Alpha-Tech, a rapidly growing distributor of electronic components, is formulating its plans for 20x5. Carol Jones, the firms marketing director, has completed the following sales forecast.
ALPHA-TECH 20x5 Forecasted Sales (in thousands) Month Sales January $10,000 February 11,000 March 10,000 April 12,500 May 13,500 June 15,000 July 16,000 August 16,000 September 17,000 October 17,000 November 16,000 December 18,000 Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. The following information will be used in preparing the cash flow projection. Alpha-Tech's excellent record in accounts receivable collection is expected to continue. Seventy percent of billings are collected the month after the sale, and the remaining 30 percent two months after. The purchase of electronic components is Alpha-Tech's largest expenditure, and each month's cost of goods sold is estimated to be 40 percent of sales. Seventy percent of the parts are received by Alpha-Tech one month prior to sale, and 30 percent are received during the month of sale. Historically, 70 percent of accounts payable has been paid one month after receipt of the purchased components, and the remaining 30 percent has been paid two months after receipt. Hourly wages and fringe benefits, estimated to be 30 percent of the current month's sales, are paid in the month incurred. General and administrative expenses are projected to be $15,970,000 for the year. The breakdown of these expenses is presented in the following schedule. All cash expenditures are paid uniformly throughout the year, except the property taxes, which are paid in four equal installments at the end of each quarter. 20x5 Forecasted General and Administrative Costs (in thousands) Salaries and fringe benefits $ 3,600 Promotion 3,900 Property taxes 1,480 Insurance 1,580 Utilities 1,600 Depreciation 3,810 Total $15,970 Income-tax payments are made at the beginning of each calendar quarter based on the income of the prior quarter. Alpha-Tech is subject to an income-tax rate of 40 percent. Alpha-Tech's operating income for the first quarter of 20x5 is projected to be $3,600,000. The company pays 100 percent of the estimated tax payment. Alpha-Tech maintains a minimum cash balance of $570,000. If the cash balance is less than $570,000 at the end of each month, the company borrows amounts necessary to maintain this balance. All amounts borrowed are repaid out of the subsequent positive cash flow. The projected April 1, 20x5, opening balance is $570,000. Alpha-Tech has no short-term debt as of April 1, 20x5. Alpha-Tech uses a calendar year for both financial reporting and tax purposes. Required: 1. Prepare a cash budget for Alpha-Tech by month for the second quarter of 205. For simplicity, ignore any interest expense associated with borrowing. (Negative amounts should be indicated by a minus sign.) April May June $ $ 0 $ 0 % 0 0 $ % 0 0 Beginning balance Collections: February sales March sales April sales May sales Total receipts Total cash available Disbursements: Accounts payable Wages General and administrative Property taxes Income taxes Total disbursements Cash balance Cash borrowed Cash repaid Endina halance $ $ 0 % 0 % 0 % 0 % 0 0 ols ol
