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a. Historically, 10 percent of the Incepta's sales have been for cash, 60 percent of sales have been collected in the month following sale, and
a. Historically, 10 percent of the Incepta's sales have been for cash, 60 percent of sales have been collected in the month following sale, and 29 percent of sales have been collected in the second month following sale: the remaining 1 percent of sales are bad debts and are never collected. Sales for the prior two months (May and June) were BDT 500,000 and BDT 550,000, respectively. The current sales forecast calls for sales of BDT 600,000 in July and BDT 700,000 in August Direct materials will be 42 percent of sales. Direct labor will be 34 percent of sales for July and August based on the production plan. Direct labor is generally paid for in the month incurred, but that trade suppliers grant terms of sale of net 60 days, which are fully utilized. Monthly fixed expenses such as rents, executive payroll, and so forth will total BDT 40,000 per month. The progress payments on the firm's new construction in the account of BDT 90,000 will be due in August. The firm has a starting cash balance of BDT 25,000 and wishes to keep cash on hand at a level of 5 percent of monthly sales. Now, prepare a monthly cash forecast for the month of July and August for Incepta Pharmaceuticals Limited. b. Based on the information provided in part 'a', highlight the importance of preparing a cash budget for Incepta Pharmaceuticals Limited
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