The Good Measure Companys sales for December 2020 and forecast for the first several months of 2021 are as follows:
The Good Measure Company’s sales for December 2020 and forecast for the first several months of 2021 are as follows:
|64, 000||56, 000||52, 000||62, 000||56, 000||60, 000|
Additional information provided is as follows:
Raw material is purchased each month at 45 % of the next month’s sales. The supplier is paid a month after delivery. For example, purchases for January are based on expected sales for February and payment is made a month after in February.
Seventy percent (70%) of sales will be for cash, while the remaining 30% will be collected in the first month following the sale.
Wages total $9,000 in December and will increase each month by 5%.
Other expense is $5,750 each month.
Taxes will be paid on March 31: $8,575
Equipment costing $24,000 was ordered in January. A 35% deposit will be made at ordering and the balance paid in March when it the equipment is to be delivered.
Good Measure Company’s cash balance on 31 December 2019 was $10,000. However, the firm has decided to use $30,000 as the minimum balance applied going forward.
Short-term credit is arranged at an interest rate of 12 percent per annum (1 percent per month) to be paid monthly. The interest on any short-term borrowing is paid in the month after it is incurred.
Use the information above to prepare the cash budget for The Good Measure Company covering January to April 2021.