With the following information about Quantum Plastics Ltd., prepare a cash budget for the months of January to April 2014.
The marketing department’s sales forecast follows:
November (2013) ........... $ 25,000
December .............. 50,000
January (2014) ............ 75,000
February ............. 120,000
March ............... 140,000
April ............... 110,000
The credit manager provides the following information:
20% of sales are on a cash basis.
60% are collected after 30 days.
20% are collected after 60 days.
Cost of sales, which is 50% of sales, is incurred in the month in which the sales are made. These goods are paid for 30 days after the purchases are made.
Monthly selling and administrative expenses are as follows:
Salaries ............. $22,000
Telephone ............ 1,000
Amortization ............. 500
Rent .............. 2,200
Hydro .............. 1,100
Stationery ............ 500
Other expenses are as follows:
Taxes: $3,000 in February and $3,000 in June.
Purchase of equipment in January for $24,000.
The cash balance on January 1, 2014 is $12,000.