Case Study 2 - Budgeting Ahead On Jan 1, 2021, GrubHeven is attempting to budget cash flows through Mar 31, 2021. On this latter date, an unsecured note will be payable in the amount of $4 million, at 3% per annum. This amount was borrowed on Sep 30, 2020 to carry the company through the seasonal peak in Oct through Dec 2020. Cash Interest payment are settled monthly. The company only transact on credit sales. A discount of 5% is given to all customers who pay within one month. 30% of the accounts receivable will be received in the month of sale. 50% will be collected in the following month, and 20% will be received 2 months after sale. There is a 5% provision for bad debt for accounts receivable owing 2 months after sale. Projected and Actual Sales are: Projected Sales ($) Actual Sales ($) October 4 900 000 5 500 000 October November November 5 000 000 5 600 000 December 5 000 000 December 5 800 000 January 4 900 000 January - February 5 400 000 February March 5 500 000 March April April 5 100 000 Purchases are made on basis of 60% of the following month's projected sales. Half of the purchases are paid for in the month of purchase, and a 5% prompt settlement discount is received. The remainder is paid in full the following month. Total budgeted fixed operating expenses for the year are $12 million. Fixed costs are accrued evenly through the year. The operating variable costs is determined to be 15% of that month's projected sales. Both fixed and variable operating expenses are paid in the month incurred. Opening cash balance as at 1 Jan 2021 is $4 500 000