Chapter 22 Budgeting 1067 1. PR 22-4A Cash budget July deficiency, The controller of Sonoma OBJ. 5 $2,200 Housewares Inc. instructs you to prepare a monthly cash bud. get for the next three months. You are presented with the following budget information: May June July Sales $86,000 $90,000 $95,000 Manufacturing costs 34,000 39,000 44,000 Selling and administrative expenses 15,000 16,000 22,000 Capital expenditures SHOW ME HOW 80,000 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 re mainder the following month econd month following sale) Depreciation, insurance, and property tax expense represent $3,500 of the estimated monthly manufacturing costs The annual insurance premium is paid in September, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, paid in the month in which they are incurred and the balance in the following month Current assets as of May include cash of $33,000, marketable securities of $40,000 and accounts receivable of $90,000 ($72,000 from April sales and $18,000 from March sales). Sales on account for March and April were $60,000 and $72,000, respectively Current liabilities as of May 1 include $6,000 of accounts payable incurred in April manufacturing costs. All selling and administrative expenses are paid in cash in the pe riod they are incurred. An estimated income tax payment of $14,000 will be made in June. Sonoma's regular quarterly dividend of $5,000 is expected to be declared in June and paid in July. Management desires to maintain a minimum cash balance of $30,000 Instructions 1. Prepare a monthly cash budget and supporting schedules for May, June, and July 2016 On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller