134 Chapter 5 Operating Activities COMPREHENSIVE PROBLEM Rancho, Inc. forecasts the following sales for the second quarter of 2017, as well as actual March sales 2nd Q.Total March (actual) April May Jane 6,000 $15,000 s3, $4,000 85,000 In addition The company makes 60% cash sales and 40% credit sales . It collects all credit sales in the month after the sale The fim budgets $4.400 for monthly operating expenises. That amount includes $400 for depreciation. The firm pays all of its cash-based expenses in the month incurred Rancho, Inc. had $100 of cash at March 31, 2017, and it must maintain a minimum $500 cash balance at the end of every month to ensure liquidity The company has a line of credit with its bank that allows borrowing in $ 100 increments at 12% interest. All borrowing takes place at the beginning of the month in which the company requires cash. The company must repay principal in hundred dollar ncrements. The credit facility requires Rancho, Inc. to repay all accrued interest to date whenever it repays principal Principal repayments and interest payments occur at the end of a month (funds permitting) Required (Part 1) Develop monthly and quarterly short-term financing budgets for the second quarter of 2017 using the templates provided below Cash low Worksheet April May June 2nd Q Cash sales Credit sales collected Cash receipts Cash monthly payments Cash inflow (outflow) Short-Term Financing Budget May June 2nd Q Beginning cash balance Net cash fBow Available cash Borrowing needed Repayment of principal Payment of interest Net cash balance Use the sales forecasts from Part 1 above. Assume Rancho sells its only product for $10. The firm has monthly fixed costs of $600 and variable costs of $8 per unit