’s long-term loan, RM15,000 will be paid in two equal payments in January and February.
v. Monthly payment of rent and insurance amount RM12,000 and RM6,000 respectively.
vi. Red Chili Corporation plan to buy a new machine to improve the operation in March cost about RM45,000.
vii. Interest on short term loan is at 4 percent compounded annually and paid in the following month.
viii. The company has ending cash balance for December amount RM5,000 and the company wishes to have minimum cash requirement of RM15,000 per month.
Prepare the cash budget for the company for the first quarter of 2023.
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman