Answered: Pencil Supply expects to have the sales…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 5P

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Question

Cash Budget

Pencil Supply expects to have the sales and expenses shown for May, June,
and July. The company expects to receive 70% of the sales in the month of the sale,
25% thefollowing month, and 5% to be uncollectible. The company’s policy to pay
manufacturing cost includes 65% in the month incurred and 35% the following
month. All other costs are paid in the month incurred. In addition, the company must
pay an income tax payment in July, which the company estimates will be 10% of total
sales for the quarter. The company will also receive interest revenue of $1,200 in
June.

	April	May	June	July
Sales	$102,500	$100,000	$105,200	$107,100
Manufacturing costs	30,000	34,500	38,000	36,500
Selling expenses	14,900	14,900	22,500	15,000
Administrative expenses	20,000	20,000	22,500	25,000

Prepare the cash budget for the three months if the cash balance as of May 1, 2015,
totaled $102,000. The company requires a $100,000 minimum cash balance.

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