Budgeting for Cash Collections and Cash Payments. Hershels Chocolate produces chocolate bars. The treasurer at Hershels Chocolate is preparing the cash budget and would like to know when cash collections from sales and cash payments for materials will occur. The dollar amount of the companys quarterly sales and direct materials purchases are projected to be as follows (this information is the result of working the previous problems for Hershels Chocolate):

	1st	2nd	3rd	4th
Sales	$2,000,000	$2,100,000	$2,200,000	$2,425,000
Direct materials purchases	$1,215,000	$1,276,125	$1,349,400	$1,417,575

• All sales are made on credit. The company expects to collect 60 percent of sales in the quarter of sale and 40 percent the quarter following the sale. Accounts receivable at the end of last year totaled $770,000, all of which will be collected during the first quarter of this coming year.
• All direct materials purchases are on credit. The company expects to pay 80 percent of purchases in the quarter of purchase and 20 percent the following quarter. Accounts payable at the end of last year totaled $257,000, all of which will be paid during the first quarter of this coming year.

Required:

1. Prepare a budget for cash collections from sales.
2. Prepare a budget for cash payments for purchases of materials.
3. How will the treasurer use this information?