Please provide detail explanation with answer

Rusty Spears, CEO of Rusty's Renovations, a custom building, and repair company, is preparing documentation for a line of credit request from his commercial banker. Among the required documents is a detailed sales forecast for parts of 2017 and 2018:

May

Jun

Jul

Aug

Sep

Oct

Nov

December

January

sales

$60,000

$130,000

$120,000

$100,000

$80,000

$60,000

$40,000

$30,000

labor and raw mat. estimates

$75,000

$95,000

$70,000

$60,000

$50,000

$20,000

$20,000

Estimates obtained from the credit and collection department are as follows: collections within the month of sale, 15%; collections during the month following the sale, 65%; collections the second month following the sale, 20%. Payments for labor and raw materials are typically made during the month following the one in which these costs were incurred. Total costs for labor and raw materials are estimated for each month as shown in the table.

General and administrative salaries will amount to approximately $15,000 a month, lease payments under long-term lease contracts will be $5,000 a month; depreciation charges will be $7,500 a month; miscellaneous expenses will be $2,000 a month; income tax payments of $25,000 will be due in both September and December; and a progress payment of $80,000 on a new office suite must be paid in October. Cash on hand on July 1 will amount to $60,000, and a minimum cash balance of $40,000 will be maintained throughout the cash budget period.

c. Assume thatreceiptsfromsales comeinuniformly duringthemonth(i.e., cash receiptscomeinattherateof1/30each day) but that all outflows are paidon the 5th of themonth. but all outflows must be paid on the 5th. Will this have an effect on the cash budget? In other words, would the cash budget you have prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although calculations can be used to illustrate the effects.