Question

Prepare a cash budget for Hula Island on a monthly basis for the period June 2014 through May 2015. Perform the calculations on an incremental basis (i.e., determine the increase or decrease in cash for each month). The following information will allow you to structure the cash budget: The cash coming in each month is approximately one-half of the current month’s sales and one-half of the previous month’s sales. The cash out for each month has several parts. Each month Hula pays cash for invoices approximately equal to the cost of products sold in the prior month. Rent of $2,000 is a fixed cost paid during the same month it is incurred. Variable costs are paid each month. They consist of part-time labor costs that average $1.25 per order and shipping and taxes that average $4.10 per order. Finally, the owner takes $2,000 a month as a personal distribution.

Hula is a small business with approximately $300,000 in annual sales and roughly $48,000 in annual profits. Can I get the answer in a more readable/legible format, other than a computer screen/

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Table 1: Hula Island Income Statement—Entire Year Ended May 2015
Unit Sales 13,926
Revenues $292,446
Less: Rent 24,000
COGS 146,227
Labor 17,408
Shipping and Taxes 57,097
Profits $47,714
Average profit/order $3.43

Hula Island Income Statement—By Month
   June* July    Aug    Sept    Oct    Nov    Dec    Jan    Feb    Mar    Apr    May
Unit Sales    731    981 973 1,301 959    1,245 2,359 1,700 850 769 1,218    840
Revenues 15,351 $20,601    $20,433 $27,321    $20,139 $26,145 $49,539 $35,700 $17,850 $16,149 $25,578 17,640
Less:
Rent    2,000 2,000    2000 2,000 2,000    2,000 2,000    2,000    2,000    2,000    2,000    2,000

COGS 7,676    10,301 10,217 13,661    10,070    13,073    24,770    17,850 8,925    8,075 12,789    8,820

Labor 914    1,226    1,216 1,626    1,199    1,556    2,949    2,125    1,063    961 1,523    1,050

Ship/Taxes 2,997 4,022    3,989 5,334    3,932 5,105 9,672    6,970    3,485    3,153    4,994 3,444

Profits    $1,764 $3,052    $3,011    $4,700 $2,938    $4,411    $10,148    $6,755 $2,377 $1,960 $4,272 $2,326

*The previous month’s sales (May sales) were $17,010.

Answer 1

Answer:-

• The previous month’s sales (May sales) were $17,010.

Cash Budget	JUNE	JULY	AUGUST	SEPTEMBER	OCTOBER	NOVEMBER	DECEMBER	JANUARY	FEBRUARY	MARCH	APRIL	MAY	YEAR
Collections from debtors
current month (50%)	$7,676	$10,301	$10,271	$13,661	$10,070	$13,073	$24,770	$17,850	$8,925	$8,075	$12,789	$8,820	$146,227
previous month(50%) =revenue/2	=17,010/2 =$ 8,505	=15,351/2 =$7,675.5	=20,601/2 =$10,300.5	=20,433/2 =$10,216.5	=27,321/2 =$13,660.5	=20,139/2 =$10,069.5	=26,145/2 =$13,072.5	=49,539/2 =$24,769.5	=35,700/2 =$17,850.0	=17,850/2 =$8925.0	=16,149/2 =$8,074.5	=25,578/2 =$12789.0	$1,45,907
Total cash =current month + previous month	$16,181	$17,976.5	$20,571.0	$23,877	$23,730.5	$23,142.5	$37,842.5	$42,619.0	$26,775.0	$17,000	$20,863.5	$21,609.0	$2,92,134
(-)cash disbursements
Rent	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$2,000	$24,000
COGS = previous month	$8,505	$7,675.5	$10,300.5	$10,216.5	$13,660.5	$10,069.5	$13,072.5	$24,769.5	$17,850.0	$8,925.0	$8,074.5	$12,789.0	$149,907
Labour	$914	$1,226	$1,216	$1,626	$1,199	$1,556	$2,949	$2,125	$1,063	$961	$1,523	$1,050	$17,408
Ship/tax	$2,997	$4,022	$3,989	$5,334	$3,932	$5,105	$9,672	$6,970	$3,485	$3,153	$4,994	$3,444	$57,097
drawings	$2,000	$2,000	$2,000	$2000	$2,000	$2,000	$2,000	$2,00	$2,000	$2,000	$2,000	$2,000	$24,000
Total cash disbursement =(rent+COGS+labour+tax+drawings)	$16,416	$16,923.5	$19,505.5	$21,176.5	$22,791.5	$20,730.5	$29,693.5	$37,864.5	$26,398	$17,039	$18,,591.5	$21,283	$2,68,412
Excess of cash in over disbursements = totl cash - total cash disbusements	$-231	$1053	$1,012	$2,701	$939	$2,412	$8,149	$4,754	$377	$-39	$2,272	$326	$23,722