Wonder Products purchases granite cleaning products from a Midwestern manufacturer and sells the product under its own brand name. The company sells its goods to local hardware stores and granite suppliers. The product is very well- received, so the company does very well in terms of sales. Unfortunately, Wonder Products deals with retailers that often do not pay their bills on time. Wonder Products, on the other hand, has to pay for the goods it receives within 30 days. That means it carries only half of each month’s purchases as accounts payable. The information pertaining to Wonder Products’ business for the second quarter of the year (April through June) are:

• Opening cash balance is $30,000.

• Wonder Products sales were:

» February : $150,000

» March: $175,000

» April: $200,000

» May : $250,000

» June: $275,000

• It expects to sell $300,000 of product in July.

• Wonder Products’ customers pay the following way :

» 20% pay in the month they receive the goods

» 40% pay the month following purchase

» 40% pay two months after receiving their goods

• The materials costs for the granite cleaner are 60% of the selling price.

• The company likes to keep 20% of its upcoming month’s sales on hand at the end of the previous month. It started out this quarter with its inventory targets being met.

• Direct labor costs are $9,000 per month.

• Warehousing and shipping costs are $25,000 per month.

• Back office and other overhead costs are $30,000 per month.

REQUIRED:

For each month, prepare:

a. A raw materials budget to determine how much granite cleaner Wonder Products needs to buy

b. A cash receipts budget

c. A cash disbursements budget

d. A cash budget

e. At the end of September, what is the company’s accounts receivable balance?

f. At the end of September, what is the company’s accounts payable balance?

g. How does Wonder Products’ cash position look to you each month? Provide specific details.