6. Cash budget Jamison Company's financial managers are meeting with the company's bank to renew their line of credit and discuss their investment needs. They have prepared the company's operating cash budget for the last six months of the year The following budget assumptions were used to construct the budget: Jamison's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Jamison's sales are made on credit with terms of 2/10, net 30' Jamison's experience is that 25% is collected from customers who take advantage of the discount, 65% is collected in the second month, and the last 10% is collected in the third month after the sale. The budget assumes that there are no bad debts The cost of materials averages 50% of Jamison's finished product. The purchases are generally made one month in advance of the sale, and Jamison pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,210 million, then purchases during June would be $605 ($1,210 million x 0.50), and this amount would be paid in July . Other cash expenses include wages and salaries at 19% of sales, monthly rent of $44 million, and other expenses at 5% of sales. Estimated tax payments of $64 million and $67 million are required to be paid on July 15 and October 15, respectively. In addition, a $1,100 million payment for a new plant must be made in September. Assume that Jamison's targeted cash balance is $200, and the estimated cash on hand on July 1 is $214. Use the preceding information to fill in the missing amounts in the following cash budget. Jamison Company Cash Budget For the Six Months Ended December 31, Year 1 $ millions) For the Six Months Ended December 31, Year 1 ($ millions) July $1,100 October November December May $1,045 une $1,078 550 August September $1,133 578 Credit sales $1,155 594 $1,188 605 $1,210 Credit purchases 567 July August September October November December Cash receipts Collections from this month's sales Collections from previous month's sales Collections from sales two months previously 278 722 291 715 108 $1,095 736 751 772 116 $1,184 Total cash receipts $1,110 $1,130 $1,155 550 209 556 211 Payments for credit purchases Wages and salaries Rent other expenses Taxes Payment for plant construction 594 605 226 56 64 1,100 Total cash disbursements Net cash fiow (Receipts-disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance Surplus (shortfall) cash $922 $867$1,983 $923 $940 $154 214 $368 200 $168 $228 368 $596 200 $396 $164 -277 -$113 200 -$313 $244 119 $363 200 $163 -$873 596 $119 Use the information provided in the budget to complete the following sentences. Jamison Company will be able to invest in short-term marketable securities in some months and l need to borrow to cover cash requirements in others. In the last six months of the year, Jamison will Jamison Company will want a credit line of at least s to expect that they will be able to invest up to $ to end the year with a cash to cover the month with the greatest shortfall, and the financial managers can tell the banlk and a cash in short-term marketable securities