Myrna Manufacturing, located in France, has projected sales in units for four months of operations as follows:
January ...........................25,000
February .........................30,000
March ............................32,000
April ..............................35,000
The product sells for €18 per unit. Twenty-five percent of the customers are expected to pay in the month of sale and take a 3% discount; 70% are expected to pay in the month following sale. The remaining 5% will never pay.
It takes 2 kilograms of materials to produce a unit of product. The materials cost €0.75 per kilogram. In January, no raw materials are in beginning inventories, but managers want to end each month with enough materials for 20% of the next month's production. The firm pays for 60% of its materials purchases in the month of purchase and 40% in the following month. It takes 0.5 hour of labour to produce each unit. Labour is paid €15.00 per hour and is paid in the same month as worked. Overhead is estimated to be €2.00 per unit plus €25,000 per month (including amortization of €12,000). Overhead costs are paid as they are incurred.
Myrna will begin January with no finished goods or work-in-process inventory. The managers want to end each month with 25% of the following month's sales in finished goods inventory. They will end each month with no work in process.
REQUIRED
Prepare a cash budget listing cash receipts and disbursements for February. The firm will begin February with a cash balance of €80,000.