Jim Daniels Health Products has eight stores. The firm wants to expand by two more stores and
Of the firm's sales, 40 percent are for cash and the remaining 60 percent are on credit. Of credit sales, 30 percent are paid in the month after sale and 70 percent are paid in the second month after the sale. Materials cost 30 percent of sales and are purchased and received each month in an amount sufficient to cover the following month's expected sales. Materials are paid for in the month after they are received. Labour expense is 40 percent of sales and is paid in the month of sales. Selling and administrative expense is 5 percent of sales and is also paid in the month of sales. Overhead is $28,000 in cash per month; Amortization expense is $10,000 per month. Taxes of $8,000 will be paid in January and dividends of $2,000 will be paid in March. Cash at the beginning of January is $80,000 and the minimum desired cash balance is $75,000.
For January, February, and March prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowings and repayments.
A cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment. Its primary purpose is to provide the...
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