1. Prepare a cash budget for April for Animal Gear. 2. Why do Animal Gear's managers prepare a cash budget in addition to the revenue, expenses, and operating income budget? Animal Gear (AG) does not make any sales on credit. AG sells only to the public and accepts cash and credit cards: 90% of its sales are to customers using credit cards, for which AG gets the cash right away, less a 2% transaction fee. Purchases of materials are on account. AG pays for half the purchases in the period of the purchase and the other half in the following period. At the end of March, AG owes suppliers $8,700. During April they plan to purchase direct materials worth $13,350. AG plans to replace a machine in April at a net cash cost of $13,600. Labor, other manufacturing costs, and nonmanufacturing costs are paid in cash in the month incurred except of course depreciation, which is not a cash flow. Depreciation is $20,500 of the manufacturing cost and $10,000 of the nonmanufacturing (fixed) cost for April. AG currently has a $2,500 loan at an annual interest rate of 24%. The interest is paid at the end of each month. If AG has more than $10,000 cash at the end of April it will pay back the loan. AG owes $5,400 in income taxes that need to be remitted in April. AG has cash of $5,900 on hand at the end of March. Revenue Budget For the Month of April Units Selling price Total Revenues Cash Budget April 30 Cash balance, beginning Add receipts Total cash available for needs Budzeled amount Cash excess (deficiency) Interest on loan = Financing Direct Manufacturing Labor Costs Budget Moves: Other nonmanufacturing For the Month of April Cash Budget Output units Cat-allac 580 190 $ 110,200 produced DMLH per unit Total Hourly Hours Wage Rate April 30 Total Dog-eriffic 215 260 $ 55,900 166,100 Cash balance, April 1 Cat-allac 800 3 1,800 $ Total Dog-eriffic 200 5 1,000 14 14 $ 25,200 14,000 Add receipts Manufacturing Overhead Budget For the Month of April $ 39,200 Total Nonmanufacturing Costs Budget Machine setup costs $ 9,100 Processing costs 60,000 Inspection costs 180 $ 69,580 Total For the Month of April Salaries S 18,800 Other fixed costs 16.000 1,661 Sales commissions Now let's calculate the amount of cash that Animal Gear has after budgeting for cash receipts and cash disbursements. Total cash available for needs Total disbursementa Cash excess (deficiency) Cash sales Credit card sales Total cash available for needs Deducl cash disbursements Direct materials Direct manufacturing labor Manufacturing overhead Nonmanufacturing salaries Sales commissions Repayment of loan Interest on loan Total effects of financing Ending cash balance, April 30 Other nonmanufacturing fixed costs Machinery purchase Income taxes Total disbursements Loan value x Interest rate x ( Months on budget 1 Months in year )Interest on loan Total cash available before loan repayment