Once Only produces various kinds of weed killers for commercial lawn applications. The company needs to watch its cash carefully in order to make sure that it can survive the busy summer months when there is a huge demand for the product, requiring large inventories. Unfortunately, not all of Once Only’s customers pay right away, so the company ends up floating receivables at its busiest time. To keep its credit rating solid, however, Once Only pays all of its bills monthly. That means at the end of each month, it still owes half of the inventory purchases to its supplier for goods received after the 15th of the month. The information pertaining to Once Only ’s cash budget for the months of July through September is:

• Opening cash balance on July 1 is $25,000.

• Sales of fertilizer were:

» May : $125,000

» June: $175,000

» July : $250,000

» August: $200,000

» September: $300,000

• It projects sales in October of $250,000.

• Once Only ’s customers pay in the following way : 25% pay in the month of purchase, 50% pay the month following purchase, and the remaining 25% pay two months after purchase.

• The materials costs are 50% of the total sales price for each month.

• The company likes to keep 25% of its next month’s sales on hand at the end of each month. It started the quarter with 25% of July’s needs on hand.

• Direct labor costs are $18,000 per month.

• Overhead for the warehouse is $30,500 per month.

• Back office workers earn $27,500 per month.

REQUIRED:

For each month, prepare:

a. A purchases budget to determine how much fertilizer Once Only needs to buy

b. A cash receipts budget

c. A cash disbursements budget

d. A cash budget

e. At the end of September, what is the company’s accounts receivable balance?

f. At the end of September, what is the company’s accounts payable balance?

g. How does Once Only’s cash position look to you each month? Provide specific details for your answer.