In: Finance
Grenoble Enterprises had sales of
$ 50 comma 500$50,500
in March and
$ 59 comma 500$59,500
in April. Forecast sales for May, June, and July are
$ 69 comma 500$69,500,
$ 79 comma 600$79,600,
and
$ 100 comma 100$100,100,
respectively. The firm has a cash balance of
$ 4 comma 900$4,900
on May 1 and wishes to maintain a minimum cash balance of
$ 4 comma 900$4,900.
Given the following data, prepare and interpret a cash budget for the months of May, June, and July.
(1) The firm makes
18 %18%
of sales for cash,
60 %60%
are collected in the next month, and the remaining
22 %22%
are collected in the second month following sale.
(2) The firm receives other income of
$ 2 comma 000$2,000
per month.
(3) The firm's actual or expected purchases, all made for cash, are
$ 49 comma 600$49,600,
$ 69 comma 600$69,600,
and
$ 80 comma 100$80,100
for the months of May through July, respectively.
(4) Rent is
$ 2 comma 500$2,500
per month.
(5) Wages and salaries are
8 %8%
of the previous month's sales.
(6) Cash dividends of
$ 2 comma 600$2,600
will be paid in June.
(7) Payment of principal and interest of
$ 4 comma 500$4,500
is due in June.
(8) A cash purchase of equipment costing
$ 6 comma 400$6,400
is scheduled in July.
(9) Taxes of
$ 6 comma 200$6,200
are due in June.