Cash Budget

The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

September October November

Sales $250,000 $300,000 $315,000

Manufacturing costs 150,000 180,000 185,000

Selling and administrative expenses 42,000 48,000 51,000

Capital expenditures _ _ 200,000

The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent $50,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month.

Current assets as of September 1 include cash of $40,000, marketable securities of $75,000, and accounts receivable of $300,000 ($60,000 from July sales and $240,000 from August sales). Sales on account for July and August were $200,000 and $240,000, respectively. Current liabilities as of September 1 include $40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $55,000 will be made in October. Bridgeports regular quarterly dividend of $25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $50,000.

September October November Estimated cash receipts from: Cash sales Collections from accounts receivable S 25,000 228,000 S 253,000 S 30,000 229,500 S 259,500 $ 31,500 256,500 S 288,000 Total cash receipts Estimated cash payments for Manufacturing costs Capital expenditures Income tax S 124,000 48,000 S 120,000 $ 134,000 51,000 200,000 Selling and administrative expenses 42,000 Other purposes: 55,000 Dividends 25,000 S 410,000 Total cash payments S 162,000 S 91,000 40,000 S 227,000 Cash increase (decrease) Cash balance at beginning of month Cash balance at end of month Minimum cash balance Excess (deficiency) S 32 500 S (122.000) S (122,000 131,000 S 131,000 S 163,500 (50,000) S 113,500 163,500 S 41,500 (50,000) S (8,500) (50,000) S 81,000 Supporting calculations: Collections of accounts receivable Sales on Account PercentageSeptember S60,000 October November July sales August sales Collected in September Collected in October September sales: Collected in October Collected in November October sales Totals Payments for manufacturing costs Account Percentage Payments Paid in September: Incurred in August Incurred in September Total Paid in October Incurred in September Incurred in October Total Paid in November Incurred in October Incurred in November Total