Prepare a quarterly cash budget for 2016. The cash budget is based on the following assumptions:

The January 1, 2016 cash balance is expected to be $38,000. The company wants to maintain a balance of at least $15,000.

60% of sales are collected in the sold quarter and 40% is collected in the next quarter. On December 31, 2015, $60,000 of A/R is expected to be fully charged in the first quarter of 2016.

                                    Q1                      Q2                      Q3            4th Quarter

Sales                     $180,000          $210,000            $240,000            $170,000

Short-term investments are expected to be sold for $2,000 upfront in the first quarter.

Direct materials are paid 50% in the purchased quarter and 50% paid in the next quarter. As of December 31, 2015, $10,600 of A/P is expected to be fully paid in the first quarter of 2016.

                                              Q1             Q2                       Q3             4th Quarter

DM purchases                $25,200        $29,200        $33,200            $37,200

Direct labor is paid in the quarter one

                                              Q1              Q2                      Q3              4th Quarter

DL purchases                  $62,000        $72,000          $82,000          $92,000

General production expenses, excluding depreciation and selling and administrative expenses, are paid in the quarter in which they are incurred.

                                                           Q1                 Q2              3rd Quarter              4th Quarter

Ministry of Health                         $53,300         $56,300           $59,300                   $62,300

Sales and management exp        $41,000        $43,000             $45,000                    $47,000

Management plans to buy a truck for $10,000 in the second quarter

The company makes quarterly equal payments of estimated annual income tax ($12,000).

Loans are repaid in the first quarter when there is sufficient cash (ie when cash on hand exceeds the required minimum balance of $15,000). Because there is excess cash available, the borrowing plus $100 interest is paid back in the third quarter.

When preparing the cash budget, it is helpful to prepare schedules for collections from customers and cash payments for direct materials.