Cash budget Blackman Corp., a rapidly expanding crossbow distributor, is in the process of for- mulating plans for next year. Cara Jordan, director of marketing, has completed her annual forecast and is condent that sales estimates will be met or exceeded. The following forecasted sales gures show the growth expected and will provide the planning basis for other corporate departments. Sales Sales January. . . . . . . $3,600,000 July . . . . . . . . . . $6,000,000 February . . . . . . 4,000,000 August . . . . . . . 6,000,000 March . . . . . . . . 3,600,000 September . . . . 6,400,000 April . . . . . . . . . 4,400,000 October . . . . . . . 6,400,000 May. . . . . . . . . . 5,000,000 November . . . . . 6,000,000 June . . . . . . . . . 5,600,000 December . . . . . 6,800,000 George Moore, assistant controller, has been given the responsibility for formulating the cash ow projection, a critical element during a period of rapid expansion. The following information will be used in preparing the cash analysis. z Blackman has experienced an excellent record in accounts receivable collections and expects this trend to continue. The company collects 60 percent of its billings in the month after the sale and 40 percent in the second month after the sale. Uncollectible accounts are insignicant and should not be considered in the analysis. z The purchase of crossbows is Blackmans largest expenditure; the cost of these items equals 50 percent of sales. The company receives 60 percent of the crossbows one month prior to sale and 40 percent during the month of sale. z Prior experience shows that 80 percent of accounts payable is paid by Blackman one month after receipt of the purchased crossbows, and the remaining 20 percent is paid the second month after receipt. z Hourly wages, including fringe benets, are a function of sales volume and are equal to 20 per- cent of the current months sales. These wages are paid in the month incurred. z Administrative expenses are projected to be $5,280,000 for the year. All of these expenses are incurred uniformly throughout the year except the property taxes. Property taxes are paid in four equal installments in the last month of each quarter. The composition of the expenses is: Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 960,000 Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,320,000 Property taxes . . . . . . . . . . . . . . . . . . . . . . . . . 480,000 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720,000 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,280,000 z Income tax payments are made by Blackman in the rst month of each quarter based on income for the prior quarter. Blackmans income tax rate is 40 percent. Blackmans net income for the rst quarter of the year is projected to be $1,224,000. z Blackman has a corporate policy of maintaining an end-of-month cash balance of $200,000. Cash is invested or borrowed monthly, as necessary, to maintain this balance. Blackman uses a calendar year reporting period. a. Prepare a budgeted schedule of cash receipts and disbursements for Blackman Corp., by month, for the second quarter of the year. Ignore interest expense and/or interest income asso- ciated with the borrowing/investing activities. b. Discuss why cash budgeting is particularly important for a rapidly expanding company such as Blackman Corp. c. Do monthly cash budgets ignore the pattern of cash ows within the month? Explain.