budget for increases in service revenue of $200 each month due to advertising campaign. The following table shows the forecast

Sales and service revenues budget March-June 2018

Month Expected sales revenue Expected service revenue Total revenue

March $6 000 $4 000 $10 000

April 8 000 4 200 12 200

May 7 500 4 400 11 900

June 9 000 4 600 13 600

The credit card company deposits 97% of the revenues recorded each day into HealthMart's account overnight. For the servicing of home oxygen equipment, 60% of oxygen services billed each month is collected in the month of the service, and 40% is collected in the month following the service.

Required

1. Calculate the cash that is expects to collect in April, May and June 2018 from sales and service revenues. Show calculations for each month.

2. HealthMart has budgeted expenditures for May of $11 000.

a. Given your answer to Requirement 1, and assuming a beginning cash balance for May of $400, will Health Mart be able to cover its payments for May?

b. Assume (independently for each situation) that (1) May revenues might also be 10% lower or that (2) costs might be 5% higher. Under each of those two scenarios, show the total net cash for May and the amount HealthMart would have to borrow if cash receipts are less than cash payments. The company requires a minimum cash balance of $250. (Again, assume a balance of $400 on May 1.)

3. Why do HealthMart's managers prepare a cash budget in addition to the revenue, expenses and operating income budget? Has preparing the cash budget been helpful? Explain briefly.