Helen Bowers, owner of Helen's Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2019 and 2020:. May 2019 $186,000
June 186,000
July 372,000
August 540,000
September 720,000
October 360,000
November 360,000
December 90,000
January 2020 180,000
Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials:
May 2012$90,000
June90,000
July126,000
August882,000
September306,000
October234,000
November163,000
December90,000
General and administrative salaries are approximately $26,000 a month. Lease payments under long-term leases are $9,000 a month. Depreciation charges are $36,000 a month. Miscellaneous expenses are $2,600 a month. Income tax payments of $63,000 are due in September and December. A progress payment of $180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be $132,000, and a minimum cash balance of $90,000 should be maintained throughout the cash budget period.
Prepare a monthly cash budget for the last 6 months of 2012. If no entry required, leave the cell blank. Use minus sign to enter losses, loans outstanding or any other negative amounts.
May June July August September October November December January
Collections and purchases worksheet
Sales (gross)$ $ $ $ $ $ $ $ $
Collections
During month of sale$ $ $ $ $ $ $ $
During 1st month after sale$ $ $ $ $ $ $ $
During 2nd month after sale$ $ $ $ $ $ $ $
Total collections $ $ $ $ $ $
Purchases
Labor and raw materials$ $ $ $ $ $ $ $
Payments for labor and raw materials $ $ $ $ $ $ $
Cash gain or loss for month
Collections $ $ $ $ $ $
Payments for labor and raw materials $ $ $ $ $ $
General and administrative salaries $ $ $ $ $ $
Lease payments $ $ $ $ $ $
Miscellaneous expenses $ $ $ $ $ $
Income tax payments $ $ $ $ $ $
Design studio payment $ $ $ $ $ $
Total payments $ $ $ $ $ $
Net cash gain (loss) during month $ $ $ $ $ $
Loan reqiutement or cash surplus
Cash at start of month $ $ $ $ $ $
Cumulative cash $ $ $ $ $ $
Target cash balance $ $ $ $ $ $
Cumulative surplus cash or loans
outstanding to maintain $90,000 target cash balance $ $ $ $ $ $
Prepare monthly estimates of the required financing or excess funds - that is, the amount of money Bowers will need to borrow or will have available to invest. Round your answers to the nearest cent. Enter loans outstanding with minus sign.
July$
August$
September$
October$
November$
December$
Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 or 1/31 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects.
The input in the box below will not be graded, but may be reviewed and considered by your instructor.
Bowers' sales are seasonal; and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the company