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Question 1 Part A Big City Manufacturing (BCM) is preparing its cash budget and expects to...

Question 1

Part A

Big City Manufacturing (BCM) is preparing its cash budget and expects to have sales of $450,000 in January, $375,000 in February, and $555,000 in March. If 20% of the sales are for cash, 45% are credit sales paid in the month after the sale, and another 35% are credit sales paid 2 months after the sale.

a) What are the expected cash receipts for March?

Part B

Big City Manufacturing (BCM) assumed that all credit sales were paid in full, which is not realistic. BCM studied its past credit sales and determined that 2.5% of its credit sales resulted in Bad Debts that were never collected. Using the same data from part A with the new assumption that 2.5% of credit sales were never collected,

b) what is your revised estimate for the expected cash receipts for March?

Part C

Big City Manufacturing (BCM) assumed that all credit sales were paid in full, with no bad debt expense. Now, Please assume that bad debt expense is again 0% for BCM. Purchases for next month's sales are 70% of projected sales for the next month, and April sales are estimated to be $495,000; purchases for April are paid in cash in March. "Other payments," which include wages, rent, and taxes, are 25% of sales for the current month.

c) Construct a cash budget for March using your expected cash receipts from Part A and calculate the average net cash flow during the month of March

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