(16-18)

Build a Model: Cash Budgeting Start with the partial model in the file Ch16 P18 Build aModel.xls on the textbook’sWeb site.Helen Bowers, owner ofHelen’s Fashion Designs, is planning to request a line of credit from her bank. She has prepared the following sales forecasts for parts of 2011 and 2012:

Sales Labor and Raw Materials May 2011 $180,000 $ 90,000 June 180,000 90,000 July 360,000 126,000 August 540,000 882,000 September 720,000 306,000 October 360,000 234,000 November 360,000 162,000 December 90,000 90,000 January 2012 180,000 NA Estimates obtained from the credit and collection department are as follows: collections within the month of sale, 10%; collections during the month following the sale, 75%; collections the second month following the sale, 15%. Payments for labor and raw materials are typically made during the month following the one in which these costs were incurred.

Total costs for labor and raw materials are estimated for each month as shown in the table.

General and administrative salaries will amount to approximately $27,000 a month;

lease payments under long-term lease contracts will be $9,000 a month; depreciation charges will be $36,000 a month; miscellaneous expenses will be $2,700 a month; income tax payments of $63,000 will be due in both September and December; and a progress payment of $180,000 on a new design studio must be paid in October. Cash on hand on July 1 will amount to $132,000, and a minimum cash balance of $90,000 will be maintained throughout the cash budget period.

a. Prepare a monthly cash budget for the last 6 months of 2011.