1.) Dunder Mifflin Paper Company has hired you as a consultant to help prepare the cash budget for the quarter ending June 30th, 2022 and answer a few questions.
Michael Scott tells you that:
Beginning cash balance April 1st is $74,000.
Dunder Mifflin has an advertising contract of $200,000 per month.
Dunder Mifflin pays $18,000 each month for rent, $7,000 for utilities and $106,000 for salaries.
Dunder Mifflin pays sales commissions to its sales staff of 4% of sales, above their regular salaries.
Dunder Mifflin will pay a yearly $15,000 dividend in the month of April.
Dunder Mifflin will purchase $16,000 of equipment in May and $40,000 in June.
Dunder Mifflin must maintain a minimum cash balance of $50,000 each month.
All borrowing is done at the beginning of the month, and any repayments are made at the end of the month.
The interest rate on borrowings is 10% per year, and interest accrues monthly.
Interest must be paid when borrowings are repaid.
2.) Michael Scott asks you which schedule of the master budget is the most important? (Explain using maximum 3 sentences).
3.) Michael Scott asks you what two types of work of managers use budgeting? Explain with an example of each. (Maximum 4 sentences).