Below are data from Peekay Chewing Gum Companys operating budgets. The companys financial year ends on 30 June.

Quarter 1 Quarter 2

Sales $248,470 $251,539

Direct material purchases 120,295 128,832

Direct labor 76,500 74,000

Manufacturing overhead 28,000 25,400

Selling and administration expenses33,500 33,500

Collection from customers 230,500 220,000

Cash payments for purchases114,000 118,000

Additional data:

Equipment was sold in July for $9,000 and $5,500 in November. Dividends of $6,500 were paid in August. 20% of the selling and administration expenses relate to depreciation expenses. The beginning cash balance was $80 000 and a required minimum cash balance per quarter is $60,000.

The company has a 15% open line of credit for $70 000 with their bank.

Required:

a) Use this information to prepare a cash budget for the first two quarters of the year

b) Briefly comment on Peekay Chewing Gum Companys expected cashflow position in the first two quarters of the year