a cash budget

Total Sales Credit Sales

Dec. 2010 $825,000 $770,000

Jan. 2011 730,000 690,000

Feb. 2011 840,000 780,000

Mar. 2011 920,000 855,000

25% of its credit sales are collected during the month when the sale is made, and the remaining 75% of the credit sales are collected during the month following the sale.

The company estimates its purchases at 60% of the next month`s sales and payment for those purchases are budgeted to lag the purchases by 1 month.

Other disbursements

January February March

Wages and salaries $250,000 $290,000 $290,000

Rent 27,000 27,000 27,000

Other expenses 10,000 12,000 14,000

A tax payment of $105,000 is due in January, and a $40,000 dividend will be declared in January and paid in March. The company has ordered a $75,000 piece of equipment with delivery in January and payment will be made in February.

The company`s projected cash balance at the end of December is $100,000 and they desire to maintain a balance of $100,000 at the end of each month.