Adequacy of Cash Flow With "What Ifs." Jennifer Victor is preparing a budget of cash receipts and disbursements for Gourmet Food Services, Inc. Some sales are for cash, and the remainder is billed on a contract basis. Sales for April to August are:

Of the billed sales, 65 percent is collected during the month of sale; and the other 35 percent is collected in the next month. Food costs amounting to 75 percent of sales must be paid during the month of sales. Monthly operating costs are $24,000. The cash balance at May 1 amounted to $7,000. If the cash balance is over $20,000 on August 31, Victor and the other shareholders will receive the excess as dividends.

Required 1. Prepare a budget of cash receipts and disbursements for each month, May to August, inclusive.
2. Compute the amount, if any, that can be paid in dividends at the end of August.
3. What is the impact on possible dividend payments in the following situations?

(a) “What if’ competitive pressures cause food costs to increase to 80 percent of sales.

(b) “What if” collections of billed sales slow to 50 percent in the month of sale and 50 percent in the next month.

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April May June Cash Sales Billed Sales Total Sales $65,000 $40,000 $105,000 72,000 46,000 118,000 84,000 68,000 152,000 July. 88,000 72,000 160,000 August 86,000 70,000 156,000