Hanover Company expects to have a cash balance of \(\$ 46,000\) on January 1, 1998 . These are the relevant monthly budget data for the first 2 months of 1998:

\(\sqrt{1}\). Collections from customers: January \(\$ 70,000\); February \(\$ 150,000\).

2. Payments to suppliers: January \(\$ 40,000\); February \(\$ 75,000\).

3. Direct labor: January \(\$ 30,000\); February \(\$ 40,000\). Wages are paid in the month they are incurred.

4. Manufacturing overhead: January \(\$ 21,000\); February \(\$ 30,000\). These costs include depreciation of \(\$ 1,000\) per month. All other overhead costs are paid as incurred.

5. Selling and administrative expenses: January \(\$ 14,000\); February \(\$ 20,000\). These costs are exclusive of depreciation. They are paid as incurred.

6. Sales of marketable securities in January are expected to realize \(\$ 10,000\) in cash. Hanover Company has a line of credit at a local bank that enables it to borrow up to \(\$ 25,000\). The company wants to maintain a minimum monthly cash balance of \(\$ 20,000\).

\section*{Instructions}

Prepare a cash budget for January and February.